Alfa Group
Encyclopedia
Alfa Group Consortium is one of Russia
's largest privately owned investment groups, with interests in oil and gas, commercial and investment banking, asset management, insurance, retail trade, telecommunications, water utilities and special situation investments. Alfa Group's portfolio of companies includes Alfa-Bank, TNK-BP
, VimpelCom, MegaFon
, X5 Retail Group, A1 Group, Alfa Capital Management, AlfaStrakhovanie Group, and Rosvodokanal Group.
The group was founded in 1989 as Alfa-Eco by Mikhail Fridman
, one of the most influential business leaders in Russia
during the Yeltsin presidency and one of the Russian oligarchs, in partnership with German Khan
, Alexei Kuzmichov
and several other partners.
Its headquarters are in Moscow
. As a holding company, in the financial year ending December 2010 Alfa Group had total assets of US$ 59,900 million, total equity of US$ 21,790 million and profit for the financial year of US$2,810 million. Return on shareholders' equity were recorded at 13.4%.
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
(NoreX), Great Britain
(BP), Sweden
(TeliaSonera), Norway
(Telenor), Turkey
and Indonesia
. Federal Reserve executive Paul Volcker
has accused Alfa Group of violation of 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.
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 bankruptcy by the Tyumen Oil Company (TNK). The arbitration court of Khanty-Mansinsk proclaimed for Chernegorneft a new chief executive officer, with a background from Alfa Group. 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 million held by EBRD was reduced to US$9 million by Khanty-Mansijsk arbitration court on 30 July 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. 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 million for Chernegorneft - a mere fifth of its assumed value. On 26 November 1999, TNK took over all of Chernorogneft for US$172 million.
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 over 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 rightful 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 11 April and 26 June 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 nullification of the voting powers in 497,142 out of the 600,000 shares held by NoreX. At an extraordinary annual assembly of Yugraneft on 28 June, 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 assembly protocol, installing Mr. A. Berman as CEO of Yugraneft. Norex' demands for investigation and nullification 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.
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 11 February 2003. The merger implied that NoreX' stake of 97% in Yugraneft come under control of Alfa Group and BP. NoreX, thereby, saw their possessions dwindle and transferred partly to BP, and appealed for copies of BP documents before a US court. 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.
For a summary of the battle of control over TNK,BP, see: TNK-BP
.
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 million far too high, after the Russian telco Golden Telecom
had declined acquiring URS at a far lower price. 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. 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 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.
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. No dividends were paid after 2003. In February, 2006, Telenor took the issue to a U.S Federal court in New York.On 16 December 2008, Alfa Group resumed normal shareholder activities, joined in the election of a new board of directors, and agreed to pay accumulated dividends. On 11 March 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. Alfa Group was convicted to daily penalties of US$100,000 from 12 March, 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 28 April 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 Ukraine.
and Omsk
have approved Farimex' claims and arrested Telenor's US$1,8 bn worth shares in VimpelCom in March, 2009, 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 Moscow
.
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.
When Minister of foreign affairs Jonas Gahr Støre
visited his Russian colleague Sergej Lavrov in Moscow on 24 March 2009, the strife between Alfa and Telenor was elevated to become the prime issue. Still, Telenor was presented by a claim from the Russian bailiff of US$1.7 bn, on 3 April, 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 widespread, 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. Russia analyst Christopher Granville views the Farimex vs. Telenor case as even more serious to Russias credibility than earlier legal battles. 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.
and list it at the New York Stock Exchange
. The holding company, and thereby VimpelCom and Kyivstar, will be owned 38,84% by Telenor and 38,46% by Altimo. The remaining stock capital, minimum 20%, is to remain free floating at any given time. The two main owners will have three board members each, and let the remaining owners appoint another three members of the Board of directors. That board of nine will appoint the holding company's CEO after an independent, international recruitment process. The agreement depends on all legal disputed concerning VimpelCom and Kyivstar to vanish, and it depends on the Russian Federation to allow Telenor to increase its ownership in VimpelCom.
