Combative telecoms partners Telenor and Altimo squared up for yet another battle on Monday, over a proposed bid by their Russian mobile phone firm Vimpelcom for Egyptian tycoon Naguib Sawiris' telecoms assets.

Norway's Telenor said it was disappointed by Vimpelcom's

board approval of a revised bid for Italy's Wind and Cairo-based Orascom Telecom from Sawiris and demanded its pre-emptive rights be safeguarded in the sale of new shares.

The row threatens a peace deal struck in 2009 after years of acrimony between Telenor and Russian billionaire Mikhail Fridman's Alfa group resulted in them combining telecom holdings into New York-listed Vimpelcom. Alfa owns its stake in Vimpelcom via its Altimo telecoms group.

Asked if Telenor would break from Vimpelcom, a spokesman for the company said: That is not on the agenda for now. Vimpelcom is a very good company and we would like to participate in developing it.

Russia's second-biggest mobile phone company wants to grab a share of high-growth emerging markets by purchasing Orascom and tap its first developed market through Wind. The combined mobile group would be the world's sixth largest by subscribers.

But Telenor is worried about the outlook for Orascom's lucrative Algerian unit Djezzy which faces nationalisation, and the debt load of its mother company Wind. The net debt of the combined entity after the deal will be $21.7 billion.

Telenor also objects to the structure of the share offer.

Under the new deal Vimpelcom will pay $1.495 billion to Sawiris for 51.7 percent of Orascom and 100 percent of Italy's Wind and issue him with shares equivalent to 30.6 percent of the voting rights in the enlarged group. Telenor's voting rights will be diluted from 36 percent to 25 percent.

It is an artificial construct aimed at depriving Telenor of its pre-emptive rights and we will defend our rights, said Telenor, which rejected Vimpelcom's initial deal in December.

At the upcoming Vimpelcom shareholders meeting, we will vote against the approval of the issuance of the new shares to Wind Telecom's owners, and we urge Vimpelcom minority shareholders to do the same.

VOTE WIN NOT A FAR REACH

Vimpelcom CEO Alexander Izosimov said he was confident of victory when shareholders vote on the deal on March 17.

The ultimate number which is needed for the support is a third of minority shareholders and this is not at all a far reach given the size of the shareholders we talked to who support the deal, he told Reuters in a telephone interview.

Knowing the size of those investors and where they stand I have reasonable degree of comfort that the transaction will be approved on March 17th, he added.

The support of Altimo's 45 percent stake means just one third of the 18 percent share owned by majority shareholders needs to vote in favour for Telenor to be thwarted.

Shares in Telenor were down 2.5 percent to 90.4 crowns at 1500 GMT. Shares in Orascom closed down 0.9 percent after it became clear Telenor would continue to resist the deal.

It's not a done deal but it seems difficult for them to completely stop it, said John Davies, analyst at ING in London. Telenor must convince other parties to work with them.

Vimpelcom's New York-listed shares were not trading on Monday due to a public holiday in the United States.

FIGHT OVER PRE-EMPTIVE RIGHTS

In a deal such as this, existing shareholders would normally expect to be able to exercise pre-emptive rights and subscribe to new shares on a pro-rata basis. This would allow Telenor to limit any dilution and block the sale of new shares to Sawiris.

However, Vimpelcom said it believed the deal was a related M&A transaction -- so not subject to any pre-emption rights -- because a subsidiary of Alfa already owns shares in Orascom. This creates a legal loophole that means existing shareholders do not have the right to buy into any new share issue.

Vimpelcom said six directors -- three nominated by Russia's Altimo and three independents -- voted in favour of the deal. The three Telenor-nominated directors voted against.

Under the new deal Vimpelcom will share any financial losses or gains with Sawiris related to a possible nationalisation of Orascom's lucrative Algerian asset Djezzy. Sawiris gave up his presence on the board to try to win Telenor's approval.

Analysts say the Egyptian tycoon needs the deal because he is blocked from repatriating profits from Djezzy, Orascom's main revenue earning unit, as he fights a bitter and costly battle over taxes with authorities in Algeria.

The clock is also ticking on his maturing debt, totalling $3 billion for Orascom alone over the next three years. Orascom has a $1 billion tranche of a $2.5 billion loan due in 2013.

Emerging markets New York Telecoms Algeria