Alfa Group May Be Losing Its Touch, Skeptics Say

Alfa Group is admired and feared in equal measure for the ruthlessness with which it does business, but some doubters wonder whether Russia's most fleet-footed dealmaker may be losing its sureness of touch.

Led by Mikhail Fridman, ranked by Forbes magazine as Russia's second-richest man with a personal fortune of $7 billion, Alfa has built an empire straddling practically every area of business growth in the country.

Set up as a commodities trader in the twilight years of the Soviet Union, the unlisted Alfa spans banking, oil, telecoms, retailing, insurance and fund management.

Yet some have questioned whether the group's strategy could come unstuck, after a troubled expansion at Alfa's banking arm, a feud with IT and Communications Minister Leonid Reiman and disputes with Norway's Telenor, its mobile partner in Russia and Ukraine.

"They are being very aggressive, and it's a high-risk game," said a top executive at a Russian industrial group that does not compete with Alfa in any of its main operations.

"Fighting with Reiman was a huge mistake," he said, adding Alfa would sooner or later have to reach a truce with Reiman.

The quarrel dates back to Alfa's purchase of a disputed 25 percent stake in Russia's No. 3 mobile phone company, MegaFon. It has also brought Alfa into confrontation with MegaFon's main shareholder, Nordic TeliaSonera, in Turkey, where both companies have interests in GSM operator Turkcell.

Some analysts believe a Bermuda-registered fund called IPOC, which claims it is the rightful owner of the shares, may be linked to Reiman, although the minister denies any connection.

Responding, Fridman said: "Our dispute over MegaFon is simply a way of defending our rights as investors and our best means of ensuring a fair, competitive mobile telecom market.

"No single business should be afforded an advantage over others simply because it has positioned itself close to a government entity or personality," he added in written answers to questions from Reuters.

A combative style of doing business has always been Alfa's hallmark.

Critics say the trading skills that made Fridman rich in the years after the Soviet collapse, when vast fortunes were made by a select few who pounced on oil and metals firms going for a song, may be less suited to running a big conglomerate.

"They have their fingers in a lot of pies, and all decisions are taken by a couple of guys at the top. It just cannot last," said a lawyer who has had dealings with Alfa.

Fridman, a master of deal-making, and his politically astute partner Pyotr Aven, who is said to be on friendly terms with President Vladimir Putin, appear less interested in the humdrum details of Alfa's businesses. "I see they are interested in building size, but day-to-day issues do not capture their imagination," said the lawyer.

Fridman has successfully bought and sold a string of firms, including a cement business in the 1990s and, more recently, a stake in brewer Sun Interbrew, which has since been sold to Belgium's InBev.

Alfa's most notable coup was in 2003 when, with its partner Access/Renova, it sold a half-share in oil company TNK to BP for $7 billion.

Fridman insists Alfa is a strategic investor: "We do have strong key sector interests -- oil, retail, financial services and telecoms -- where we are absolutely committed and where we intend to remain for a long time."

But some wonder whether Alfa has the stomach to develop its banking and telecoms ventures over the long term into major players in sectors that are becoming increasingly dominated by international corporations.

"I don't think they have the capital to put behind making Alfa Bank a successful bank in the long term," said a foreign fund manager, who requested anonymity.