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==Dispute with Telenor==
==Dispute with Telenor==
The power-broking between Alfa group and Telenor in '''VimpelCom''' started [[2004]], when Alfa proposed that VimpelCom acquire a larger share in [[Ukrainian RadioSystems]] ''(URS)'', a small GSM operator in [[Ukraine]] operating under the brand ''«WellCom»''. Telenor found the price of US$ 132 mio far to high, after the Russian telco [[Golden Telecom]] had declined acquiring URS at a far lower price.<ref>[http://www.telenor.com/en/news-and-media/in-focus/ownership-interests-in-russia/background/ Telenor] - Background on Russia and the Ukraine, 2009.</ref> In [[October]], [[2004]], a minor shareholder of VimpelCom lodged three law-suits against Telenor in the provinsial city of [[Krasnodar]] in [[Siberia]], with claims that the VimpelCom shareholder agreement be cancelled, and the URS shares be acquired.
Alfa started investing in VimpelCom in summer, [[2001]].<ref>[http://www.highbeam.com/doc/1G1-76926154.html IPR Strategic Business]: «VimpelCom shareholders approve Alfa Group investment», August 2, 2001.</ref> The power-broking between Alfa group and Telenor in '''VimpelCom''' started [[2004]], when Alfa proposed that VimpelCom acquire a larger share in [[Ukrainian RadioSystems]] ''(URS)'', a small GSM operator in [[Ukraine]] operating under the brand ''«WellCom»''. Telenor found the price of US$ 132 mio far to high, after the Russian telco [[Golden Telecom]] had declined acquiring URS at a far lower price.<ref>[http://www.telenor.com/en/news-and-media/in-focus/ownership-interests-in-russia/background/ Telenor] - Background on Russia and the Ukraine, 2009.</ref> In [[October]], [[2004]], a minor shareholder of VimpelCom lodged three law-suits against Telenor in the provinsial city of [[Krasnodar]] in [[Siberia]], with claims that the VimpelCom shareholder agreement be cancelled, and the URS shares be acquired.


In [[May]], [[2005]], the Alfa Group filed a law-suit against Telenor, via Alfa's daughter company ''Eco Telecom Ltd'', contesting the declination of Telenor's three VimpelCom board members to approve the URS acquisition. Eco Telecom especially contested Telenor's vetoing power in the VimpelCom shareholder agreement.<ref>[http://www.forbes.com/technology/feeds/afx/2005/05/24/afx2050040.html Forbes Magazine], Bente Bjørndal, «Telenor to fight new Alfa Group lawsuit over Ukraine's WellCom», May 24, 2005.</ref> After the trial, Alfa Group declined during four years to take part in the board of managers meetings in Ukrainian [[Kyivstar]], thereby blocking the normal procedures of annual assemblies, approval of accounts, and payments of dividends. In [[2008]] Telenor achieved several legal approvals in the U.S. Federal Court of Appeal in [[New York]], and in [[2009]] the Alfa Group submitted to the rulings and took up normal shareholder activity in Kyivstar. In Russian VimpelCom, however, the Alfa Group geared up its legal battle with Telenor by nominating more directors than Alfa's capital share implied. In [[January]], [[2007]], a court of appeal in [[Geneva]], [[Switzerland]] ruled that Alfa Group had violated the shareholder agreement of VimpelCom.
In [[May]], [[2005]], the Alfa Group filed a law-suit against Telenor, via Alfa's daughter company ''Eco Telecom Ltd'', contesting the declination of Telenor's three VimpelCom board members to approve the URS acquisition. Eco Telecom especially contested Telenor's vetoing power in the VimpelCom shareholder agreement.<ref>[http://www.forbes.com/technology/feeds/afx/2005/05/24/afx2050040.html Forbes Magazine], Bente Bjørndal, «Telenor to fight new Alfa Group lawsuit over Ukraine's WellCom», May 24, 2005.</ref> After the trial, Alfa Group declined during four years to take part in the board of managers meetings in Ukrainian [[Kyivstar]], thereby blocking the normal procedures of annual assemblies, approval of accounts, and payments of dividends. In [[2008]] Telenor achieved several legal approvals in the U.S. Federal Court of Appeal in [[New York]], and in [[2009]] the Alfa Group submitted to the rulings and took up normal shareholder activity in Kyivstar. In Russian VimpelCom, however, the Alfa Group geared up its legal battle with Telenor by nominating more directors than Alfa's capital share implied. In [[January]], [[2007]], a court of appeal in [[Geneva]], [[Switzerland]] ruled that Alfa Group had violated the shareholder agreement of VimpelCom.