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 and 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 Alfa Group that same year. Through this US$3.5 bn purchase, Alfa Group exercised control of Turkcell's board of directors already from First quarter, 2006. 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 7 March 2008, and repeated the demand to enter into negotiations with Alfa Group over at transfer of the shares, but with no practical results. On 7 August 2009 the International Chamber of Commerce
issued an award stating that Cukurova must deliver all the remaining shares in Turkcell Holding to TeliaSonera.
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
's largest privately owned investment groups, with interests in oil and gas, commercial and investment banking, asset management, insurance, retail trade, telecommunications, water utilities and special situation investments. Alfa Group's portfolio of companies includes Alfa-Bank, TNK-BP
TNK-BP
TNK-BP is a major vertically integrated Russian oil company. It is Russia's third largest oil producer and among the ten largest private oil companies in the world. TNK-BP is Russia's third largest oil company in terms of reserves and crude oil production...
, VimpelCom, MegaFon
MegaFon
MegaFon ,previously known as North-West GSM, is the second largest mobile phone operator in Russia. It works in the GSM and UMTS standard. Its main competitors are Bee Line GSM and Mobile TeleSystems ....
, X5 Retail Group, A1 Group, Alfa Capital Management, AlfaStrakhovanie Group, and Rosvodokanal Group.
The group was founded in 1989 as Alfa-Eco by Mikhail Fridman
Mikhail Fridman
Mikhail Maratovich Fridman is a Jewish Russian businessman. Mr. Fridman graduated from Moscow Institute of Steel and Alloys in 1986. In 1988 Fridman started his career in trading and financial services before founding Alfa Group Consortium in 1989...
, one of the most influential business leaders in Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
during the Yeltsin presidency and one of the Russian oligarchs, in partnership with German Khan
German Khan
German Borisovich Khan is a Russian businessman with interests in the oil and gas industries. He studied at the . When Alfa Group took over oil giant TNK, it was Khan who was chosen to run the operation...
, Alexei Kuzmichov
Alexei Kuzmichov
Alexey Viktorovich Kuzmichev or Kousmichoff is a Russian businessman...
and several other partners.
Its headquarters are in Moscow
Moscow
Moscow is the capital, the most populous city, and the most populous federal subject of Russia. The city is a major political, economic, cultural, scientific, religious, financial, educational, and transportation centre of Russia and the continent...
. As a holding company, in the financial year ending December 2010 Alfa Group had total assets of US$ 59,900 million, total equity of US$ 21,790 million and profit for the financial year of US$2,810 million. Return on shareholders' equity were recorded at 13.4%.
Ownership structure and joint ventures
Alfa Group has ownership stakes in the following companies and joint ventures:- Alfa-Banking Group, which includes Alfa-Bank Russia, wholly owned commercial and investment bank and one of Russia's largest, private banks, Alfa-Bank Ukraine, one of the ten largest banks in Ukraine, banks in the NetherlandsNetherlandsThe Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
(Amsterdam Trade BankAmsterdam Trade BankAmsterdam Trade Bank is a Dutch bank owned since March 2001 by the Russian Alfa Bank. The company was founded in 1994 as Stolichny Bank International, a subsidiary of the Russian SBS-AGRO Bank, to provide trade financing for companies wishing to do business in Russia and former Soviet states...
), BelarusBelarusBelarus , officially the Republic of Belarus, is a landlocked country in Eastern Europe, bordered clockwise by Russia to the northeast, Ukraine to the south, Poland to the west, and Lithuania and Latvia to the northwest. Its capital is Minsk; other major cities include Brest, Grodno , Gomel ,...
and KazakhstanKazakhstanKazakhstan , officially the Republic of Kazakhstan, is a transcontinental country in Central Asia and Eastern Europe. Ranked as the ninth largest country in the world, it is also the world's largest landlocked country; its territory of is greater than Western Europe...
as well as financial subsidiaries in CyprusCyprusCyprus , officially the Republic of Cyprus , is a Eurasian island country, member of the European Union, in the Eastern Mediterranean, east of Greece, south of Turkey, west of Syria and north of Egypt. It is the third largest island in the Mediterranean Sea.The earliest known human activity on the...
