Status Update

Nov 29, 2013

Press Release

Thank you for standing by, and welcome to the Telia Senera Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today, Friday, 11/29/2013. I would now like to hand the conference over to your speaker today, Mr. Wilgrove. Please go ahead, sir. Yes. Hi, everyone, and welcome to this analyst call regarding today's announcement that four senior employees will leave Thielas Nera. We'd just like to say that the intention is to close this call within twenty five minutes. By that, I would like to hand over to our CEO, Johan Danilin. Please, Johan. Thank you, Jesper. Good morning, all. As you've seen this morning, we announced that four senior employees will leave Telia Sonra, including our CFO and then three other individuals. The Board has also decided to hand over some material to the prosecutor the Swedish prosecutor, I should say. The decision is the result of due consideration in the Board of Directors and follows the independent review of transactions and agreements in Eurasia, excluding Uzbekistan, conducted by the international law firm Norton Rose Fulbright and the Swedish law firm Mannheimers Cycling Advice. Let me first start to say then that these kind of decisions that we have taken and announced today are never easy because we're dealing with people we know and people that have dedicated their professional lives to Telia Sonra and have done so with big commitments. But nevertheless, these actions had to be taken. Let me put some perspective to this before we go further. The new Board started the review of these transactions in April. I took over September 1 with a clear mandate to continue and support and drive the review internally to facilitate for the Board to make their assessment. While the review has been going on in various countries, I've taken several actions to continue to strengthen the compliance and governance in our company. It is very clear clearly one of our key priorities, as I've told you on our road shows, some of you, in the way we want to shape Telia Sonra into the future. Just to mention a few. We have a new compliance officer in place since September 1. We have a new General Counsel starting January 1 with strong experience in the field. We have already removed one of the key individuals from his previous position of Head of Mobility, who was instrumental in the Eurasian transaction in the past. I have created a new function for M and A and strategy, which then clearly puts the focus on M and A and the way we need to do business going forward. And I also have a new CEO office with oversight of various governance reviews and initiatives. And I'd also like to mention that we are in the progress of rolling out our anti corruption policy and procedures and to get it fully committed on all levels in the company. But as I've also stated, we're not finished with its work ongoing. The point I'm trying to make here is that we're continuously improving our compliance and we'll continue to do so going forward. The facts from the North of Rose review are bringing news that is more of a pattern, how things have been carried out in the past, Nothing new in that sense. The news is that it shows the pattern, as I mentioned, that several transactions have been conducted in a way that is not evidently transparent and ethical. So what I'd like to say with this is that we've already started to address the root causes, I. E, this is not a new crisis. This is something that we already are addressing. But we also now have seen a need to take clear actions on some of our senior employees, unfortunately. The reason is ultimately, it's a lack of trust. And the reason is that they have not done enough in their respective capacities as senior leaders to ensure that we have done thorough risk assessment and that we have carried out business transactions in an ethical and transparent manner. That's the ultimate reason why four of our senior leaders have to leave today. This is, of course, a must for an international company to have these high standards as our expectations for most of our stakeholders, including yourselves, is very high. And this is the Telia Sonra that I'm aiming to build with my team, and it should be an environment where we need leaders and employees that take pride in doing things the right way all the time. I just want to then add that we have also appointed Christian Luiga as our acting CFO. Most of you know him from before, which is very good continuation. He has been the acting CFO from February to September, and he has been heading the CEO office, reporting to me since September 1. He's now stepping in as acting CFO, and you will meet him shortly in our interactions. I think I will stop there and open up for some comments and questions so we can potentially clarify any of your thoughts. Thank you. Thank you. Thank you. Your first question comes from the line of Peter Nielsen. Please ask your question. Thank you. Hi, Johan. Just a couple of questions please. First, did I interpret your comment correctly about the Nielsen rules review findings here this time that this relates to transactions excluding U. Bankistan transactions? And secondly, if we look forward, the strategic