TeliaSonera Appoints Christian Luiga as Acting CFO (Transcript)

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 |  About: TeliaSonera AB ADR (TLSNY)
by: SA Transcripts

TeliaSonera AB ADR (OTCPK:TLSNY) Shareholder Analyst Call November 29, 2013 1:00 PM ET

Executives

Jesper Wilgodt - Head of IR

Johan Dennelind - CEO

Analyst

Peter-Kurt Nielsen - CAI Cheuvreux

Andrew Lee - Goldman Sachs

Jakob Bluestone - Credit Suisse

Andreas Joelsson - Enskilda Securities

Erik Pers - Danske Markets

Sasu Ristimäki - Merrill Lynch

Maurice Patrick - Barclays Capital

Operator

Welcome to the TeliaSonera 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. (Operator Instructions). I must advice you that this conference is being recorded today Friday 29 of November 2013. I would now like to hand the conference over to your speaker today, Mr. Wilgodt. Please go ahead sir.

Jesper Wilgodt

Hi everyone and welcome to this analyst call regarding today's announcements for senior employees who leave TeliaSonera. We'd just like to say that intention is to close this call within 25 minutes. By that I would like to handover to our CEO, Johan Dennelind. Please Johan.

Johan Dennelind

Thank you Jesper, good morning all. As you have seen this morning we announced that four senior employees who leave TeliaSonera, including our CFO and three other individuals. The Board has also decided to handover the 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 Mannheimer Swartling.

Let me first start to say that this kind of decision that we have taken and announced today were never easy, because we're dealing with people we know and people that have dedicated their professional lives to TeliaSonera and have done so with 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 at September 1st to declare mandate to continue support and drive their view internally to facilitate with the Board to make their assessments. While the review has been going on in various counties, I have 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 have told you on our road shows to some of you in the way we want to shape TeliaSonera into the future.

Just to mention a few, we have a new Compliance Officer in place since September 1st. We have a new General Counsel starting January 1st 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&A and strategy which then clearly puts the focus on M&A and the way we need to do business going forward, and I also have a new CEO office with all the files to various governance reviews and initiatives.

And I would 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 the roles in the company. As I have also stated we're not finished, it's work on going. The point I'm trying to make is that we're continuously improving our compliance in governance and we'll continue to do so going forward. The fact from the Norton Rose review are bringing news that is more of a pattern, how things have been carried out in the past, nothing new in that front. The news is that it shows the pattern as I mentioned that several transactions have been conducted in a way that it's not evidently transparent and ethical.

So what I would like to say with this is that we have 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 action on some of our senior employees unfortunately. The reason is -- ultimately it's 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 yourself is very high. And this is the TeliaSonera that I'm aiming to build with my team and it should be environmental, we need leaders and employees that take pride in doing things the right way all the time.

I just want to 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 1st of September. He is 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.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Your first question comes from the line of Peter Nielsen. Please ask your question.

Peter-Kurt Nielsen - CAI Cheuvreux

Hi Johan, just a couple of questions for you. Did I interpret your comment correctly about the Norton Rose review finding CEO at this time, that this relates to transactions excluding the Uzbekistan transactions? And secondly, if we look forward the strategic review which you have just mentioned, I assume that the CFO has played a crucial role of that review process. So how has that today impact the strategic review and the timing for its completions? 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 with continuity in operations and financial performance can be maintained going forward? Thank you.

Johan Dennelind

Let be sort of 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 would like to say though that the pattern that we have seen in the Uzbekistan investigation from Mannheimer report is not un-similar to what we are seeing in other markets, i.e. not enough risk assessment, not enough questions asked, not enough red flags acted upon.

When it comes to 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 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.

Operator

Thank you. Your next question comes from the line of Andrew Lee. Please ask your questions.

Andrew Lee - Goldman Sachs

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 are able to do business in the foot print? What about the reputational damage 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?

Johan Dennelind

On the later one no, and on the first one clearly we need to continue to do some business in these markets. And I have said it many times and I repeat that it's possible to do profitable long term business in these countries, if you have 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 or we have not been following enough executing them.

Andrew Lee - Goldman Sachs

The business risk from continuing in these regions given the uncertainty and what's been going on that kind of stuff to impact perception based from customers and major shareholders on the rest of your group.

Johan Dennelind

Well it 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 strong business there, as you know it's growing and there is good profitability. The focus we have now is to make sure it's long term sustainable growth and profitability. We have very good people, 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.

Andrew Lee - Goldman Sachs

Understood, just one last question I promise from me. You mentioned these four senior managers that have left the firm. Are there any less senior people that are leaving as a result of this? Thank you.

Johan Dennelind

No, it's four people that are leaving the company due to the findings that have come up in the review at this stage.

Operator

Thank you. Your next question comes from the line of Jakob Bluestone. Please ask your question.

Jakob Bluestone - Credit Suisse

Three relatively quick questions. Firstly can you maybe just talk through the process for the appointment of a permanent CFO, is it based on the same process as when you were appointed earlier this year? And secondly I suspect the answer is no -- but I'll ask anyway. Are you able to comment on which markets you have found other issues? And then finally I understand the reviews, mostly looking at the Eurasian assets, are you looking more broadly at any other parts of the business as well, as part of these governance reviews? Thanks.

Johan Dennelind

On the CFO side, Acting CFO, Christian Luiga stepping in today very comfortable that we have solid pair of hands to manage that. But obviously since he'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. 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 interestingly 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, no answers.

