Teleoperator TeliaSonera has been the target of a police investigation in what may be one of the biggest corruption cases in Sweden. The United States Department of Justice is also said to have the company in its sights over its dealings in countries such as Uzbekistan. Eurasia has netted the company tens of millions in profits, but it has also become a thorn in the teleoperator’s side, over reports of bribes and kickbacks to gain market entry.
The story itself began in 2012 and centres on transactions the teleoperator conducted when it set up its operator business in Uzbekistan. Police investigations in Sweden revealed that in January 2008 then-CEO Lars Nyberg and Eurasia director Tero Kivisaari met with Gulnara Karimova, the daughter of the Uzbek president and an influential businesswoman in her own right.
Karimova’s business strategy included taking money from foreign companies looking to enter the Uzbek market. The money was paid into an offshore account and she would become the company’s local partner.
Weeks before that first meeting TeliaSonera, had already paid Karimova’s Gibraltar-registered company Takilant 80 million US dollars for frequencies and the numbering block. Karimova received another 220 million dollars in 2010 when TeliaSonera purchased 20 percent of the local operator.
The case of TeliaSonera’s business dealings in Uzbekistan and other ex-Soviet states has sparked one of the biggest corruption investigations ever seen in Sweden. Retiring Swedish chief prosecutor Gunnar Stetler has been front and centre of the lengthy and high-profile investigation. The many jurisdictions involved have further complicated the matter.
"You have to follow money that is first sent - for example - to Riga, then to Hong Kong, then forward to Cyprus and the Cayman Islands. Then it can be mixed with shelf companies in Panama that are linked to a trust in Bermuda. It is clear that it is slow to follow money and transfers in this international system," Stetler noted.
Documents acquired by Swedish media indicate that the chief suspects in the case are Nyberg and Kivisaari. Both men have denied any wrongdoing. So too has Karimova, who has charged that the allegations are politically motivated.
'Who's to blame' game
The question that has been asked in many circles is whether or not Sonera – the Finnish arm of the company that existed before the 2000 merger that created TeliaSonera – is solely to blame for the company’s shady business practices.
In late 1990s Sonera had already ventured east and built up collaborations with local partners. That’s because undeveloped markets in former Soviet republics as well as Turkey represented potential growth and profits.
"You have to remember that early on Telia was also doing business in the St. Petersburg area. As we know, Russia is also a very corrupt market," said Patricia Hedelius, a Swedish journalist who has written a book about TeliaSonera.
When both companies came together in 2000, they were looking to tap into growth markets in the East using a combination of Telia’s thick wallet and Sonera’s experience. In 2007 TeliaSonera CEO Anders Igel was under pressure because he hadn’t delivered sufficient growth and profits.
"The Uzbekistan affair was initiated by Igel," Hedelius declared.
Ex-CEO: "We always played by the rules"
It was at this point that former chief executive Harri Koponen – now CEO of the data security company SSH Communications - assumed responsibility for the merged company’s Eurasia business. But he did not hold the position for long, as Igel quickly showed him the door.
Koponen claimed that TeliaSonera always played by the rules. Moreover if there was even a hint that any employee was acting unethically or accepting kickbacks, that individual would be immediately terminated, he added.
Koponen said that lawyers always accompanied him to negotiations.
"You needed to have at least four eyes and ears. If you go to meetings alone you expose yourself to risks," he declared.
Money making machine for TeliaSonera
In recent years TeliaSonera has been able to pay out very hefty dividends – in part due to profits from Eurasia. Since 2009 Eurasian operations have contributed approximately seven billion euros to the bottom line, about a third of all company earnings.
The Finnish state has earned about one billion euros in dividends since 2009 – via state-owned investment holding company Solidium. Moreover Solidium has pocketed an additional 2.6 billion euros for the state from the partial sale of its TeliaSonera shares – it now owns just three percent of the teleoperator.
Despite the state’s gradual exit TeliaSonera still has a strong Finnish following - Finnish shareholders hold almost ten percent of TeliaSonera shares.
Difficult exit
Leaving Eurasia won’t be easy for TeliaSonera – it can’t sell off its overseas holdings to just any partner. The other challenge is how to exit with the profits that are essentially locked in local bank accounts. For example, authorities in Uzbekistan have not given their approval to pull out any funds.
In April TeliaSonera managed finally to sell its operations in Nepal for one billion US dollars, on condition that the buyer Axiata also pays out profits held on bank accounts on top of the sales price. But even after that the teleoperator still has up to half a billion euros frozen in accounts in other countries.
The investigation in Sweden might not be the company’s biggest concern. The US Department of Justice is also breathing down its neck, and previous US fines for corruption have been very harsh compared to Swedish penalties.
Current CEO Johan Dennelind noted that TeliaSonera’s unsold Eurasian operations are like “a wet blanket” over the company.
Goodbye to Sonera
Shareholders attending the company’s annual general meeting in Stockholm agreed on a new corporate name – Telia Company. Sonera will only be used for the Finnish business.
Yle attempted to speak with Telia board member and former Nokia CEO and chair Olli-Pekka Kallasvuo about the name change. However he slipped away from the AGM undetected.
The Swedish-Finnish company said that it is now focusing on northern Europe. But former Sonera board chair Tapio Hintikka said he’s not optimistic about its prospects.
"From where I sit, I don’t see anything that would offer a path that could replace it [Eurasia]," Hintikka added.
Sonera’s history began more than 100 years ago when it was the State Telegraph Company. It has now come full circle and the story has in one sense now come to an end.
This is an abridged version of an article that originally appeared in Finnish on 17.4.2016.
