Russian Telco Altimo’s Past To Haunt India Plans

RUSSIAN TELCO ALTIMO’S PAST TO HAUNT INDIA PLANS

TMCnet
August 12, 2008

(Ecomonic Times, The (India) (KRT) Via Acquire Media NewsEdge)
Aug. 12–NEW DELHI — In a development that could jeopardise Russian
telco Altimo’s plans of entering India, the home ministry (MHA) has
said the company is embroiled in lawsuits and faces allegations of
fraud, corruption and bribery.

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It has also said its parent company, the Alpha Group, is under
investigation by European anti-money laundering agencies, in
addition to being named in the Volcker Report in connection with the
oil-for-food scandal. These observations were made by the ministry
while rejecting the foreign investment proposal of a company with
which the Alpha Group jointly owns a bank.

Altimo owns a 44 percent stake in VimpelCom and 25 percent in
Megafon, which together control more than 80 percent of the Russian
communications market. It has been looking to establish a toehold
in India for the past two years, and is reported to have been in
talks with realty major Unitech to pick up a 26 percent stake in its
telecom arm.

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The telecom firm, in the past, has been linked to several other
companies which were awarded telecom licences recently. Last year,
Altimo was among the five bidders to acquire a controlling stake
in Hutchison Essar, but the deal eventually went to British giant
Vodafone. Following its failure, Altimo, in a statement, had said
it had borrowed $1.5 billion from Deutsche Bank to expand in a
fast-growing market like India.

However, the home ministry’s observations that Altimo and its parent
company, Alpha, have a "tainted background" could become a stumbling
block for their India plans.

The Alpha Group, controlled by Russian oligarch Mikhail Friedman,
is one of the largest conglomerates in the world with interests in
oil and gas, commercial and investment banking, asset management,
insurance, retail trade, telecommunications, technology and media.

The consortium has been entangled in a series of controversies, the
latest being the fight with British Petroleum over control of TNK-BP,
one of Russia’s largest oil and gas companies.

Altimo’s valuation is pegged at over $30 billion and has a customer
base, through all its subsidiaries, of over 150 million. For the
past three years, Altimo has been locked in a legal dispute with
Norwegian telecom major Telenor over VimpelCom in which Telenor
has about 30 percent. VimpelCom, through its different arms, has
operations in Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan,
Georgia and Armenia.

The government’s strong views on Altimo came to light when Meta
Telecom, which has been issued national and international licences by
the Department of Telecom, sought the Foreign Investment Promotion
Board’s (FIPB) nod to permit Cyprus-based Daltotrade to raise its
foreign holding in the company to 74 percent from the current 40
percent.

The home ministry, in its report to FIPB, pointed out that Daltotrade
owned 42.7 percent in Belarus-based Mezhtorgbank, adding that the
Alpha Group also held a 40 percent stake in the bank. The report
added that according to the US Centre for Public Integrity, Alpha
Group president Mikhail Friedman and his colleague Pyotr Aven were
involved in drug trafficking on a global scale.

Another possible reason for FIPB to reject the proposal could be based
on the department of revenue’s report. It said Meta Telecom has only
provided skeletal information about Daltotrade and key details like
the company’s financial credibility and sources of funds had not
been furnished.

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