review, which you've just mentioned, I assume that the CFO has played a crucial role of that review process. So how will what has happened today impact the strategic review and the timing for its conclusions? And just finally, if I may, for the past years, I believe Telia has been recognized by the market as a fairly well managed company. And obviously, we now have a new Board. Key management positions have been replaced over the past year. I mean, what can you tell us that will keep the market confident that continuity in operations and financial performance can be maintained going forward? Thank Thank you. Let me be try to be quick. Uzbekistan, that's correct. This is not the findings from Uzbekistan. These are findings from other markets that we have gone through. What I'd like to say, though, that the pattern that we have seen in the Uzbekistan investigation from Mann Hemen report is not unsimilar to what we're seeing in other markets, I. E, not enough risk assessment, not enough questions to ask, not enough red flags acted upon. When it comes to the strategic review, it's ongoing. Luckily, Christian Luiga has been driving that change program and strategic review from the CEO office, and he is fully up to speed to also carry on with that. We have a full team supporting that. So that continues as usual. On the management team and confidence, I think the only thing I can say there is I will not say so much. I will demonstrate to you that we can continue delivering according to our own expectations, and then that trust has to be built in your community. But we have as I mentioned earlier, this is nothing new. We are already addressing the root causes that have been appearing also earlier. So in that sense, this is nothing to be worried about on that level. Okay. Thank you. Thank you. Your next question comes from the line of Andrew Lee. Please ask your question. Yes. Good morning. I wondered, Johan, if you could talk a bit more on your attitude to the Eurasian assets. Is the only thing you think about whether you're able to do business in the footprint? What about the reputational damage to the firm as a whole from continuing in that region? Is that a concern to you? And is there any update you could give us in terms of the Swedish government's view on your ongoing involvement in the region? On the latter one, no. On the first one, clearly, need to continue to do sound business in these markets. And I've said it many times, I repeat that. It's possible to do profitable long term business in these countries if you have a strong framework for governance and if you have the right culture. And I'm absolutely convinced that we can continue to do that in these markets. So this is not about the overall picture at this stage in Eurasia. This is about some of the transactions that we have gone through where we have not been thorough enough executing them. There's a business risk from continuing in these regions given the uncertainty and what's been going on that it kind of starts to impact perception both from customers and major shareholders on the rest of your group? Well, remains to be seen, but I don't think so. We're working with the communication around our position, and I think we have a very sound business there. As you know, it's growing and there's good profitability. The focus we have now is to make sure it's long term sustainable growth and profitability. We have very good people and leaders out in these markets to help us deliver value. But clearly, these findings that we are showing the world in the sense raises the concerns that you're bringing up. We will manage them the best we can, but it's not about our presence in Eurasia at this stage. Understood. Just one last question, if I may, from me. You mentioned there's four senior managers that have left the firm. Are there any less senior people that have been leaving the firm as a result of this? No. It's for people that have are leaving the company due to the findings that have come up in the review at this stage. Thank you. Thank you. Your next question comes from the line of Jacob Bluestone. Please ask your question. Hi, there. Three relatively quick questions. Firstly, can you maybe just talk through the process for the appointment of a permanent CFO? Is it basically the same process as when you were appointed earlier this year? Secondly, I mean, I suspect the answer is no, but I'll ask anyway. Are you able to comment on which markets you have found other issues in? And then finally, I mean, understand the reviews mostly looking at the Eurasian assets. Are you looking more broadly at any of the other parts of the business as well as part of these governance reviews? Thank you. On the CFO side, acting CFO, Christian Louie, stepping in today, very comfortable that we have a solid pair of hands to manage that. But obviously, since it's acting, we will also have a process to make sure we have a permanent CFO in place as soon as possible. On the markets, the only thing we can say is that it's other markets than Uzbekistan that have been through the review, and there are more than one market. And we're not commenting specifically on which markets at this point of time. On your last question, broadly