Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Divestment 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. At which time, if you wish to ask a question, you will need to press star and one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today, 5th of March 2018. I would now like to hand the conference over to a speaker today, Johan Dennelind. Please go ahead.
Good afternoon from Stockholm, everyone. I'm Johan Dennelind, and I'm here with Christian Rueegard, 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 Azertel, and therefore also Azercell in Azerbaijan. I'll go through quickly some highlights, then Christian will take you through some details, then we'll go straight to Q&A, if you have any. As mentioned, we have together then with Turkcell, through Fintur, accepted a divestment of 51.3% in Azertel, who is the 100% owner of the Azercell Telekom company in Azerbaijan. It's a divestment of the 51% equivalent to around EUR 222 million, approximately SEK 2.2 billion, of which about SEK 1.3 billion will be attributable to Telia.
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. There are no outstanding approvals pending. The deal is hereby closed, and the share transfer has occurred during the day. We're no longer, as of today, the owner of Azercell. It has been quite a lengthy and complex process, where I 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 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 you will be reminded about in a short while. 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, then we have two more companies within Fintur together with Turkcell, which is the Moldova and Kazakhstan. We also, as you know, have a direct holding in Kcell, which is not through Fintur. 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, then we'll go to Q&A.
Thank you, Johan. On the shareholder structure, just giving you the details on that. Fintur is owned by TeliaSonera Holding in Netherlands and by Turkcell, 58% owned by Telia and 41% by Turkcell, and together, Fintur Holdings owing 51.3% in Azertel. This 51.3% of the shares in Azertel is now sold to the purchaser, Azerbaijan International Telecom, which is a wholly state-owned company under the Ministry of Transport, Communications and High Technologies in Azerbaijan. We have sold this company, and the partner still, or the co-owners in Azertel is still at the selling point, FA Invest and Cenay İletişim, and those are a company we still don't know who the ultimate beneficial owners are. If we 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 for the last two years in our books. In this transaction, we have received in the end to Telia, through our ownership, SEK 1.3 billion, and we have consolidated SEK 2.8 billion. That means a negative impact on the total cash of SEK 1.5 billion through this transaction, taking our net debt pro forma by end of year from SEK 33.8 billion to SEK 35.3 billion, which had an impact on our net debt to EBITDA. That was 1.14x to go from 1.1x-1.2x at times at the pro forma 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 SEK 0.1 billion 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 reduce equity over net income and increase it over directly in the balance sheet with a zero impact of SEK 3 billion. On EPS in Q1, we 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 go to the compliance review and the due diligence 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. 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 the individuals, as I said. We have also checked the money flow, where it comes from in this case, and secure it comes directly from the state. If we go to the next page, just a flashback on our transactions. This is another proof point that we are divesting in Eurasia.
It started with Nepal and Ncell back in 2015, and in 2017, we carried out the divestment of Tajikistan and Turkcell and MegaFon, and beginning this year, then Georgian and Azerbaijan. Finally, this transaction has been, 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 Sullivan & Cromwell, and also Turkish, Dutch, Syrian, Swiss legal advisors. That's all.
Thank you, Christian. 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. 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. As a reminder, if you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. The first question comes from the line of Terence Tree. 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 could dive into a bit more of the details, maybe suggest to us what were some of the challenges that you had to overcome. Secondly, do you see this sale as a catalyst for getting the remaining region sold at all? Maybe just very 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.
Hey, Terence. Yes, it's been a lengthy process. This started back in September 2015, as you know. For a while, we spent time on trying to divest Fintur to Turkcell, who clearly was a buyer at the time. We found out through the process that they were not buyers and rather sellers. We spent some time structuring a process around divestment, where we early on found the interested party from Azerbaijan to be keen. 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 Azertel, which we have been clear on, and that's not a good start.
There has been obviously a lot of risk associated with doing business in the country, and also with regulatory situation as question marks. We haven't had very many buyers, to be honest. That's also, as I said, reflected in the price. 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 being able to reach an agreement, first and foremost with Turkcell to divest.
Agreeing with them the terms, because that has to be done, of course. Finding a buyer that we can sell to, which we just went through, the states of Azerbaijan. Getting to a price level which we think then is acceptable, which we have done in this case. Catalyst 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. With the other assets remaining, we have been clear that in terms of repatriation of cash from Uzbekistan is still the same problem. We haven't seen any increased prospects for ourselves.
When it comes to cash in Kazakhstan, has not been a problem, as we don't see a reason for any problems going forward. Moldova is fine in Fintur.
That's great. Thanks very much.
Thank you.
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. You've given us an indication for the timeframe. Christian, is it fair to assume now that when you exit the remaining operations, you'll probably add another 0.1 times to net debt EBITDA, and that will sort of be the complete impact, I guess, between 0.1 and 0.2 in total from these exits. Is that a fair assumption? Thank you.
Thanks for the question. I would give you a prognosis on the sales price, and I can't do that. We have said that it will have a non-material impact on our net debt 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 Heath. 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. 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 Fintur. We haven't done that before.
All right. I guess that's.
Turkcell and Telia will decide when we want to bring that money home for whatever purpose.
That's a unanimous decision that requires both parties' approval?
Yes.
All right. Thank you.
Thank you. Yes.
I just want to add. Yeah, sorry. Go ahead.
Sorry. I just want to remind participants again, if you wish to ask a question, please press star one on your telephone keypad and wait for a 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.