Status Update

Sep 15, 2016

Press Release

Ladies and gentlemen, thank you for standing by, and welcome to the other conference call. This time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. Must advise you the conference is being recorded today, Thursday, 09/15/2016. I'd like to hand over to your speaker today, Johan Dannelly, CEO. Please go ahead. Good morning from Stockholm. This is Johan Dannen Lind. I'm here with Jonas Wengtsson, our Legal and General Counsel. I will open with some brief comments, then Jonas will walk you through some of the process parts, and then I will conclude and open for some brief questions. But given today's release and the nature of the release, you will understand that we won't be able to comment much. But since we wanted you all to get a chance to hear from us, we decided to have a brief conference call. And for those of you who have not read the release, let me just repeat the main content. And it reads like this. The U. S. And Dutch authorities have since the 2014 investigated historical transaction related to Telia Company's entry into Uzbekistan in 02/2007. On the evening of September 14, I. E, yesterday, Telia Company received new information from the authorities with proposals from them with settlement with the company. The information received was general and did not go into much detail, but suggests a total settlement amount of $1,410,000,000 approximately 12,000,000,000 for all investigations. Then there is a quote from our Chairman. Let me just elaborate briefly. As you are aware, some of the company's historical transactions, which were made and approved by the former management starting in 2007 at the time when the company entered the market, are under investigation in several jurisdictions: U. S, Netherlands and Sweden. We have received proposal now from the authorities on the within amount of €1,400,000,000 for all investigations. The proposal covers, as far as we understand, all existing investigations across all jurisdictions. It is a very high amount. The Board has convened during the night and will now have to analyze the information and decide how to proceed. But we have with information in hand that we need to disclose to the market. We have, on many occasions, said that wrongdoings are costly. We have said repeatedly since we started that we cannot exclude illegal actions, and wrongdoings and unethical behavior were certainly part of the previous decision to enter the market. Telia company acknowledged that and are ultimately prepared to take responsibility for the wrongdoings made at the time. Now with the information at hand, the Board will have to analyze the information further and then decide how to proceed. We would like to give you some further background on the process that we have had with the authorities at this moment in time, but please also be aware that this is information just received and we need to understand this more in detail. But with that, I will hand over to you, Jonas, to walk us through a little bit more on the process side and what has happened up to now. Yes. Good morning, everyone. Let me then give you a relatively brief recap, which I think could be proper at a time like this to remember what has happened and how the path up until today has been. In late twenty twelve, the Swedish prosecutors started an investigation on whether or not there could be a criminal liability for certain individuals relating to them Telia Sonra's market entry and operations into Uzbekistan. The company started its own investigation to clarify this and engaged external law firm, Mannheim and Sartling, to go into and look into all details in what had happened. That report was made public and broadcasted live in all Swedish national media in January 2013. And as a consequence of that, and the report, I should say, contained serious criticism and about the processes and the actions taken by the management and Board. As a consequence, the former management has left the company and the new Board of Directors was elected in at the AGM in 2013. The new Board, headed by our Chair, Marie Arne, has had as one of their main priorities to change the company fundamentally and strengthen its controls and processes and to cooperate fully with all investigating authorities to find out what has happened and who is responsible. In spring twenty fourteen, we were informed at the same day by The U. S, first the SEC and a day later by the Department of Justice and also by the Dutch authorities that they too were investigating or looking into the same underlying transactions, I. E. Then Telia Sonora's market engine operations in Uzbekistan. The company immediately took the decision to cooperate also with those authorities and have done so since. We have had and are having extensive cooperation with the authorities in providing information, searching for data, analyzing, providing that to the authorities, meeting them, helping out with questions, etcetera. During these now more than two years, we have had several meetings with the authorities and several document productions to them. We have also concluded and summarized our view and our understanding on what has happened and conveyed that to the authorities. Now Johan informed you and as is stated in the press release submitted this morning, yesterday evening, we then received the information from