Norway’s Telenor and Russia’s Alfa-Group had an unexpected obstacle thrown in the path of their asset merger when Ukraine’s anti-monopoly regulator said it would review its March approval of the deal.
Analysts said the merger — which will end one of Russia’s longest corporate wars — was unlikely to be reversed and, at most, the newly created telecoms company Vimpelcom Ltd. might have to surrender some of its bandwidth in Ukraine.
Under the peace deal, Telenor and Alfa agreed last year to merge their holdings in Russia’s Vimpelcom VIP.N and Ukraine’s Kyivstar into Vimpelcom Ltd.
They had secured all the necessary regulatory approvals and completed a share exchange. However, on Thursday, the Anti-Monopoly Committee of Ukraine (AMCU) suspended its March decision to approve the deal, saying it had to review a petition submitted by Kyivstar rival, Astelit.
“We have started the revision of this decision based on Astelit’s petition and have suspended it for the period,” the AMCU said in a statement.
Astelit, which operates under life:) brand, is controlled by Turkey’s largest mobile phone operator Turkcell and SCM Holdings, which represents the interests of Ukrainian billionaire Rinat Akhmetov.
Astelit is claiming the March approval was based on calculations of shares of telecoms operators in the market and the same frequency bandwidth that were incorrect.
AMCU head Alexei Kostusev said during a meeting of the regulator the review could take “between one and several months” and in the meantime the participants should not take any steps towards the merger.
“We do not believe there is any legal basis for a review of the AMCU’s prior approval of the transaction and will defend our legal rights using all available means. Shares of VimpelCom Ltd. will begin trading today April 22 as planned,” Vimpelcom Ltd said in emailed comments.
Its New-York listed stock rose 14 percent to $18.65 at the market open versus Wednesday’s close of Vimpelcom stock (OVIP.K) alone, and later edged down 5 percent against the open.
Rival MTS was trading 1.27 percent lower.
Telenor and Alfa’s unit Altimo said they would proceed with the deal based on AMCU’s earlier decision, confident it was legal.
“We do not see any legal consequences of AMCU’s decision today, as all the main necessary conditions for the deal to close had been fulfilled by the time the deal closed on April 21. The deal is closed and Vimpelcom Ltd. will act with no changes to its plans,” Altimo said.
Telenor’s spokeswoman Anna Ivanova-Galitsina said the deal had been completed in line with the initial decision by the AMCU.
Vimpelcom said on Wednesday that 97.87 percent of its shareholders had tendered their shares in an exchange offer, which effectively completes the merger.
Analysts said the merger was unlikely to be reversed.
“We tend to think that Vimpelcom Ukraine and/or Kyivstar might be pushed into giving up some of the frequency band — Kyivstar and Vimpelcom Ukraine combined now have the widest band in the country — so as to keep the deal,” VTB analysts wrote in a note.
But they said that the deal was “extremely unlikely” to be reversed.
Under Ukrainian law, AMCU can reverse a decision or make changes to it.
“This (review) could be an attempt to stir up noise from one of the competitors, some bureaucrat, etc,” said Fondsfinans analyst Arild Nysaether.
“I believe the best argument is that the combined political lobbying power of Kyivstar and Altimo in the Ukraine is very strong and probably outweighs any others, and that this noise, wherever it came from, will be settled.”
© Thomson Reuters