Telenor Will Continue To Defend Its Investment in VimpelCom

Press release
4 minute read
(Fornebu, Norway and Omsk, Russia - 20 February 2009) Telenor has said it will appeal today's decision of the Eighth Arbitrazh Appellate Court in Omsk holding Telenor liable for approximately US$1.7 billion in damages. The Omsk court has heard from the start the claim by Farimex Products, Inc., a British Virgin Islands company, against Telenor, in which Farimex alleged that Telenor's nominees on the VimpelCom Board delayed VimpelCom's acquisition of Ukrainian mobile operator Ukrainian Radio Systems (URS). Despite the fact that the claims against Telenor are baseless and unlawful, the Court decided to grant Farimex's claims in part.
"Today's court decision is a serious violation of Telenor's lawful rights and interests as a strategic investor in Russia. We will continue to defend our investment in VimpelCom using all legal means available," said Jan Edvard Thygesen, Executive Vice-President and head of Telenor's Central and Eastern European operations. "Since 1998, Telenor has acted in the interests of VimpelCom, and we have repeatedly pointed out that this suit is an illegal attempt to steal Telenor's investment in Russia."

In April 2008, Farimex, an obscure company registered in the British Virgin Islands and owning just 0.002% of Vimpelcom shares in the form of ADRs (American Depositary Receipts), filed a claim for US$3.8 billion against Telenor in the Khanty-Mansiysk Autonomous District. Following a number of hearings marked by significant procedural violations, the Khanty-Mansiysk court ruled that Telenor should pay damages of approximately US$2.8 billion. Telenor appealed the decision to the Eighth Arbitrazh Appellate Court, which considered the appeal and vacated the Khanty-Mansiysk court's decision, ruling that the case should be heard de novo in Omsk. The Eighth Arbitrazh Appellate Court has now heard the case and today ruled that Telenor is liable for US$1,728,297,207 in damages. The Court denied Farimex's motion to arrest Telenor's VimpelCom shares, but said that the damage claim can be enforced by both VimpelCom and Farimex.

In its suit, Farimex alleged that Telenor-nominated members of VimpelCom's Board of Directors delayed VimpelCom's 2005 acquisition of Ukrainian Radio Systems (URS), a loss-making Ukrainian mobile operator. Telenor says its Board members opposed the acquisition because URS was over-valued and had no credible business plan, and because there was a lack of transparency in the deal.

At the time of the proposed acquisition, URS was a small mobile operator in a market with a high level of penetration. Based on the multiples used to value comparable assets, URS's US$231.3 million purchase price was too high. In addition, URS was being sold by five offshore companies whose beneficial owners are still unknown. Currently, despite investments made by VimpelCom in excess of US$600 million, URS continues to make losses and, as of December 31, 2008, had only a 4% market share (source: AC&M Consulting).

Further information:
Dag Melgaard, Communications Manager, Telenor ASA
tel: +47 901 92 000

Anna Ivanova-Galitsina, PR and Communications Director, Telenor Russia