Telia’s $1.4B Uzbek fine exceeds expectations, but could help telco move on

Marie Ehrling, chairman of Telia

Telia finally learned what the potential cost could be of its ill-fated entry into Uzbekistan in 2007, after U.S. and Dutch authorities proposed an amount of about $1.4 billion (€1.25 billion) to settle all allegations of corruption at the business.

The authorities have been investigating Sweden-based Telia -- until recently called TeliaSonera -- since early 2014 over alleged bribery and money laundering, believed to be connected to the company’s acquisition of an operating licence in Uzbekistan. VimpelCom has also faced a similar investigation.

Telia’s initial reaction to the fine was that it was “very high”, according to comments from Telia chairman Marie Ehrling.

“We will now have to analyse the information and decide on how to proceed with the ongoing discussions with the authorities,” Ehrling said.

Telia spokeswoman Johanna Hansson told FierceWireless:Europe that it was too early to comment on what the next steps might be or how long the process would take. She was also unable to comment on what amount would have been regarded as fair.

“We never really speculated on the amount,” Hansson said.

Telia has already booked SEK7.2 billion (€754 million/$847 million) in total non-cash impairment charges for the fourth quarter of 2015, with the bulk related to its operations in Uzbekistan.

Hansson added that the investigation into the Uzbekistan situation has now been ongoing for about two and a half years. The suggested settlement is at least a step towards bringing the matter to a close.

That was also the view of Jefferies analysts, who also said the proposed settlement “exceeds our own assumption by $0.9 billion.”

However, the analysts further noted that apart from the “direct drag” on company finances, “a settlement would remove uncertainty from the case and allow investors to focus on operations, where trends are encouraging, in our view.”

Jefferies pointed out that Telia “has comprehensively addressed the issues by rebuilding the supervisory board, changing not only Eurasia management but also group management, instituting tight compliance procedures, starting to sell the assets in Eurasia, and co-operating fully with the investigations.”

That point was also emphasised by Ehrling: “I have said on many occasions in the past that Telia Company’s entry into Uzbekistan was done in an unethical and wrongful way and we are prepared to take full responsibility. We are cooperating fully with the authorities to bring clarity to the matter,” she said.

Jefferies added that by settling all allegations, Telia will be able to “credibly engage with interested parties in Ucell (Uzbekistan) -- which was previously not possible because the allegations centred on Uzbekistan.”

Ucell is the last of Telia's three directly held assets in Eurasia: the operator has already divested its operations in Nepal and Tajikistan as part of its strategy to ultimately exit the Eurasian market and focus on its operations in the Nordics and Baltics.

In February, Turkcell made a binding offer for TeliaSonera's 58.55 per cent stake in Fintur Holdings, which co-owns the stakes in Azerbaijan, Georgia, Kazakhstan and Moldova. Turkcell owns 41.45 per cent of Fintur.

For more:
- see Telia’s statement

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