Russia's Alfa Group to sue Ukrainian cell phone network operator

Russia's Alfa Group financial-industrial holding filed suit in Ukraine over alleged violations of its rights as a shareholder in mobile phone network operator Kyivstar, a joint venture with Norway's Telenor ASA holding 56.5 percent, and Alfa holding 43.5 percent.

The two companies are already involved in a dispute over strategy at OAO Vimpel Communications in Russia, where they are also the largest two shareholders.

Alfa claims that various provisions of Kyivstar's company statutes violate Ukrainian law, notably one that requires minority shareholders' representatives on the board to vote for the majority shareholder's choice of candidate for chief executive officer.

Alfa also alleges that Kyivstar is paying "millions of dollars" unnecessarily to Telenor every year for management services.

"This is far in excess of the market value of the services provided," Alfa said in a statement. "In addition, the services of the management provided don't meet professional standards."

Alfa's announcement comes a week after it withdrew from an extraordinary general meeting of Vimpelcom shareholders that it itself had called, a move that left the meeting without quorum.

Alfa had sought to secure support from a majority of disinterested shareholders for its attempts to have Vimpelcom buy Ukrainian Radiosystems, operator of the Wellcom mobile phone network in Ukraine.

Telenor's representatives on the board of Vimpelcom have blocked the acquisition, which would bring Vimpelcom into direct competition with Kyivstar, Ukraine's second-largest mobile phone network operator, the AP reports.