the authorities on their view on how these investigations could be brought to close by means of a settlement. And that was not in full detail and it is very recently received information. But as we have stated in the press release, the proposed settlement amount adds up to a total of approximately SEK 12,000,000,000. That amount and that proposal, as far as we understood it from the information we received yesterday evening, covers all interest all authorities have in Telia Companies' activities. And there is basically where we are now, I think. Thank you, Jonas. Let me conclude and then open up for questions. We just received this information. The board will now evaluate and analyze this, how to proceed. And then we will, of course, get back to you as soon as we have any more news. But it was important for us to make sure that you got the same information as we at this time. And let me also then pick up on some of the now questions coming in from many of you. And let me clearly state that we have not changed anything with regards to our dividend and our dividend policy. And with those concluding remarks, I will open up for questions. Thank you. Your first question comes from the line of Roman Arbenzov. Please ask your question. Good morning. Thank you very much for taking my question. What is the scope you've made for negotiation on the amount? Or is it the type of situation where you either accept what's proposed or go to court essentially? Thank you, Roman. And I probably will say I hope I don't have to say the same thing too many times. But at this time, we have just received this information, And we need to analyze and understand better how to proceed, and that's what the Board is doing as we speak, of course. And we will come back with any such further information when we know. But if you want to mention anything else, Jonas, on that, please do. No. I think it is fair to say that the only way to do it now is to understand it better, analyze information and then when we have better clarity, to decide on what is the right and proper response to the information we received. And we simply are not there right now at this point in time. Can have a follow-up, please? I appreciate it's early days, but do you have any understanding in terms of how the number was arrived at? And what are the calculations behind? And in particular, I think it's natural to compare this number to what Simpelcom has come out with earlier this year, and they've come out with $800,000,000 So for example, do you have any initial understanding in terms of why your numbers may differ so widely? Roman, we there are some, as we described it in the press release, some general information that doesn't go into much detail. And that needs, of course, to be part of our next step to fully understand and hear from the authorities the rationale behind the numbers. And then when we have that, of course, we will also then use that in our next communication with you. Your next question comes from the line of Thomas Please ask your question. Thank you. Thomas Heath here with Danske Bank. A few questions, if I may. Firstly, if you would choose to go to court with this, is there any guarantee that the amount will not be even higher? Or is it possible that if you take this to court, the actual settled amount could be even higher? That's my first question. Second question, you say this you your understanding is that this covers all interest from legal authorities. Am I correct in understanding that covers all interest in all countries across the Eurasian footprint? And then thirdly, can you say now if this has any impact on dividend payout for the coming year? Thomas, let me start from behind. We said that we have not changed anything with regards to our dividend. The second question, we, as far as we know, this covers all existing investigations from the authorities. Jonas, please elaborate if you want. And on the first one, we don't want to speculate that it's part of our now assessment. We have received this information late yesterday, and we feel obliged to disclose that and then come back to you as soon as we have more information on how we want to respond to this. And now I think that's just to comment slightly is that we understand this that this proposal covers all interest all the authorities as in Telia Telecom company. So there is no other interest that is not covered by the proposal we received yesterday. Thank you. That's very helpful. Your next question comes from the line of Mangit Singh. Please ask your question. Hi. I'm sorry to belabor this point, but I think it's quite important. On the dividend, obviously, you're not changing your dividend policy, but equally, you're saying it's too early to give us any final answers on the amount, how you may choose to settle this or contest it in court. So are you just really saying no change in dividend policy for now or no change in dividend policy regardless? So I think that's an important clarification. The second question I would like to do in the context of this, to what extent is this having any impact? Or could you provide us just with an update on your disposable efforts on Eurasia? Yes. I'm just going to repeat again that we have not changed anything with regards to our dividend policy, and I think you should stay confident in that. The second one, divestments, we have no