ZAO Ukrainian Radio Systems has a licence for providing cellular communication services of GSM 900 standard on the whole territory of Ukraine. The company has operated since October 1998 under trademarks WellCOM and Mobi, having over 100,000 subscribers. The company’s networks cover 40 Ukrainian towns. 31 percent stake of Ukrainian Radio Systems pertains to Kiev-based Ukrfondinvest, 20 percent - to Ravenskroft Holding Ltd (British Virginia Islands), 24,5 percent is owned by Occidental Management Co. Ltd (Cyprus), another 24,5 percent – by Optima Telecom Inc (USA).

The Ukrainian Antimonopoly Committee declared last week that it was considering the possibility of Ukrainian Radio Systems’ purchase by Russian VimpelCom. “As far as the purchase of Ukrainian Radio Systems by VimpelCom is concerned, it is being discussed by the committee. A reasoned decision will be made after the study of documents,” the antimonopoly committee’s press service told Kommersant. In terms of law this announcement means that the parties are close to the conclusion of the deal. At least all the documents needed were handed in to the committee with the request for the bargain’s approval. “It is serious and significant that antimonopoly organs have endorsed the deal,” Eldar Nazmutdinov, senior legal expert at Prospect investment company, says. “The fact that the application has been filed means that the parties are in the final stage of the talks.

At the same time, it is known that one of VimpelCom’s shareholders, Norwegian Telenor, is against the deal. It owns 26,6 percent stake of VimpelCom and is represented by three of the total eight members of the company’s board of directors. According to the charter, in line with which VimpelCom’s board of directors acts, the purchase of Ukrainian Radio Systems must be endorsed by at least six out of eight members of the board, i.e. Telenor can block the deal. To all appearances, this is what the Norwegian company is doing now in order to avoid the conflict of interest in the Ukrainian market. Telenor owns 56,5 percent stake of the Ukrainian cellular operator Kievstar GSM. The appearance in the Ukrainian market of such a large Russian player as VimpelCom would entail an inevitable competition between these two operators.

Telenor’s stance on the appearance of VimpelCom in Ukraine was the same yesterday, which baffled the analysts who are certain that the deal is never to be closed without the approval of Telenor. “It’s unclear why the Antimonopoly Committee makes such declarations, since Telenor has an opportunity to block the purchase of Ukrainian Radio Systems,” Alexey Yakovitsky thinks. “What is more, Telenor will take advantage of this opportunity without fail,” Konstantin Chernyshev, senior analyst at Uralsib, is of the same opinion.

On the other hand, VimpelCom’s entering the Ukranian market, is advantageous to another larger shareholder of the company – Alfa Group that controls its 32 percent stake. Analysts suppose that it was in favour of Alfa Group that the District Court of Temryuk (Krasnodar Region) obliged VimpelCom January this year to alter its charter of the board of directors so that four of eight votes are enough for the purchase of Ukrainian Radio Systems. And yet, this ruling doesn’t bring the acquisition of Ukrainian Radio Systems near. Not only is VimpelCom going to appeal from the judgment of Temryuk’s court (the hearing is to take place at the Moscow Arbitration Court), but Telenor as well. Norwegian company’s representatives have filed an appeal for the actions of the Temryuk District Court to the Russian Supreme Court.

In these circumstances, the purchase of Ukrainian Radio Systems by VimpelCom seems unlikely, let alone will it go smoothly if it will happpen after all. As for the declaration of the Ukrainian Antimonopoly agencies, it only proves the aggravation of the contradictions between VimpelCom’s shareholders, since one of the shareholders is preparing to close a deal opposed by another.

Pavel Kulikov, head of Alfa Telecom, commented on the news yesterday by a short phrase, “We welcome the declaration of Ukraine’s antimonopoly agencies.”

Still, a number of analysts see some slight chance of Telenor’s letting VimpelCom buy Ukrainian Radio Systems. “The competition in the cellular market is getting stiffer. A larger operator Turkcell has lately entered it and badly needs GSM 900 licence embracing the whole Ukraine,” Alexey Yakovitsky underscores. “Ukrainian Radio Systems has this license. If Turkcell obtains this license, it would be much easier for the company to develop, while its rivals (among which is Kievstar GSM) will encounter many difficulties. In this case Telenor may come to an agreement with Alfa approving the purchase of Ukrainian Radio Systems by VimpelCom.

© Dmitry Zakharov, "Kommersant"