Swedish operator’s CEO says financial penalties are a ‘painful reminder’ of what happens when a company does not ‘do the right thing’
Telia has reached a settlement with U.S. and Dutch authorities over its dealings in Uzbekistan that will see it pay a financial penalty approaching US$1 billion.
The Sweden-based telco group will pay fines and disgorgements to the U.S. Department of Justice (DoJ), the Securities and Exchange Commission (SEC) and the Dutch Public Prosecution Service totalling $965 million after the various authorities ruled that its conduct in Uzbekistan contravened international corrupt practices legislation.
Telia CEO Johan Dennelind, who took office in June 2013 after the corruption investigation claimed the job of his predecessor Lars Nyberg and triggered a board overhaul, noted that the company has worked hard to regain trust and focus on governance and compliance over the past three and a half years.
"It is a never-ending journey as we aspire to embed this into our culture making sure that all employees understand the importance of doing the right thing all the time," Dennelind said, in a statement.
"The resolution and related financial sanction that we announce today is a painful reminder of what happens if we don’t," he said.
The U.S. and Dutch authorities investigated Telia’s historical transactions in Uzbekistan and its dealings with Takilant, its partner when it entered the market in 2007. Telia acquired its 3G licence in Uzbekistan through Takilant, a Gibraltar-based outfit associated with Gulnara Karimova, daughter of the late Islam Karimov, former president of Uzbekistan.
The investigations concluded that Telia had made corrupt payments of approximately $330 million.
In addition to the fines and disgorgements, Telia’s Uzbekistan unit Coscom has entered a guilty plea with the DoJ.
Telia is not the only company to have fallen foul of regulators as a result of dealings with Takilant.
In early 2016 Veon, then known as VimpelCom, announced a $795 million settlement with the same Dutch and U.S. authorities following a similar corruption investigation in Uzbekistan.
Although Telia has settled its part in the wrongdoing in Uzbekistan, it still faces the possibility of a further financial impact from the role of individual executives in the scandal.
"The Swedish prosecutor’s investigation into individuals is still ongoing and the company may be subject to disgorgement proceedings resulting for that investigation," Telia admitted.
Against the background of the various investigations, Telia has been seeking to sell its Uzbekistan business as part of a wider decision to exit the Eurasian market and focus on the Nordics and Baltics.
Earlier this week the telco sold its remaining direct stake in Turkcell, although it remains the operator’s largest shareholder as a result of a 24% indirect holding.
In the past couple of years Telia has offloaded assets in Nepal and Tajikistan, and it is working on the disposal of its stake in Fintur Holdings, a joint venture with Turkcell that holds stakes in Georgia’s Geocell, Moldova’s Moldcell, and Azercell in Azerbaijan. However, in January Dennelind admitted that he expects the Uzbek business, which operates under the brand name Ucell, will be the most difficult asset to sell. Nonetheless, he said he expects the telco to exit all of its Eurasian businesses by the end of the year.