Sweden’s TeliaSonera has written down the value of its Uzbek unit, Ucell, by about half – SKr5.3bn (US$620m) – as it prepares to exit Eurasia. The telco also plans to record an impairment charge of SKr1.9bn (US$222.25m) for its operations in Demark following its abandoned joint venture in the country with Telenor.
Sweden’s TeliaSonera (STO:
The telco said in a statement today that its seven Eurasian businesses will be reported as held-for-sale and discontinued operations in its full year report for 2015. As such, it said the group’s operating income for Q4 2014 will be impacted by a SKr5.3bn non-cash impairment charge relating to the business in Uzbekistan. It added that the valuation is based on an overall assessment of the impact of the sales process and the risk in the country.
TeliaSonera is also writing down the value of its Danish operations by SKr1.9bn (US$222.25m) as a result of “updated earnings projections” following its failed attempt to establish a joint venture in the country with Telenor amid European Union opposition.
TeliaSonera announced last September that it had launched a process to exit Eurasia, where it has had a tough time for several years, particularly in Uzbekistan. A controversial 3G tender in the country led to the resignation of erstwhile CEO Lars Nyberg in early 2013 and, later that year, TeliaSonera fired its CFO, head of Eurasia and two other employees. TeliaSonera and other foreign operators present in Uzbekistan have come under investigation from international authorities concerning their purchases of mobile licences.
Nyberg’s replacement Johan Dennelind (pictured) said today that the process to exit Eurasia continues, noting that significant progress was made last December when it agreed to sell its 60.45% stake in Ncell in Nepal to Axiata for US$1.03bn. The telco also agreed to dissolve its economic interest in an additional 20% stake, held locally by Niraj Shrestha, for some US$48m.
TeliaSonera said it will change the accounting method for its Eurasian operations to one based on market values, reflecting forecasted sales, rather than on discounted values from continuing operations.
Write-down represents half of Ucell’s value
Berenberg analyst Ghazi Usman said it was not yet possible to calculate an adjusted valuation of Ucell since TeliaSonera has not disclosed its net asset value.
However, he noted that the telco did provide the net asset value (NAV) of the entire Eurasian business in its 2014 annual report (SKr24bn, US$2.81bn) as well as NAVs for KCell in Kazakhstan (SKr3.9bn, US$456.2m), Azertel in Azerbaijan (SKr6.36bn, US$743.6m) and Ncell (SKr4bn, US$467.67m).
This leaves a value of SKr9.8bn for the rest of its Eurasian operations, of which the Uzbek asset is the largest.
“In summary, feedback from the sales process has led TeliaSonera to write down half of the book value of the Uzbekistan business according to the above calculation!” he said.
Usman added that his team expects TeliaSonera to exit its Eurasian units at depressed multiples, which will in turn reveal an overvalued European business at risk of a derating.
Meanwhile, Swedbank analyst Stefan Wård said he expects the developments to have a significant impact on equity, but none on cash flow.
“Broadly we consider this to be discounted in the already conservative valuation of the share. Hence we expect only a minor negative impact on the back of the announcement.”
In his view, the news can be viewed positively as it paints a clearer picture of what TeliaSonera will look like ex-Eurasia.
Last November, when announcing the planned Eurasian exit, Dennelind, said TeliaSonera had since made great strides in the region, particularly in corporate governance.
“We now have better and more well managed companies which we believe others can successfully develop further,” he said.
The CEO noted that sales process is being conducted market by market.
TeliaSonera’s interests in Azercell, Geocell in Georgia, Kcell and Moldcell in Moldova are held indirectly through Fintur, a holdco in which it owns 58.55%.
Turkcell, which owns the other 41.45% of Fintur, said last November that it would make a binding bid for TeliaSonera’s 58.55% stake in Fintur.
TeliaSonera board nominees include Olaf Swantee
The Swedish company’s board has separately nominated three new board members, including Olaf Swantee, who will step down as CEO of UK mobile operator EE following its expected sale to BT.
Prior to joining EE, the Netherlands-born executive held various board roles at EE’s part-owner Orange Group, as well as senior leadership roles within HP, Compaq and Digital Equipment Corporation.
The second nominee is Susanna Campbell, currently the CEO of Swedish private equity firm Ratos. Before that, she held positions at McKinsey and Alfred Berg Corporate Finance.
Anna Settman, meanwhile, is founder, CEO and partner of investment firm The Springfield Project, and the former CEO of newspaper Aftonbladet. She sits on the boards of Nordnet Bank, pest control firm Anticimex and business skills development group Hyper Island.
They will replace Mats Jansson, Per-Arne Sandström and Kersti Strandqvist, who decided not to stand for re-election.
