updated 2/13/2006 2:38:55 PM ET 2006-02-13T19:38:55

Russia’s second-largest mobile operator, OAO Vimpelcom Communications, said Monday it made a $5 billion stock offer for leading Ukrainian telecom Kyivstar.

The bid underscores the importance of Ukraine’s 50 million subscribers in Vimplecom’s race with another Russian telecom, MTS, for dominance in the former Soviet Union.

It also highlights a struggle in Vimpelcom’s boardroom between its main shareholders: Norwegian telecom giant Telenor and Russia’s Alfa Group.

Vimpelcom Chief Executive Alexander Izosimov trumpeted the offer for Kyivstar as a way to beat rival MTS in becoming “the No. 1 telecoms company in the CIS (bloc of former Soviet republics).”

Telenor — which is already the major shareholder in Kyivstar — has little need for a deal with Vimpelcom and would rather the Russian company’s money was spent elsewhere.

“Key corporate governance issues have to be resolved before Telenor is willing to discuss a possible merger between Kyivstar and Vimpelcom,” Telenor Vice President Jan Edvard Thygesen said.

Under the Kyivstar bid, Telenor and Alfa would see their stakes each rise to 36.1 percent in Vimpelcom — currently at 26.6 percent and 32.9 percent respectively.

The standoff over Ukraine has already led to a court fight between Alfa and Telenor. After Vimpelcom bought No. 4 Ukrainian operator URS for $231 million last year, Telenor took Alfa’s telecoms division to court, alleging that the acquisition was illegal and later blocked Vimpelcom’s 2006 budget in apparent protest.

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