, United KingdomUnited KingdomThe United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
and the United StatesUnited StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
. - AlfaStrakhovanie Group, one of the largest Russian insurers with a diversified portfolio of comprehensive business and retail insurance products.
- X5 Retail Group, the largest food retail operator in RussiaRussiaRussia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
in terms of sales. Operates Pyaterochka, one of the largest discount grocery retailers in RussiaRussiaRussia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
in terms of sales, Perekrestok, which runs a leading chain of supermarkets in Russia, Kopeyka, a leading discount grocery retailer, and Karusel, one of the largest hypermarket chains in Russia. Listed on London Stock Exchange under the symbol FIVE. Alfa Group owns 47.86% of the company, 19.85% stake belongs to the founders of Pyaterochka. - TNK-BPTNK-BPTNK-BP is a major vertically integrated Russian oil company. It is Russia's third largest oil producer and among the ten largest private oil companies in the world. TNK-BP is Russia's third largest oil company in terms of reserves and crude oil production...
, one of the top ten privately-owned oil companies in the world in terms of crude oil production. The company was formed in 2003 as a result of the merger of BPBPBP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
's Russian oil and gas assets and the oil and gas assets of Alfa Group, Access Industries and Renova Group (AAR). BPBPBP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
and AAR each own 50% of TNK-BP. - VimpelCom, one of the world's largest groups of integrated telecommunications services operators. Listed on the New York Stock ExchangeNew York Stock ExchangeThe New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
under the sympol VIP. Alfa through AltimoAltimoAltimo is the telecoms investment arm of Russia's Alfa Group Consortium, controlled by Russian oligarch Mikhail Fridman. Altimo invests in Russia, the CIS and Turkey, operating in the field of mobile and fixed-line communications. Altimo was launched in London on 1 December 2005. Before then,...
owns 24.998%, NorwegianNorwayNorway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
telco TelenorTelenorTelenor Group is the incumbent telecommunications company in Norway, with headquarters located at Fornebu, close to Oslo. Today, Telenor Group is mostly an international wireless carrier with operations in Scandinavia, Eastern Europe and Asia, working predominantly under the Telenor brand...
owns 25.007% of shares, and 29.626% stake is owned by Weather InvestmentsWeather InvestmentsWind Telecom S.p.A. , is a privately held telecommunications investment company previously 97% controlled by the Sawiris family Wind Telecom S.p.A. (former Weather Investments S.p.A), is a privately held telecommunications investment company previously 97% controlled by the Sawiris family Wind...
of Sawiris familySawiris FamilySawiris Family is an Egyptian Coptic family that owns the Orascom group of businesses including telecommunications, construction, tourism, industries and technology.Onsi Sawiris , now retired, is the patriarch of the family....
. - MegaFonMegaFonMegaFon ,previously known as North-West GSM, is the second largest mobile phone operator in Russia. It works in the GSM and UMTS standard. Its main competitors are Bee Line GSM and Mobile TeleSystems ....
, one of the three largest mobile operators in Russia. Alfa Group through Altimo owns 25.1% stake, while SwedishSwedenSweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
telco TeliaSoneraTeliaSoneraTeliaSonera AB is the dominant telephone company and mobile network operator in Sweden and Finland. The company has operations in other countries in Northern, Eastern Europe, Central Asia and Spain, with a total of 150 million mobile customers...
controls 36% stake and 31% of shares are controlled by AF Telecom Holding. - TurkcellTurkcellTurkcell is the leading mobile phone operator of Turkey, based in Istanbul. The company has 34.1 million subscribers as of June 30th, 2011.- Company background :...
, TurkeyTurkeyTurkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
's largest mobile operator. Alfa Group controls 13.22% stake in the company with SwedishSwedenSweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
telco TeliaSoneraTeliaSoneraTeliaSonera AB is the dominant telephone company and mobile network operator in Sweden and Finland. The company has operations in other countries in Northern, Eastern Europe, Central Asia and Spain, with a total of 150 million mobile customers...
. - Rosvodokanal Group, a leading private operator of water utilities in Russia and CIS.
- A1 Group, former Alfa-Eco, wholly owned special situations investment company.
- Alfa Capital Management, an asset management company, which serves Russian as well as international institutional and private clients.
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
Legal disputes
Over 10 years, Alfa Group has found itself in legal battle with business partners from CanadaCanada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
(NoreX), Great Britain
Great Britain
Great Britain or Britain is an island situated to the northwest of Continental Europe. It is the ninth largest island in the world, and the largest European island, as well as the largest of the British Isles...
(BP), Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
(TeliaSonera), Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
(Telenor), Turkey
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
and Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
. Federal Reserve executive Paul Volcker
Paul Volcker
Paul Adolph Volcker, Jr. is an American economist. He was the Chairman of the Federal Reserve under United States Presidents Jimmy Carter and Ronald Reagan from August 1979 to August 1987. He is widely credited with ending the high levels of inflation seen in the United States in the 1970s and...
has accused Alfa Group of violation of the UN sanctions against Iraq
Iraq
Iraq ; officially the Republic of Iraq is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert....
during Saddam Hussein
Saddam Hussein
Saddam Hussein Abd al-Majid al-Tikriti was the fifth President of Iraq, serving in this capacity from 16 July 1979 until 9 April 2003...
's regime, and for pressure exercised against KPMG
KPMG
KPMG is one of the largest professional services networks in the world and one of the Big Four auditors, along with Deloitte, Ernst & Young and PwC. Its global headquarters is located in Amstelveen, Netherlands....
during their investigation of a Bermuda
Bermuda
Bermuda is a British overseas territory in the North Atlantic Ocean. Located off the east coast of the United States, its nearest landmass is Cape Hatteras, North Carolina, about to the west-northwest. It is about south of Halifax, Nova Scotia, Canada, and northeast of Miami, Florida...
registered, Russian telecom company.
Dispute with NoreX and BP
Alfa Group's legal disputes with BPBP
BP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
date back to 1991, when the Canadian
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
oil company Norex
Norex
Norex is a Canadian web design company based in Halifax, Nova Scotia. They are known for providing services such as graphic design, website design, flash animation, content management systems, and web hosting....
represented a newly formed, Russian-Canadian joint venture in Siberia
Siberia
Siberia is an extensive region constituting almost all of Northern Asia. Comprising the central and eastern portion of the Russian Federation, it was part of the Soviet Union from its beginning, as its predecessor states, the Tsardom of Russia and the Russian Empire, conquered it during the 16th...
'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 bankruptcy by the Tyumen Oil Company (TNK). The arbitration court of Khanty-Mansinsk proclaimed for Chernegorneft a new chief executive officer, with a background from Alfa Group. 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 million held by EBRD was reduced to US$9 million by Khanty-Mansijsk arbitration court on 30 July 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. 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 million for Chernegorneft - a mere fifth of its assumed value. On 26 November 1999, TNK took over all of Chernorogneft for US$172 million.
Letters of protest from prime minister Tony Blair
Tony Blair
Anthony Charles Lynton Blair is a former British Labour Party politician who served as the Prime Minister of the United Kingdom from 2 May 1997 to 27 June 2007. He was the Member of Parliament for Sedgefield from 1983 to 2007 and Leader of the Labour Party from 1994 to 2007...
to president Vladimir Putin
Vladimir Putin
Vladimir Vladimirovich Putin served as the second President of the Russian Federation and is the current Prime Minister of Russia, as well as chairman of United Russia and Chairman of the Council of Ministers of the Union of Russia and Belarus. He became acting President on 31 December 1999, when...
