"Standard & Poor's Governance Services said today it placed its corporate governance score (CGS) of 'CGS-7' and its Russia national scale CGS of 'CGS-7.4' on Russian mobile telecommunications operator Vimpel-Communications (JSC) (VimpelCom) on GovernanceWatch with negative implications," the agency said.
VimpelCom (RTS ticker: VIMPG), Russia's second largest mobile phone operator, is jointly owned by Norwegian operator Telenor, and Altimo, the telecom arm of Russia's Alfa Group. The conflict between Telenor and Alfa Group erupted over VimpelCom's plans to enter the Ukrainian cell phone market.
Alfa Group supported a VimpelCom deal to acquire Ukrainian Radio Systems, a leading cell phone operator in Ukraine. However, Telenor was against the deal saying it was overpriced.
The deal was struck in the fall of 2005 and in January 2006 Telenor filed three lawsuits with a Moscow arbitration court against VimpelCom to challenge the deal.
Recently VimpelCom sent an offer to Telenor and Altimo, the telecoms arm of Alfa Group, to buy a 100% stake in Kyivstar GSM, another Ukrainian mobile operator, to end the dispute. Telenor and Alfa Group are the core shareholders of Kyivstar. If the deal is approved, VimpelCom intends to merge two Ukrainian operators into one business.
VimpelCom is best known for the Beeline trademark, one of Russia's most popular mobile operators. Telenor holds 26.6% of shares in VimpelCom, whereas Russia's leading private equity group Altimo (previously named Alfa Telecom), the telecoms arm of financial and industrial holding Alfa Group, holds a 32.9% stake.
S&P governance analyst Oleg Shvyrkov said: "This aggravating confrontation between VimpelCom's shareholders may have negative consequences for the company's governance, with potential for the CGS to be lowered."
"Standard & Poor's expects the GovernanceWatch to be resolved as the outcome of both the current disputes and the bid for Kyivstar becomes clearer. A GovernanceWatch placement is used to highlight the fact that identifiable governance events and short-term trends have caused a CGS to be reviewed. GovernanceWatch does not mean that a change to the CGS is inevitable. Changes to the CGS may occur without the CGS having first being placed on GovernanceWatch," the agency said.
