Investor Update

Mar 5, 2018

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Diversement of Assets Conference Call. At this time, all participants are in listen only mode. There will be a presentation followed by the question and answer session. I must advise you that this conference is being recorded today, 03/05/2018. I would now like to hand the conference over to your speaker today, John Dennerlend. Please go ahead. Good afternoon from Stockholm, everyone. I'm Johan Dennerleind, and I'm here with Christian Wiege, my CFO and Jonas Bengtsson, our General Counsel. We appreciate you joining the call for a brief update on today's announcement where we have signed and closed the divestment of Assertel and therefore also Assertel in Azerbaijan. I'll go through quickly some highlights and then Christian will take you through some details and then we'll go straight to Q and A if you have any. So as mentioned, we have together then with Turkcell through Fintur accepted a divestment of 51.3% in AcerTel, who is the 100% owner of the Acercel telecom company in Azerbaijan. So it's a divestment of the 51% equivalent to around €222,000,000 approximately SEK2.2 billion, of which about SEK1.3 billion will be attributable to Telia. And you will see some of the details here on the financial effects from Christian in a short while. I'd like to mention that it has been a simultaneous signing and closing during the course of today. So there are no outstanding approvals pending. The deal is hereby closed, and the share transfer has occurred during the day. So we're no longer, as of today, the owner of Asser itself. It has been quite a lengthy and complex process where we have to say that it has not been an easy asset to sell. And I think that's also something which is reflected in the price of the asset, which of course is a low on comparable levels. I don't want you to read anything in that valuation into our other divestments ongoing. This is a very specific case, specific market, a specific shareholder situation, which we will be reminded about in a short while. So all in all, we are pleased that we are able to jointly with Turkcell, I have to remind you, come to an agreement to divest another asset in our portfolio, where we're now left with three more assets to divest. It's Uzbekistan in our own control and then we have two more companies within Fintur, together with Terxel, which is Moldova and Kazakhstan. We also, as you know, have a direct holding in K Cell, which is not through Fintur. And we will provide you further updates on those assets divestments during the year. With that, Christian, I'll leave it to you to take us through some more details, and then we'll go to Q and A. Thank you, Johan. On the shareholder structure, just to be giving you the details on that, Finter is owned by Telia for Sonera Holding in Netherlands and by Turkcell, 58% owned by Telia and 41% by Turkcell. And together, Fintur Holdings have been owing 51.3% in Acertel. This 51.3 of the shares in Acertel is now sold to the purchaser, Azerbaijan International Telecom, which is a wholly state owned company under the Ministry of Transport Communication and High Technologies in Azerbaijan. We have then sold this company and the partner still or the co owners in AssetTel is still at the selling point FA Invest and Sinai, Elysysim and those are companies we still don't know who the Alpejibials are. If we then go to the next page, which is the financial impacts of this transaction. As you know, we have been consolidating 100 of Azerbaijan even though we have been owning a smaller stake, it has been consolidated 100%. That means we have consolidated fully the balance sheet and income statement and the cash flow of this company, but it has been reported within the discontinued operations over the last two years in our books. In this transaction then, we have received in the end to Telia through our ownership SEK1.3 billion and we have had consolidated SEK2.8 billion that means a negative impact on the total cash of SEK1.5 billion through this transaction, taking our net debt pro form a by end of year from SEK33.8 billion to SEK25.3 which has an impact on our net debt to EBITDA that was 1.14 to go from 1.1 to 1.2 times at pro form a year end. We did write down the book value of Azerbaijan assets in our year end closing. And therefore, the capital loss of this transaction is minimal, it's 0.1 between year end and today. And there has not been any change to that. On the other hand, we also have reclassified, which we have to do according to IFRS, former FX losses that have been taken directly to equity needs to be as we call them so called recycled over the income statement and back into the equity, meaning it has no impact on the equity. We just reduced equity over net income and increased it over directing the balance sheet with a zero impact of billion dollars So on EPS in quarter one, will have the impact on equity, we will not have the impact. Those are the financial effects on the accounting of this transaction. If we then go to the compliance review and the dividends of the buyer, this has been gone through by our ethics compliance function and we have done a human rights impact assessment of our operation. And we are selling to the state of Azerbaijan and have done the proper analysis of those in the board, but also those who are buying this as we think is proper in this case. It has been going through our normal due diligence and we have also screened individuals, as I said. And we have also checked the money flow where it comes from in this case and secured it comes directly from the state. And