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 over 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 rightful 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
Transneft
Transneft is a Russian state-owned business responsible for the national oil pipelines. It was founded in 1993 and owns the largest oil pipeline system in the world, with a total network length of almost...
. On 11 April and 26 June 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 nullification of the voting powers in 497,142 out of the 600,000 shares held by NoreX. At an extraordinary annual assembly of Yugraneft on 28 June, 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 assembly protocol, installing Mr. A. Berman as CEO of Yugraneft. Norex' demands for investigation and nullification remained fruitless. Norex brought the case before a U.S. Federal court in New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
in February, 2002, demanding US$1.5 bn in redemption from TNK and Alfa Group.
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 11 February 2003. The merger implied that NoreX' stake of 97% in Yugraneft come under control of Alfa Group and BP. NoreX, thereby, saw their possessions dwindle and transferred partly to BP, and appealed for copies of BP documents before a US court. 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.
For a summary of the battle of control over TNK,BP, see: TNK-BP
TNK-BP
TNK-BP is a major vertically integrated Russian oil company. It is Russia's third largest oil producer and among the ten largest private oil companies in the world. TNK-BP is Russia's third largest oil company in terms of reserves and crude oil production...
.
Dispute with Telenor
Alfa started investing in VimpelCom in summer, 2001. The power-broking between Alfa group and TelenorTelenor
Telenor Group is the incumbent telecommunications company in Norway, with headquarters located at Fornebu, close to Oslo. Today, Telenor Group is mostly an international wireless carrier with operations in Scandinavia, Eastern Europe and Asia, working predominantly under the Telenor brand...
in VimpelCom started 2004, when Alfa proposed that VimpelCom acquire a larger share in Ukrainian RadioSystems (URS), a small GSM operator in Ukraine
Ukraine
Ukraine is a country in Eastern Europe. It has an area of 603,628 km², making it the second largest contiguous country on the European continent, after Russia...
operating under the brand «WellCom». Telenor found the price of US$132 million far too high, after the Russian telco Golden Telecom
Golden Telecom
Golden Telecom is a trademark of EDN Sovintel, LLC , of Russia.In 2008, Sovintel was acquired by Vimpelcom .-Golden Telecom Inc.:Golden Telecom Inc. is an offshore company to support operations of Golden Telecom.-History:...
had declined acquiring URS at a far lower price. In October, 2004, a minor shareholder of VimpelCom lodged three law-suits against Telenor in the provinsial city of Krasnodar
Krasnodar
Krasnodar is a city in Southern Russia, located on the Kuban River about northeast of the Black Sea port of Novorossiysk. It is the administrative center of Krasnodar Krai . Population: -Name:...
in Siberia
Siberia
Siberia is an extensive region constituting almost all of Northern Asia. Comprising the central and eastern portion of the Russian Federation, it was part of the Soviet Union from its beginning, as its predecessor states, the Tsardom of Russia and the Russian Empire, conquered it during the 16th...
, 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. After the trial, Alfa Group declined during four years to take part in the board of managers meetings in Ukrainian Kyivstar
Kyivstar
Kyivstar is the largest mobile phone operator in Ukraine, serving 24,944,592 subscribers as of October 2010. Kyivstar's wireless network operates using the GSM standard and provides coverage accessible by approximately 99% of the Ukrainian population....
, 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
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
, 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
Geneva
Geneva In the national languages of Switzerland the city is known as Genf , Ginevra and Genevra is the second-most-populous city in Switzerland and is the most populous city of Romandie, the French-speaking part of Switzerland...
, Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
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
Golden Telecom
Golden Telecom is a trademark of EDN Sovintel, LLC , of Russia.In 2008, Sovintel was acquired by Vimpelcom .-Golden Telecom Inc.:Golden Telecom Inc. is an offshore company to support operations of Golden Telecom.-History:...
which operates in both Russia and Ukraine, and in Ukraine's major mobile operator Kyivstar GSM, and in Turkish
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
Turkcell
Turkcell
Turkcell is the leading mobile phone operator of Turkey, based in Istanbul. The company has 34.1 million subscribers as of June 30th, 2011.- Company background :...
which owns a stake in the Ukrainian mobile operator Astelit
Astelit
life:) is the third largest Ukrainian mobile telephone network operator, behind MTS Ukraine and Kyivstar, covering the territory where 97.2% of population lives....
. Telenor and Alfa disagree over the latter's ownership in three of Kyivstar's competitors in the Ukrainian market.
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
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
, 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. No dividends were paid after 2003. In February, 2006, Telenor took the issue to a U.S Federal court in New York.On 16 December 2008, Alfa Group resumed normal shareholder activities, joined in the election of a new board of directors, and agreed to pay accumulated dividends. On 11 March 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. Alfa Group was convicted to daily penalties of US$100,000 from 12 March, 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 28 April 2009, the New York court ruled that Alfa Group had submitted to the legal rulings. Judge Gerard E. Lynch
Gerard E. Lynch
Gerard Edmund Lynch is a United States federal judge on the United States Court of Appeals for the Second Circuit. He was confirmed to that seat on September 17, 2009 after previously having been appointed in 2000 by President Bill Clinton to serve on the United States District Court for the...
established that Alfa Group had reduced their ownership in competing mobile operations in 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 Ukraine. Courts in Khanty-MansiyskKhanty-Mansiysk
Khanty-Mansiysk experiences a subarctic climate . The climate is extreme, with temperatures as low as -49 C° and as high as 34.5 C°. On average, however, the region is very cold, with an average tempurature of -1.1 C°...
and Omsk
Omsk
-History:The wooden fort of Omsk was erected in 1716 to protect the expanding Russian frontier along the Ishim and the Irtysh rivers against the Kyrgyz nomads of the Steppes...
have approved Farimex' claims and arrested Telenor's US$1,8 bn worth shares in VimpelCom in March, 2009, but Telenor refuses to accept the legal premises and appeals the verdicts to the regional court of Tyumen
Tyumen
Tyumen is the largest city and the administrative center of Tyumen Oblast, Russia, located on the Tura River east of Moscow. Population: Tyumen is the oldest Russian settlement in Siberia. Founded in 16th century to support Russia's eastward expansion, the city has remained one of the most...
, which is the last court of appeal before the federal level in Moscow
Moscow
Moscow is the capital, the most populous city, and the most populous federal subject of Russia. The city is a major political, economic, cultural, scientific, religious, financial, educational, and transportation centre of Russia and the continent...
.
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.
When Minister of foreign affairs Jonas Gahr Støre
Jonas Gahr Støre
Jonas Gahr Støre is the Norwegian Minister of Foreign Affairs, having been appointed to Jens Stoltenberg's second cabinet on 17 October 2005. He represents the Norwegian Labour Party.-Personal life:...
visited his Russian colleague Sergej Lavrov in Moscow on 24 March 2009, the strife between Alfa and Telenor was elevated to become the prime issue. Still, Telenor was presented by a claim from the Russian bailiff of US$1.7 bn, on 3 April, 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 widespread, 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. Russia analyst Christopher Granville views the Farimex vs. Telenor case as even more serious to Russias credibility than earlier legal battles. 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.