updates. We are sticking to our previous communication that we believe that would be possible and doable within twelve months from when we announced it earlier this year. Your next question comes from the line of Peter Nielsen. Please ask your question. Thank you. Yes, just one question, please. This is obviously a proposed settlement from The U. S. And the Dutch authorities. How about the Swedish authorities? The Swedish prosecutor's investigation, believe, is still ongoing. And may that also result in a separate settlement with the Swedish prosecutor? Thanks, Peter. Very good that you bring that up and let us clarify. Yes is the short answer, and the longer is from Jonas. Yes. Sorry to bore everyone. But as you may know, the Swedish legal system do not recognize criminal liability for legal entities, only for physical persons. So the Swedish the main bulk of the Swedish interest is towards establish whether or not there has been criminal liability on behalf of physical persons. You are right that the Swedish prosecutor has said that he is contemplating for future claim against a company in the event of convictions against one or more individuals. The question about this is that we the understanding we have from the information we received yesterday evening is that this proposal covers all such interest also. But again, I must stress that we received this yesterday evening, and it's still relatively early hours in the morning after. So we need to clarify more what exactly this means for all jurisdictions. Okay, very good. Thank you. The next question comes from the line of Stefan Dossien. Please ask your question. Yes. I think most questions have been asked. But given the large Swedish state ownership interest, this is in a way U. S. And bachelor's authorities taxing Swedish citizens. Do you see that you could get political support in this matter? This is not a political matter as far as I am concerned and no. This is something that we We are very supportive from the company. Your next question comes from the line of Robert Slorak. Robert Slorak with Handelsbanken here. I was just wanted to clarify one thing. When it comes to the countries in the press release, you clearly talked about Uzbekistan. The other geographies, as Azerbaijan and so forth, has there been any investigations that have been opened and then closed? Or is it just that there's never been any investigation around other countries in Croatia? Thank you. Yes. Thank you for the question, Robert. And sorry to be a bit detailed here, but obviously, it's not in the nature of things that investigative authorities do not necessarily share whatever they investigate or not investigate with the parties they are investigating. Having said that, in spring, the Swedish prosecutor publicly announced that they were not investigating any other jurisdictions than Uzbekistan. And to the best of our knowledge, there are no other interests from the other authorities either. All right. Okay. Thank you very much. Your next question comes from line of Johanna Aukhfis. Please ask your question. Yes. Johanna Altvist with SEB. Two questions, if I may. The first one, how strong is the jurisdiction really for the Department of Justice to have such a claim given that you were not a US listed company or even the company bought the license from at the time? And then secondly, you state in the press release that the fine was higher than expected. I'm just wondering what did you expect? Thank you. Jana, thank you. Jana will cover the first one. The press release, I hope, doesn't say expected or anything. Just says that the amount is very high. And that's the Board's reaction, and we will make sure that, that is analyzed, understood before we make any further comments. But it's a very high amount. Yes. On the jurisdictional point, as you, of course, know, all countries have their own rules on jurisdiction, and there are several grounds under which a country can establish jurisdiction over transactions or entities. And especially The U. S. Have a relatively extensive view on their jurisdictional authorities. And there are, of course, several arguments also then under U. S. Under which and under U. S. Legal theory under which the U. S. Government can establish a jurisdiction. We cannot at this time go into any details on that, but obviously, there are some points that you could argue would point to that U. S. Has jurisdiction. There are also arguments going in the other direction. And then that is one of the questions we have been discussing in a constructive and good manner with the authorities. And yes, I think that is all I can say about it right now. And let me just say one more thing on the first one. Throughout the last two years, it's been very clear in all my answers on the topic of an amount, say that we don't know and we don't want to speculate. And therefore, we haven't had an expectation per se. We just now state that it is a big number. K. Thank you. And as you're new in front, please ask a question. Billing, your line is now open. You can cut that one? Okay. We thank you for your attendance, and we're happy to take further questions, of course, as normal, through our IR team, and then we'll see you out there. Thank you very much. Ladies and gentlemen, that does conclude the conference for today. Thank you for participating. You may all disconnect.