Revision as of 15:00, 3 June 2009

"Alfa Group" redirects here. For the counter-terrorism unit, see Alpha Group.
Alfa Group
Альфа-Групп
Company typePrivate conglomerate
IndustryDiversified investments
Founded1989
FounderMikhail Fridman
Pyotr Aven
Headquarters
Russia Moscow
,
Russia
Area served
Russia, Ukraine, Turkey, CIS
Key people
Mikhail Fridman
German Khan
Alexei Kuzmichov
L. Goldberg
Pyotr Aven
RevenueIncrease US$2,803,351,000 (2006)[1]
Increase US$1,790,920,000 (2006)[1]
Increase US$1,664,493,000 (2006)[1]
Total assetsIncrease US$32,194,759,000 (2006)[1]
Total equityIncrease US$9,391,639,000 (2006)[1]
SubsidiariesAlfa-Bank
TNK-BP
Altimo
VimpelCom
MegaFon
Websitehttp://www.alfagroup.org

Alfa Group Consortium (Russian: Консорциум «Альфа-Групп») is one of Russia's largest privately owned financial-industrial conglomerates, with interests in oil and gas, commodities trading, commercial and investment banking (Alfa Bank), insurance, retail trade and telecommunications. The group was founded as Alfa-Eco by Mikhail Fridman, one of the most influential business leaders in Russia and one of the Russian oligarchs, in partnership with L. Goldberg and Peter Aven. The Consortium was built on Alfa-Eco, a trading company established in 1988 by Mr. Fridman.

Its headquarters are in Moscow. As a holding company, Alfa Group has incomes from dividends and daughter companies that are more or less consolidated in Alfa's accounts. Therefore, formal revenue in 2007 was a mere US$ 1.8 billion, whereas income and dividends from daughters and joint ventures was US$ 17,3 billion, plus a US$ 5,3 bn from retail trade, US$ 2.4 bn from banking and insurance, and US$ 295 mio from other activities - alltogether US$ 22,9 bn from activities excluding oil and gas.[2] In addition, Alfa has substantial revenues from it's partly owned oil an gas venture TNK-BP, co-owned with the british oil conglomerate BP.

Joint ventures

Alfa Group has ownership stakes in the following companies and joint ventures:

Daughter and holding companies
  • Alfa Bank, wholly owned investment bank and one of Russia's largest, private banks. Business in Russia, Cyprus, and the Netherlands, and currently applying for banking licence in the United States.
  • CTC Media Inc, a media holding company owning three national terrestrial (DTT-H) broadcasters, including television stations CTC, Domashny and DTV; and local TV stations distributing the programs of these three broadcasters.
  • Смирновъ (or Smirnov Trading House), the popular Russian vodka. Diageo, the owner of Smirnoff and Captain Morgan, is the other co-owner in the venture.
  • Perekryostok, Russia's largest retail and warehouse chain, merged in 2006 with Pyaterochka which was also majority-controlled by Alfa Group.
  • Karusel, a Russian chain of 24 hypermarkets in main cities across Russia.
  • TNK-BP, oil and gas venture with british BP, where the two parties control 50% each of the stock capital.
Ownership through the holding companies Altimo and CTH

There are a number of current disputes regarding Alfa's claimed ownership of various stakes in telecoms companies.

Alfa Group is notably involved in a commercial dispute with Norwegian mobile phone company Telenor over the control of Russian company Vimpelcom [3]

Legal disputes

Over 10 years, Alfa Group has found itself in legal batle with business partners from Canada (NoreX), Great Britain (BP), Sweden (TeliaSonera), Norway (Telenor), Turkey and Indonesia. Federal Reserve executive Paul Volcker has accused Alfa Group of violation fo the UN sanctions against Iraq during Saddam Hussein's regime, and for pressure exercised against KPMG during their investigation of a Bermuda registered, Russian telecom company.[4]

Dispute with NoreX and BP

Alfa Group's legal disputes with BP date back to 1991, when the canadian oil company Norex represented a newly formed, Russian-Canadian joint venture in Siberia's oil industry, operating the marginal Chernogor oil-fields close to Khanty-Mansijsk. With the Russian company Chernogorneft, the Canadian company entered into a 60% ownership in the joint-venture Yugraneft. Later on, NoreX increased their stake to 97,64%, and in september 1998 Chernogorneft was filed with bankrupcy by the Tyumen Oil Company (TNK). The arbitration court of Khanty-Mansinsk proclamed for Chernegorneft a new chief executive offiser, with a background from Alfa Group.[5] The main owner of Chernogorneft was British Petroleum (BP), via their holding company Sidanko.

