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Telenor Seeks Arbitration on VimpelCom-Orascom Deal

Telenor ASA, the Nordic region’s largest phone company, asked for the dispute over VimpelCom Ltd.’s purchase of Egyptian billionaire Naguib Sawiris’s phone assets to be referred to a court of arbitration.

Telenor opposes a plan by VimpelCom, Russia’s second-biggest mobile-phone operator, to issue new stock representing 20 percent of shares outstanding and 31 percent of voting rights to investors in Wind Telecom SpA, the holding company for Sawiris’s phone assets. Altimo, the telecommunications arm of Russia’s Alfa Group and VimpelCom’s biggest shareholder by voting rights, supports the deal.

After Telenor appoints its representative on the tribunal, selecting the other two arbitrators may take up to 60 days, Dag Melgaard, a spokesman for the Fornebu, Norway-based company, said today. VimpelCom shareholders are scheduled to vote March 17 on the new shares.

“We are following two paths, the legal path and the shareholders’ meeting, where we will try to convince as many as possible of the minority shareholders to vote with us,” Melgaard said.

VimpelCom is seeking to take over Sawiris’s Italian mobile operator Wind Telecomunicazioni SpA and his 51.7 percent stake in Egypt’s Orascom Telecom Holding SAE for about $6.5 billion to create the world’s sixth-largest phone company.

Orascom shares tumbled 8.5 percent to 3.62 Egyptian pounds ($0.62) in Cairo as protests in Egypt demanding the resignation of President Hosni Mubarak continued. Telenor shares rose 1.3 percent to 89.10 kroner in Oslo.

Meeting Date

“We still think the deal makes sense financially and strategically, and we would very much like the shareholders to vote and make the decision,” Chairman Jo Lunder said in an interview. “It’s really not the board deciding, it’s the shareholder’s meeting. At the same time Telenor has certain rights under the shareholders’ agreement and the board will also respect those rights.”

VimpelCom is considering changing the date of the shareholders’ meeting in order to balance the rights of all shareholders, he said, adding that no decision has been made.

Telenor asked VimpelCom to adjourn the March 17 shareholders’ meeting and to postpone the record date for the meeting until after the arbitration panel decides the claim, according to VimpelCom’s statement today.

As of today, the meeting date remains the same, said Elena Prokhorova, a VimpelCom spokeswoman, adding the company has no further comment.

Legal Issue

The tribunal will rule on whether the merger is classified as a related party transaction, which would enable VimpelCom to issue shares to Sawiris without offering them to Telenor and other shareholders first.

“We would not have done this if we had not thought we would win,” Melgaard said. “Our pre-emptive rights have been taken away from us.”

The shareholder agreement provides that disputes should be arbitrated in London under the laws of the state of New York, Melgaard said. Private arbitration services following rules set down by the United Nations are used, he said.

The VimpelCom board overrode Telenor’s objections to the bid. Telenor holds about 36 percent of votes in VimpelCom to Altimo’s 45 percent. Each company has three seats on the nine-member board.

VimpelCom, listed on the New York Stock Exchange, was formed from the consolidation of Russian billionaire Mikhail Fridman’s Alfa Group and Telenor’s holdings in Russian and Ukrainian mobile-phone operators.

The merger of Telenor and Altimo shares in VimpelCom and ZAT Kyivstar GSM was agreed to in October 2009, ending years of courtroom disputes over the control of mobile companies in Russia and Ukraine.

The agreement resulted in a retreat from lawsuits that had led to a fine against the Norwegian company of $1.7 billion in a Siberian court.

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