Jakob Bluestone - Credit Suisse

On the last one actually I was wondering whether you were reviewing other assets aside from Eurasia as part of your governance reviews. So looking whether there is anything that should happen in other markets that shouldn't have happened.

Johan Dennelind

As far as I understand, 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 Norton Rose review that is initiated by the Board, nothing specifically for the Eurasian markets.

Operator

Thank you. Your next question comes from the line of Andreas Joelsson. Please ask your question.

Andreas Joelsson - Enskilda Securities

Good afternoon. I 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?

Johan Dennelind

I think that's an excellent bridge to what I want to focus on going forward. I haven't spent too much time with this I have to say, as the last couple of weeks have been quite hectic. I have had a project team in my field who is running this review and it's 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 TeliaSonera for the future, I mean right balances in our strategy. We will keep you posted on that as we meet now into Q1.

Operator

Thank you. Your next question comes from the line of Erik Pers. Please ask your question.

Erik Pers - Danske Markets

I just have a question regarding sort of what phase are you in when it comes to rectifying the mismanagement of this transactions in the past. Are these actions you take today the final actions with regards to 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 we 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.

Johan Dennelind

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 weaker focus in the past on risk management and poorer reviews in terms of bad 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 Norton Rose, 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.

Operator

Thank you. Your next question comes from the line of Sasu Ristimäki. Please ask your question.

Sasu Ristimäki - Merrill Lynch

This is Sasu from Merrill Lynch, I have three quick questions. Firstly, do the findings now relate early to the entry into the markets you're referring to what has been -- has there been an ongoing pattern of what you would call unsatisfactory management of these businesses? Secondly, you've indicated you have passed material along to the prosecutor's office. Do you see if there is any risk of liability for the company or do you think that is primarily the individuals who potentially have issues to face? And thirdly what do you see are the consequences for corporate culture that you talked previously about wanting to restore kind of culture of innovation or connectivity to TeliaSonera. Isn't there a risk that as you exit senior people and as you boost up the compliance function you've moved the company to the wrong direction?

Johan Dennelind

Let me start with the first one, easy questions longer answers. But on the findings, I'm not going to go into details on the findings, but what I can say is it's related to transactions not running the business. The reviews about the transaction entering into certain of these markets, so it's not running the businesses mainly. On the prosecutor side we're not in a position to do legal assessment of 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 that we have not done enough to avoid ending up with these many questions marks on too many of the transactions.

On the corporate culture side, that's a very interesting point. I think this should be seen in the light of all the changes and the initiatives we are driving to shape the future of TeliaSonera and I hope this shows that we're serious about sustainability, 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. 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 told you before. So I am 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.

Operator

Thank you. Your next question comes from the line of Faroq [indiscernible]. Please ask your question.

Unidentified Analyst

Faroq [indiscernible] Uzbek Service Radio for Europe Radio Liberty based in Prague but broadcasted to Uzbekistan. Mr. Dennelind you said that this review was not related to Uzbekistan and on the other hand you said you are going to cooperate with the prosecutor. As far as we know the prosecutor's investigation is mainly focused on the deals 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. Blomquist. But the Swedish media is reporting that another person is Tero Kivisaari who was responsible for Eurasia and who is alleged to be responsible for the negotiations with Uzbek partners in 2007. Is it really that this decision does not have anything to do with Uzbekistan? Thank you.

Johan Dennelind

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 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, as we know and what I said before Tero Kivisaari has left his position as head of mobility, because he did no longer have my trust in driving the business. And I can confirm that he's also one of the persons that are leaving the company now as well.

Unidentified Analyst

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 scandalous if I may. Is there going to be any further decisions?

Johan Dennelind

Look on Uzbekistan we have said there an ongoing preliminary investigation from the Swedish prosecutor which we are fully cooperating with, but also not making any comments on it at this point. I am very keen to make sure we find the answers that are not fully covered. What we can do to help to get those answers we will do, and that's a continuing dialog with the Swedish prosecutor on Uzbekistan.

Unidentified Analyst

But you said you are going to cooperate with the Swedish prosecutor…

Jesper Wilgodt

We'll go to the next question please.

Operator

Thank you. Your next question comes from the line of Maurice Patrick. Please ask your question.

Maurice Patrick - Barclays Capital

Maurice here from Barclays. I mean you said it's a time to look ahead rather than back. The Board obviously saw the governance issue as being sufficiently serious to make changes in the senior management. So should we look to see any change in strategy looking forward, whether it be M&A related, restructuring related, headcount related. Should we expect to see any changes since you have announced the last few months and quarters? Thank you.

Johan Dennelind

Let's talk about the strategy going forward in a different context; this is about taking actions on findings in the 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 let's separate it in this stage.

Jesper Wilgodt

We have time for one final question.

Operator

Thank you. Your next question comes from the line of Peter [indiscernible]. Please ask your question.

Unidentified Analyst

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.

Johan Dennelind

We can start with the last one, I will comment on the people directly reporting to me. And of course the CFO has been reported to me and we had to also make that public. And since Tero was part of my team before and there has been a lot of speculations, I'm also confirming but also reminding that he has already 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 handover and making the material available. So that's part of the decision and the communication that we have so far.

Unidentified Analyst

But you haven't decided when you will give the information to them?

Johan Dennelind

It's up to the Swedish prosecutor to now decide when and where and how they want to take part of that information.

Jesper Wilgodt

Okay, I think that concludes the call today. Thank you everyone.

Johan Dennelind

Thank you very much and looking forward to see you next year in a different context.

Operator

Thank you, that does conclude our conference for today. You may all disconnect.

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