if we then go to the next page, just a flashback on our transactions. And this is another proof point that we are divesting in Eurasia. It started with Nepal and NCEL back in 2015. And in 2017, we carried out the divestment of Pakistan and Turkcell and Megaphone. And beginning this year then Eurogen and Azerbaijan. Finally, this transaction has been a like many of our transactions, an important transaction from a legal and compliance point of view and we have used UBS as a transaction advisor, but also then several legal counselors for this transaction, including Sutherland Cromwell and also Turkish, Dutch, Siri and Swiss legal advisors. Hansel? Thank you, Christian. And we decided to have this call even if some of this may be not the usual reason for the call. We thought we will have it for you if you have any questions and to be fully transparent on the progress of the divestment. So I open up for questions to ourselves here in Solna, Stockholm. Thank you. Ladies and gentlemen, we'll now begin the question and answer session. The first question comes from the line of Terence Treat. Please ask your question. Thank you. Good afternoon, everyone. I've got a couple of questions, please. Just firstly, you mentioned at the beginning that it was a lengthy process. I was just wondering if you can dive into a bit more of the details, maybe suggest to us what were some of the challenges that you had to overcome? And then secondly, do you see this as a catalyst for getting the remaining regions sold at all? And then maybe just lastly, can you just give us a quick reminder of what the situation is like repatriating cash from the remaining Eurasian regions to be sold? Thank you. Thanks, Terence. Yes, it's been a lengthy process. I mean, this started back in September 2015, as you know. But for a while, we spent time on trying to divest into Turkcell, who clearly was a buyer at the time. But we found out through the process that they were not buyers and rather sellers. And then we spent some time structuring a process around divestment, where we early on found the interested party from Azerbaijan to be keen. But of course, we wanted to run a competitive process, which we have to some extent done, but it's been, as I said, difficult with an asset of this kind where most importantly, as we have been saying, we don't know who are the other shareholders of AcerTel, which we have been clear on, and that's not a good start. Also, there has been obviously a lot of risk associated with doing business in the country and also with regulatory situation. So we haven't had very many buyers, to be honest. And that's also, as I said, reflected But also we there has not been an option for us to stay in. We see the risk of staying in and the reasons for staying in as not attractive. And therefore, we are happy to be able to reach an agreement, first and foremost with Turkcell to divest and agreeing with them the terms because that has to be done, of course, and then finding a buyer that we can sell to, which we just went through, the state of Azerbaijan, and then getting to a price level which we think that is acceptable, which we have done in this case. Capitalist for the rest, we have already said that we are since we started to divest pieces of Fintur in a new phase where we have good progress. We see no reason why we should not be able to conclude this during the year. And with the other assets remaining, we have been clear that in terms of repatriation of cash from the Spekistan, it's still the same problem. We haven't seen any increased prospects for ourselves. When it comes to cash in CapEx fund has not been a problem as we don't see a reason for any problems going forward, more device line in Q2. Thank you. The next question comes from the line of Peter Nielsen. Please ask your question. Thank you very much. Just a very short one, and you've given us an indication for the time frame. Question, is it fair to assume now that when you exit the remaining operations, you'll probably add another 0.1x to net debt EBITDA, and that will sort of be the complete impact, I guess, between 0.1%, 0.2 in total from these excess. Is that a fair assumption? Thank you. Thanks for the question. Then if I would answer that, I will give you a prognosis on the sales price, and I can't do that. But we have said that it will have a nonmaterial impact on our net debt to EBITDA, the total sales process of all entities together, and we still remain firm on that statement. Okay. Thank you. Thank you. The next question comes from the line of Thomas Please ask your question. Thank you. Thomas Heath with Danske Bank. Just a quick question on the cash that now comes to Fintur. Is that being upstreamed to Telia immediately? Thank you. That is not something we have decided or discussed with Turkcell, and we don't tell that to you actually when we do that. We usually don't go out and tell when we are making a dividend from Piltir. We haven't done that before, so. All right. I guess that Turkcell and TLA will decide when we want to bring that money home for whatever purpose. And that's a unanimous decision that requires both parties approval? Yes. All right. Thank you. Thank you. Yes, just want to add yes, sorry. Go ahead. Sorry. I just want to remind the participants again, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Dear speaker, there are no further questions at this time. Please continue. We thank you for this short update on Azerbaijan, and we will speak to you soon again. Thank you. That does conclude our conference for today. Thank you for participating. Have a nice day. Speakers, please stand by.