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Telenor Commences New York Arbitration against Alfa for Violating Kyivstar Shareholders Agreement


(Fornebu, Norway and Kyiv, Ukraine, 8 February, 2006) -- Telenor has commenced an arbitration proceeding against Alfa Group subsidiary Storm LLC in connection with Storm’s violations of the Shareholders Agreement relating to Ukrainian mobile operator Kyivstar G.S.M.

Telenor is the majority owner of Kyivstar, holding 56.5% of the shares, while Storm holds a 43.5% interest.

“Just over one year after negotiating and signing the Shareholders Agreement, Alfa tried to undermine it by going to court in Ukraine, despite having agreed to arbitrate any such disputes under New York law,” said Executive Vice President and head of Telenor’s operations in Central and Eastern Europe, Mr. Jan Edvard Thygesen. “While Alfa will likely try to portray this as an attempt by Telenor to prevent competition in Ukraine, our sole objective is to vigorously defend our investment in Kyivstar and our rights under the Shareholders Agreement,” added Thygesen. Telenor, Storm and Kyivstar are all parties to the Shareholders Agreement.

The agreement is governed by New York law and explicitly states that all disputes between the parties should be settled by arbitration in New York under the UNCITRAL rules (United Nations Commission on International Trade Law). In its claim filed yesterday, Telenor states that Storm and its affiliates violated the Shareholders Agreement in several ways, namely by:

Storm and its affiliates filing a number of lawsuits in Ukraine in an effort to undermine the Shareholders Agreement and Kyivstar’s charter, despite having agreed to settle all disputes by arbitration;

Storm’s failure to attend both annual and extraordinary meetings of Kyivstar shareholders, despite agreeing to make good faith efforts to do so;

The failure of Storm’s nominees on the Board of Directors of Kyivstar to attend meetings of the Kyivstar Board, again, after agreeing to do so; and

The acquisition by Storm affiliate Alfa Telecom of a 13.2% interest in Turkcell Iletisim Hizmetleri A.S. (which, in turn, controls Ukrainian mobile operator Astelit LLC) in violation of Storm’s agreement that neither it nor any of its affiliates would acquire, directly or indirectly, more than a 5% interest in any Ukrainian mobile operator other than Kyivstar.

As part of its arbitration claim, Telenor seeks an arbitration award that will make Alfa, Storm and their affiliates comply with the terms of the Shareholders Agreement and among other things, require Storm and its nominees on the Kyivstar Board to attend future shareholder and board meetings, and Storm and its affiliates to cease the commencement or further pursuit of all court actions in Ukraine.

“The refusal by Alfa’s management to abide by their own written agreements whenever it suits them is at odds with global standards of business conduct,” said Thygesen. “We are exercising our legal rights under the Shareholders Agreement to make Alfa comply and end their attempts at interference with Kyivstar’s governance. Regrettably, we have come to the conclusion that we have to defend our investments from these hostile attacks, both in Ukraine and in Russia, by pursuing litigation and arbitration against Alfa. We will not tolerate partners who violate written agreements.”


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