Privately-held Russian mobile operator OAO Megafon, which holds around $2 billion in cash and cash equivalents, said its shareholders failed to reach a decision on dividends at their annual general meeting on Wednesday.

A spokesman for Alfa Group, which holds a 25.5% stake in the mobile operator, said that only AF Telecom voted in favor of the proposal not to pay dividends, and other shareholders abstained.

Nordic operator TeliaSonera (TLSN.SK) has a 43.8% interest in Megafon, but only holds a direct stake of 35.6%, and the Russian company has been the object of a battle for control between its shareholders.

Megafon's large cash deposits have accumulated largely because of the shareholders' inability to agree on a dividend policy or strategy for expansion.

Two years ago, metals tycoon Alisher Usmanov took a 31% stake in Megafon, and last year he suggested that the company form an alliance with Russia's state-controlled telecoms holding Svyazinvest.

That proposal was opposed by TeliaSonera as well as Alfa -- those two shareholders suggested instead that Megafon merge with Turkey's largest operator Turkcell.

Last year, Alfa officials were in favor of Megafon paying a dividend, while AF Telecom, was opposed.

-By Will Bland, Dow Jones Newswires; +7 495 232 9198; william.bland@dowjones.com
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