By Alexander Kolyandr

MOSCOW-Russian telecommunications company VimpelCom (VIP) Friday said it agreed to sell a 51% stake in Algeria's biggest mobile operator Orascom Telecom Algeria, also known as Djezzy, to the Algerian National Investment Fund, or FNI, thus ending a long-standing dispute

Vimpelcom sold the stake for $2.64 billion. However, taking into account the dividend the Algerian company is set to pay, the full net proceeds amount to $4 billion.

The acquisition talks had been going on for over two years as the Algerian government sought to gain control over telecom assets it regards as being in the national strategic interest.

Aside from reducing a long-standing dispute, the deal leaves VimpelCom with a 49% stake in Djezzy and reduced debt, amassed in a shopping spree in previous years.

Vimpelcom bought Djezzy in 2010 from Egyptian tycoon Naguib Sawiris as part of a more than $6 billion deal with the aim of diversifying outside Russia. But Algerian government plans to nationalize the operator hit the business with back tax claims and various restrictions.

"This favorable long-term agreement and settlement represents a successful outcome for all stakeholders," said Vimpelcom Chief Executive Jo Lunder.

Moscow-based Otkritie brokerage said the deal was done on "very favorable terms" for the Russian company. The deal is expected to be closed in the fourth quarter of 2014.

VimpelCom is Russia's third largest telecom operator by revenue after Mobile TeleSystems and MegaFon and the seventh largest telecom company globally.

Write to Alexander Kolyandr at alexander.kolyandr@wsj.com

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