TNK gained control over 60% of Chernogorneft's debts, and the debt of US$ 35 mio held by EBRD was reduced to US$ 9 mio by Khanty-Mansijsk arbitration court on July 30, 1999. Thereby, TNK controlled 60% of the debt claims, and according to NoreX the Alfa Group took over Chernogorneft's oil sales below market prices.[6] Resulting in a forced sell-out of the company, Sidanko (BP) was rejected from taking part in auctions, and remaining bidders were legally restrained from offering more than US$ 200 mio for Chernegorneft - a mere fifth of it's assumed value. On November 26, 1999, TNK took over all of Chernorogneft for 172 mio US$.

Letters of protest from prime minister Tony Blair to president Vladimir Putin helped little, the legally BP-owned company was forcibly sold to TNK below market price. TNK also got approval from the Khanty-Mansijsk arbitration court to take obver Chernogorneft's stakes in two joint ventures, in spite of protests from venture partners Norex and Oxidental Petroleum. BP fought on for years to retrieve its rightous ownership in Chernogorneft, and in August, 2001 this got its first legal approval.

In 2000, according to NoreX, TNK started to undermine Yugraneft's oil transports through the national. semi-monopolistic pipeline system Transneft. On April 11 and June 26, 2001, TNK again got two legal victories in the Khanty-Mansijsk arbitration court, first through a reversal of earlier regulation regarding Chernogorneft's stock capital in the joint-venture, and thereafter through a nillification of the voting powers in 497,142 out of the 600,000 shares held by NoreX. At an extra-ordinary annual assembly of Yugraneft on June 28, NoreX' candidate for the CEO position was elected, but the day after TNK's security executive and 20 heavily armed guards appeared at the Yugraneft office with a false annual assemblu protocol, installingMr. A. Berman as CEO of Yugraneft. Norex' demands for investigation and nillification remained fruitless Norex brought the case before a U.S. Federal court in New York in February, 2002, demanding US$ 1.5 bn in redemption from TNK and Alfa Group.[7]

The year after, BP and Alfa Group merged all their oil and gas interests into a 50/50 joint venture, in spite of BP's legal and financial losses in the Yugraneft disputes since 1999. The new venture controlled both Sidanko og TNK from February 11, 2003.[8] The merger implied that NoreX' stake of 97% in Yugraneft come under control of Alfa Group and BP. NoreX, thereby, saw their posessions dwindle and ttransferred partly to BP,[9] and appealed for copies of BP documents before a US court.[10] In 2004 the U.S. Supreme Court sustained Norex' right to appeal, but at a lower level the legal dispute went on for years, with only gradual victories for NoreX.[11]

For a summary of the battle of control over TNK,BP, see: TNK-BP.

Dispute with Telenor

Alfa started investing in VimpelCom in summer, 2001.[12] The power-broking between Alfa group and Telenor in VimpelCom started 2004, when Alfa proposed that VimpelCom acquire a larger share in Ukrainian RadioSystems (URS), a small GSM operator in Ukraine operating under the brand «WellCom». Telenor found the price of US$ 132 mio far to high, after the Russian telco Golden Telecom had declined acquiring URS at a far lower price.[13] In October, 2004, a minor shareholder of VimpelCom lodged three law-suits against Telenor in the provinsial city of Krasnodar in Siberia, with claims that the VimpelCom shareholder agreement be cancelled, and the URS shares be acquired.