Agreement
In early October 2009, it became evident that Altimo (Alfa) and Telenor had for some time conducted negotiations for a solution to their conflicts. On 5 OCtober, it was communicated that written agreement had been reached, to establish a joint holding company for VimpelCom and Kyivstar, named VimpelCom Ltd. The agreement says that the two main owners establish VimpelCom Ltd in AmsterdamAmsterdam
Amsterdam is the largest city and the capital of the Netherlands. The current position of Amsterdam as capital city of the Kingdom of the Netherlands is governed by the constitution of August 24, 1815 and its successors. Amsterdam has a population of 783,364 within city limits, an urban population...
and list it at the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
. The holding company, and thereby VimpelCom and Kyivstar, will be owned 38,84% by Telenor and 38,46% by Altimo. The remaining stock capital, minimum 20%, is to remain free floating at any given time. The two main owners will have three board members each, and let the remaining owners appoint another three members of the Board of directors. That board of nine will appoint the holding company's CEO after an independent, international recruitment process. The agreement depends on all legal disputed concerning VimpelCom and Kyivstar to vanish, and it depends on the Russian Federation to allow Telenor to increase its ownership in VimpelCom.
Dispute with TeliaSonera
Alfa Group and Swedish-Finnish TeliaSoneraTeliaSonera
TeliaSonera AB is the dominant telephone company and mobile network operator in Sweden and Finland. The company has operations in other countries in Northern, Eastern Europe, Central Asia and Spain, with a total of 150 million mobile customers...
jointly own the Turkish
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
mobile operator Turkcell
Turkcell
Turkcell is the leading mobile phone operator of Turkey, based in Istanbul. The company has 34.1 million subscribers as of June 30th, 2011.- Company background :...
, and the Russian mobile operator MegaFon
MegaFon
MegaFon ,previously known as North-West GSM, is the second largest mobile phone operator in Russia. It works in the GSM and UMTS standard. Its main competitors are Bee Line GSM and Mobile TeleSystems ....
.
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
Çukurova
Çukurova , historically known as Cilicia, is a geographic, economic and cultural region in south-central Turkey, covering the provinces of Mersin, Adana, Osmaniye and Hatay...
. TeliaSonera and 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 Alfa Group that same year. Through this US$3.5 bn purchase, Alfa Group exercised control of Turkcell's board of directors already from First quarter, 2006. In January, 2007, a court of appeal in Geneva
Geneva
Geneva In the national languages of Switzerland the city is known as Genf , Ginevra and Genevra is the second-most-populous city in Switzerland and is the most populous city of Romandie, the French-speaking part of Switzerland...
, Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
, 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
Vienna
Vienna is the capital and largest city of the Republic of Austria and one of the nine states of Austria. Vienna is Austria's primary city, with a population of about 1.723 million , and is by far the largest city in Austria, as well as its cultural, economic, and political centre...
, Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
confirmed this ruling on 7 March 2008, and repeated the demand to enter into negotiations with Alfa Group over at transfer of the shares, but with no practical results. On 7 August 2009 the International Chamber of Commerce
International Chamber of Commerce
The International Chamber of Commerce is the largest, most representative business organization in the world. Its hundreds of thousands of member companies in over 130 countries have interests spanning every sector of private enterprise....
issued an award stating that Cukurova must deliver all the remaining shares in Turkcell Holding to TeliaSonera.
Links to the Icelandic financial crisis
Alfa Bank has a Luxembourg-registered subsidiary Alfa Finance Holdings. The company's document trail shows that Shapburg Limited was a shareholder of Alfa Finance Holdings. Shapburg Limited is an anonymous Luxembourg-registered company which has been suspected of controlling important Icelandic companies. The finding was reported in 2005.External links
Alfa Group official website Alfa Group official website- TeliaSonera initiates legal action against Russian Alfa Group 28 November 2005
- Western Operators Warned to Beware Altimo's Business Record 14 December 2005
- Shareholder dispute could drive Kyivstar into technical default 11 April 2007
- Telenor steps up fight on Altimo 'propaganda' 30 March 2007
- BP, Russian billionaires, and the Kremlin: a Power Triangle that never was 23 November 2011