VimpelCom offered US$105 a share for the Russian Internet, voice and data provider, 3.5% higher than the closing price 30 November, the Moscow-based companies said in a joint statement. They are «in discussions regarding the potential acquisition of all the outstanding common stock’’ of Golden Telecom, according to the statement.

"It will become Russia’s first integrated fixed and mobile phone holding of a national scale," Konstantin Belov, a telecommunications analyst with UralSib Financial Corp. said in a telephone interview in Moscow today. "The news should support both stocks short term."

VimpelCom, which had more than 61 million subscribers at the end of October in Russia, Armenia, Kazakhstan, Ukraine, Tajikistan, Uzbekistan and Georgia, wants to branch out in more markets and into services such as broadband Internet. Golden Telecom said Nov. 8 it had 394,900 broadband Internet subscribers in Russia and plans to become the leading high-speed Internet provider in the nation and in other former Soviet countries.

Golden Telecom has said it will spend more than US$1 billion expanding fiber-optic networks to cover 65 Russian cities with a total population of 65 million.

Neither Golden Telecom Chief Executive Officer Jean-Pierre Vandromme or VimpelCom CEO Alexander Izosimov was available for comment today.

VimpelCom Strategy

Izosimov told reporters in Moscow 29 Novemberthat "everyone is looking with big interest at the possibility of such an integration" between a fixed-line and a mobile-phone operator, but "no one has done anything in reality yet."

Last year VimpelCom bought Armentel, a fixed-line and mobile-phone operator in Armenia.

"One of the tasks we have set before ourselves in Armenia is to try to make something and try out our strength on the market with an integrated product," he said last week. "So far, we don’t have anything to boast about."

Golden Telecom went public in 1999 on the Nasdaq Stock Market in the U.S. Its parent at the time was Global TeleSystems Group Inc., a U.S.-based phone company backed by billionaire George Soros. Golden Telecom shares rose US$2.84, or 2.8%, to US$104.30 as of 1:27 p.m. in New York. VimpelCom shares rose 1.7% to US$34.16, valuing the company at US$35 billion.

Golden Telecom Growth

Golden Telecom, which also operates in Ukraine, Kazakhstan and Uzbekistan, said Nov. 8 that its third-quarter profit more than tripled to US$74.4 million on sales of US$350.4 million. The company in May bought Corbina Telecom, a Moscow-based broadband Internet provider, to profit from the growing demand in the Russian capital.

Golden Telecom raised its forecast for the%age growth in full-year sales to the high 40s from the mid 40s. Growth in earnings before interest, tax, depreciation and amortization will be about 40%, the company said.

"We have to see what form it takes to identify our strategy," Mikhail Shamolin, vice president at OAO Mobile TeleSystems, VimpelCom’s larger rival in Russia, said in a telephone interview today. "There are more questions than answers so far."

Feuding Shareholders

Telenor ASA, Norway’s largest phone company, holds 29.9% in VimpelCom and 18.3% in Golden Telecom. Altimo, the telecommunications unit of billionaire Mikhail Fridman’s Alfa Group, holds 44% in VimpelCom and 26.6% in Golden Telecom.

Telenor and Altimo have repeatedly clashed over their holdings in Russia and Ukraine. The companies co-own ZAT Kyivstar GSM, Ukraine’s largest mobile-phone provider.

Kjell-Morten Johnsen, a VimpelCom and Golden Telecom board member and Russian head of Telenor, wasn’t immediately available for comment. Kirill Babayev, a vice president at Altimo, also was unavailable.

VimpelCom and Golden Telecom said the deal will have to be approved by the boards of both companies and that there is "no assurance that the discussions will lead to a definitive agreement or that a transaction will be consummated."

The possible purchase of Golden Telecom by VimpelCom is part of "a larger picture of Telenor and Altimo resolving their long- standing conflicts," UralSib’s Belov said.

A New York arbitrator in August ruled that an Alfa subsidiary breached the Kyivstar shareholder agreement by failing to attend board meetings and by owning or controlling more than 5% of competing wireless operators in Ukraine.

Selling Stakes

The ruling required Alfa to sell its Kyivstar shares within 120 days or sell its stakes in competing companies.

Altimo said today it has made "every effort to comply with" the arbitration award. Altimo has withdrawn claims submitted by its subsidiaries against Telenor in Ukrainian courts, it said today in an e-mailed statement. Alfa will sell its stake in Ukrainian High Technologies, a wireless company, and has cut its stake in Ukrainian operator Astelit to below 5%.

Altimo said it has instructed its Ukrainian subsidiary to attend Kyivstar shareholder meetings.

"We therefore wholeheartedly urge Telenor to return to a constructive and mutually beneficial dialogue between the shareholders," Babayev, the Altimo executive, said in the statement.

"We will believe Altimo’s compliance with the court ruling when we see it," Anna Ivanova-Galitsina, a spokeswoman in Moscow for Telenor, said in a telephone interview. She added that Altimo’s representatives today failed to appear at a Kyivstar meeting. She declined to comment on the VimpelCom offer to buy Golden Telecom.

Golden Telecom shares have more than doubled in 2007. The stock is priced at 40.4 times earnings for the past year, about twice the average of other Russian phone companies tracked by Bloomberg. VimpelCom also has more than doubled, and the stock has a price-earnings ratio of 27.

UralSib’s Belov said that in mid- to long-term the stock of both companies may drop. "We recommend using the speculative momentum to lock in profits in both VimpelCom and Golden Telecom."