speaking, we're always, as you know, interested in looking at new opportunities, both where we are and if there is anything that makes sense in our current strategy. So unfortunately, I have to disappoint you on the last one there. Normal answers. On the last one, actually was more wondering whether you're reviewing other assets aside from Eurasia as part of your governance review. So looking whether there's anything that should have happened in other markets that shouldn't have happened. Okay. I'm sorry that I misunderstood your question. Not specifically, but as part of our normal governance review and governance upgrade, of course, we're looking at everything, but not in the light of the Northern Rose review that is initiated by the Board. That is specifically for the Eurasian markets. Got it. Thank you. Thank you. Thank you. Your next question comes from the line of Andreas Jolfsson. Please ask your question. Yes. Good afternoon. Just had a question on how you see forward. I guess you have spent quite a lot of time with this issue and just how you see spending your time going forward, if there is other areas to focus more on ahead? I think that's an excellent bridge to what I want to focus on going forward. I haven't spent too much time on this, I have to say. It's the last couple of weeks that have been quite hectic. I have had a project team in my CEO office running this review, and it's the Board's, as you know, the Board's review which we're supporting. But absolutely, we have we're focusing on what we talked about in our meetings. It's about shaping the Telia Sona for the future, finding the right balances in our strategy. And we will keep you posted on that as we meet now into Q1. Thanks. Thank you. Your next question comes from the line of Erik Peirs. Please ask your question. Thank you. Just have a question regarding sort of what phase are you in when it comes to rectifying the mismanagement of these transactions in the past? Are these actions you take today the final actions with regards things that relate to past transactions? Your Chairman seems to indicate today in media that the company is now entering a new phase, so to speak. Or are you sort of in the middle of things still and we should expect more to come when it comes to these transactions made in the past? Thank you. I hope my Chairman is right that we have most of this behind us. And the reason we can say that is that we have addressed most of these root causes that are behind the kind of weaker focus in the past on risk management and thorough reviews and transparent transactions. So what I mentioned when I went through the list of what we have already implemented, I want to send a strong message to you that we have done a lot to improve our compliance already. Now we relate to the information that has come up so far in the review from Notre Dame. We have a few more things to do to cover, but the ambition, as the Chairman has stated, is to conclude this during Q1. And if we need to come up with anything else, we'll do so. But hopefully, this now concludes the major remedies as stated. Thank you. Thank you. Your next question comes from the line of Sasu Ritsynikki. Please ask your question. Thanks. It's Sasu from Merrill Lynch. I have three hopefully quick questions. Firstly, do the findings now relate only to the entry into the markets you're referring to? Or has there been an ongoing pattern of what you would call unsatisfactory management of these businesses? Secondly, indicate you've passed material on to the prosecutor's office. Do you see if there's any risk risk of liability for the company? Or do you think that it's primarily the individuals who potentially have issues to face? And then thirdly then, what do you see are the consequences for corporate culture that you talked previously about wanting to restore a kind of culture of innovation or kind of activity to Telia Scenera? Isn't there a risk that as you exit senior people and as you boost up the compliance function, you move the company into the wrong direction? Let me start with the first one. Easy questions, longer answers. But on findings, I'm not going go into details on any of the findings, but what I can say is related to the transactions not running the business. The reviews about the transactions entering into entering into or up in certain of these markets. So it's not running the businesses mainly. On the prosecutor side, we're not in a position to do a legal assessment of what what it means to the company. We have not been able to see anything criminal, but it's also not our job. We have said this is about trust and confidence, but we have not done enough to avoid ending up with these many question marks on too many of the transactions. On the corporate culture side, that's a very interesting point. I think this is should be seen in the light of all the changes and the initiatives we are driving to shape the future of Telia Sonra. And I hope this shows that we're serious about sustainability and ethics. But it's not why we're doing it, but we're acting because we have to, but it sends strong signals internally, of course. And when it comes to other parts of building the culture, we have a great