In May, 2005, the Alfa Group filed a law-suit against Telenor, via Alfa's daughter company Eco Telecom Ltd, contesting the declination of Telenor's three VimpelCom board members to approve the URS acquisition. Eco Telecom especially contested Telenor's vetoing power in the VimpelCom shareholder agreement.[14] After the trial, Alfa Group declined during four years to take part in the board of managers meetings in Ukrainian Kyivstar, thereby blocking the normal procedures of annual assemblies, approval of accounts, and payments of dividends. In 2008 Telenor achieved several legal approvals in the U.S. Federal Court of Appeal in New York, and in 2009 the Alfa Group submitted to the rulings and took up normal shareholder activity in Kyivstar. In Russian VimpelCom, however, the Alfa Group geared up its legal battle with Telenor by nominating more directors than Alfa's capital share implied. In January, 2007, a court of appeal in Geneva, Switzerland ruled that Alfa Group had violated the shareholder agreement of VimpelCom.

In November 2005, VimpelCom acquired 100% of URS, after having got approval from VimpelComs annual assembly. Thereby, the Alfa Group owns shares in both URS (Beeline Ukraina) via VimpelCom, and in Golden Telecom which operates in both Russia and the Ukraine, and in Ukraine's major mobile operator Kyivstar GSM, and in turkish Turkcell which owns a stake in the Ukrainian mobile operator Astelit. Telenor and Alfa disagree over the latter's ownership in three of Kyivstar's competitors in the Ukrainian market.[15]

In 2004, Alfa Group's daughter company «Storm» filed a number of law-suits against Telenor, to nullify a number of provisions in the Kyivstar charter and shareholder agreement. Alfa Group especially wanted to nullify an arbitration case that Telenor had lodged in New York, but was rejected. Alfa reacted to their legal loss by boycotting all normal shareholder activity in Kyivstar, for four years from 2004, effectively blocking the business of annual assemblies, and avoiding the consolidation and ratification of Kyivstar's annual accounts.[16] No dividends were paid after 2003. In february, 2006, Telenor took the issue to a U.S Federal court in New York.On December 16, 2008, Alfa Group resumed normal shareholder activities, joined in the election of a new board of directors, and agreed to pay accumulated dividends. On March 11, 2009, the Federal district court in New York ruled for the second time that Alfa companies Altimo, Storm, Alpren and Hardlake had revealed contempt for the court by not depositing their Kyivstar shares in the United States.[17] Alfa Group was convicted to daily penalties of US$ 100,000 from March 12, and a further 100,000 daily if not either Alfa's shares in Kyivstar be sold, or ownership in competing business be reduced to a maximum 5%. NeOn April 28, 2009, the New York court ruled that Alfa Group had submitted to the legal rulings. Judge Gerard E. Lynch established that Alfa Group had reduced their ownership in competing mobile operations in the Ukraine.

Farimex vs. Telenor

In 2009 a small, Russian-owned company, Farimex Ltd, wholly owved by a Dimitrij Fridman, lodged a claim of US$ 5.7 bn from Telenor in compensations for Telenor's refusal to approvet VimpelCom's acquisition of URS and market entry in the Ukraine. Courts in Khanty-Mansiysk[18] and Omsk have approved Farimex' claims and arrested Telenor's US$ 1,8 bn worth shares in VimpelCom in March, 2009,[19] but Telenor refuses to accept the legal premises and appeals the verdicts to the regional court of Tyumen, which is the last court of appeal before the federal level in Moskva.[20]

Telenor Executive vice president Jan Edvard Thygesen has repeatedly said that a swap of shares in VimpelCom and Kyivstar between Telenor and Alfa Group is an option, but hard to achieve in practice.[21]

When Minister of foreign affairs Jonas Gahr Støre visited his Russian collegue Sergej Lavrov in Moscow on March 24, 2009, the strife between Alfa and Telenor was elevated to become the prime issue.[22] Still, Telenor was presented by a claim from the Russian bailiff of US$ 1.7 bn, on April 3, via a Norwegian district bailiff. Three days later, Telenor asked the federal arbitration court in Moscow to sustain this action until the Tyumen court has negotiated the substantial issue.

The case between Farimex and Telenor has aroused wide-spread, international concern. Roland Nash, Chief of research at Renaissance Capital viewed the case as a test to the creditibily of Russia's legal system and opennes to foreign investment.[23] Russia analyst Christopher Granville views the Farimex vs. Telenor case as even more serious to Russias credibility than earlier legal battles.[24] And judge Gerard E. Lynch, presiding in the New York appeal cases lodged by Telenor over Kyivstar, has critizised Alfa Group's utilisation of remote courts in Western Siberia.[25]

Dispute with TeliaSonera

Alfa Group and Swedish-Finnish TeliaSonera jointly own the turkish mobile operator Turkcell, and the Russian mobile operator MegaFon.

In Turkey, TeliaSonera has acquired 47% of the shares in Turkcell Holding, which controlled 51% of Turkcell. Telia's partner was the Turkish company Cukurova. TeliaSonera andg Cukurova agreed on a binding shareholders' agreement in 2005, depriving Cukurova from the right to sell Turkcell shares without the prior consent of TeliaSonera, and with the latter company's right of first priority to buy eventual shares from Cukurova. However, Cukurova sold their shares to Afla Group that same year.[26] Through this US$ 3.5 bn purchase, Alfa Group exercised control of Turkcell's board of directors already from First quarter, 2006.[27] In January, 2007, a court of appeal in Geneva, Switzerland, ruled that Cukurova had violate the shareholder's agreement by selling their shares on to the Alfa Group. The court demanded Cukurova to see to it that the shares be transferred back and re-sold to TeliaSonera. A court of appeal in Vienna, Austria confirmed this ruling on March 7, 2008, and repeated the demand to enter into negotiations with Alfa Group over at transfer of the shares, but with no practical results.

References

  1. ^ a b c d e "Alfa Group Annual Report 2006" (PDF). Alfa Group. 24 September 2007. Retrieved 2008-03-23. {{cite web}}: Check date values in: |date= (help); Unknown parameter |coauthors= ignored (|author= suggested) (help)
  2. ^ Alfa Group - Annual Report 2007.
  3. ^ Wall Street Journal, Norway seeks caution in Telenor battle
  4. ^ Telegraph - «BP antagonist has Altimo ambitions», June 27, 2008.
  5. ^ NoreX - «History of Conflict».
  6. ^ NoreX - «History of Conflict».
  7. ^ Norex Petroleum Ltd. v. Access Industries, et al., No. 02-CV-1499 (LTS)(KNF) (S.D.N.Y.).
  8. ^ Pravda - «Alfa Group, Access/Renova and BP to create new company», 11. February, 2003.
  9. ^ Moscow Times - «Norex Petroleum Sues For BP's Dirt on TNK», 13,februar 2002, refered at the NoreX web page.
  10. ^ Extract of NoreX' appeal of February 18, 2003.
  11. ^ U.S. Court of Appeal, New York - extract of rulings on NoreX' right to further appeal and repartiation of funds, July 21, 2005.
  12. ^ IPR Strategic Business: «VimpelCom shareholders approve Alfa Group investment», August 2, 2001.
  13. ^ Telenor - Background on Russia and the Ukraine, 2009.
  14. ^ Forbes Magazine, Bente Bjørndal, «Telenor to fight new Alfa Group lawsuit over Ukraine's WellCom», May 24, 2005.
  15. ^ Forbes Magazine, Bente Bjørndal,«Telenor to fight new Alfa Group lawsuit over Ukraine's WellCom», 24.mai 2005.
  16. ^ Telenor - Background on Russia and the Ukraine, 2009.
  17. ^ Telenor - «Alfa Held in Contempt for Second Time by US Court; Telenor's VimpelCom Shares Arrested in Russia», March 12, 2009.
  18. ^ Times Online - «Telenor to fight Siberian court order», August 18, 2008.
  19. ^ Norwegian business daily Dagens Næringsliv - «Telenors Vimpelcom-aksjer i arrest», March 12, 2009.
  20. ^ IT Examiner - «Telenor appeals Farimex decision», March 4, 2009.
  21. ^ Reuters - «Telenor confident as Alfa bows to U.S. court», March 18, 2009.
  22. ^ Aftenposten - «Støre ga klar melding til russerne», March 24, 2009.
  23. ^ St.Petersburg Times - «Investors See Major Implications in Telenor Case», March 17, 2009.
  24. ^ The New York Times - «Telenor Ruling Stirs Fear of Court Shopping in Russia», April 10, 2009.
  25. ^ The New York Times - «Telenor Ruling Stirs Fear of Court Shopping in Russia», April 10, 2009.
  26. ^ TeliaSonera - «Significant events after Year-end 2007».
  27. ^ TeliaSonera - «Delårsrapport Januari-juni 2006», page 16.

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