momentum in our current programs in the strategic review and shaping the future company, as I've told you before. So I'm not worried in the longer perspective. I'm rather actually glad that we can now put this behind us and move forward focusing on the right things. Thanks. Thank you. Your next question comes from the line of Faroo Yousupov. Please ask your question. Yes. Thank you very much. Faroo Yousupov, Uzbek Service of Radio Free Europe Radio Liberty based on track but broadcast to Uzbekistan. Mr. Dan Lund, you said that this review was not related to Uzbekistan. And on the other hand, you said that you are going to cooperate with the prosecutor. As far as we know, the prosecutor's investigation is mainly focused on the dealings with the Uzbek partner and how does this statement match? And secondly, as I understand, you are not disclosing the names of the individuals except for Mr. Blunquist. But the Swedish media is reporting that another one another person is Terro Kivisiari who was responsible for Eurasia and who is alleged to be responsible for the negotiations with Uzbek Partners in 02/2007. Is it really the decision does not have anything to do with Uzbekistan? Okay. Let me take that question anyway. The Uzbekistan matter, as I mentioned, this is not part of the review. This is other countries, and that's why we're making these or taking these actions. And I just want to make that clear. I made that clear in the initial statement. So no, it's not Uzbekistan. With regards to names, I've seen also that. And what I've said before, Tero, Kivizari has left his position as Head of Mobility because he did not long did no longer have my trust in driving that business. And I can confirm that he is also one of the persons that are leaving the company now as well. And if I may, are you going to take any decisions in regards to the situation with Uzbekistan? I mean, if you are firing four people now for dealing with other countries in Eurasia, but Uzbekistan case was in Swedish public one of the most scandals, if I may. Is there going to be any further decisions? Look, on Uzbekistan, we have said there is an ongoing preliminary investigation from the Swedish prosecutor, which we are fully cooperating with, but also not making any comments on at this point. I am very keen to make sure we find the answers that are not fully covered. And what we can do to help to get those answers, we will do. And that's a continuous dialogue with the Swedish prosecutor on Uzbekistan. You said you are going to cooperate with the Swedish prosecutor. Next question, please. Thank you. Thank you. Your next question comes from the line of Maurice Patrick. Please ask your question. Hi guys. Maurice here from Barclays. I mean you said it's a time to look ahead rather than back. The Board obviously saw the governance issues as being sufficiently serious to make changes to senior management. So should we look to see any change in strategy looking forward, whether it be M and A related, restructuring related, headcount related? We expect to see any changes to the strategy you've announced the last few months and quarters? Well, let's talk about the strategy going forward in a different context. This is about taking actions on findings and then a review related to the history. Going forward, we will make sure that we communicate on our new strategic framework, which, of course, includes proper governance and compliance. But that's let's separate the two in this stage. Okay, thank you. I think we have time for one final question. Okay, thank you. Your next question comes from the line of Peter Aostig. Please ask your question. Thank you. I was wondering, first, you say that you intend to give the information that you found to the prosecutor, but we talked to them and it seems like you haven't done it yet. So my first question is when will you do that? And my second question would be, you decided to give us two other names of the four people being fired. Could you give us the names of the other two? And if not, why not? Thank you. Let me start with the last one. It's I will comment on my people the people directly reporting to me. And of course, the CFO has been reporting to me, and we had to also public make that public. And since Terro was part of my team before and it's been a lot of speculations, I'm also confirming, but also reminding you that he has already left the management team already early October. So those two, I comment on. But the others, I prefer not to comment on, respecting their integrity at this stage. When it comes to the prosecutor, we have said and communicated to the Swedish prosecutor that we are intending to hand over and making the material available. So that's part of the decision and the communication that we have said. But you haven't decided then when you will give the information to them? It's up to the Swedish prosecutor to now decide when and where and how they want to take part of that Okay. Thank you. Thank you. Okay. Then I think that concludes the call today. Thank you, everyone. Thank you very much, and looking forward to see you next year in a different context. Thank you. That does conclude our conference for today. You may all disconnect.