Power struggle rocks troubled Telenor

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Norway’s Parliament is demanding some answers after reports of deep conflicts at the highest levels of Telenor, one of the country’s biggest companies. The state still owns a majority stake in Telenor, and now the government minister in charge of it is also caught in the conflict between the woman she chose to lead Telenor’s board of diretors less than a year ago and Telenor’s chief executive.

Norwegian telecoms firm Telenor is among the companies that's been hit by computer attacks tied to industrial espionage. PHOTO: newinenglish.no

More gloom has gathered over Norway’s international telecoms firm Telenor, because of a reportedly deep conflict between the new leader of Telenor’s board of directors and the company’s chief executive. It has led to a conflict within the board as well. PHOTO: newinenglish.no

It’s the latest in a string of serious trouble to hit Telenor, much of it tied to the company’s aggressive international expansion over the past 25 years. Newspaper Dagens Næringsliv (DN) reported Friday that the conflict between Telenor’s new chairman, Gunn Wærsted, and CEO Sigve Brekke is rooted in “serious matters” from the years when Brekke ran Telenor’s Asian operation. Most have never been reported publicly, but are said to involve both strategic and operational matters tied to Telenor’s compliance with various regulations.

Wærsted is widely believed to have been hand-picked by Norway’s business and trade minister, Monica Mæland, to lead Telenor’s board after Mæland fired its former leader in the wake of a major corruption scandal. Brekke was also new at the time, after taking over for Telenor’s former longtime CEO Jon Fredrik Baksaas who retired during a climax of the same scandal. Wærsted has had clear marching orders to “clean up” at Telenor and ensure company compliance with its so-called “zero tolerance” for corruption.

Wærsted initially expressed confidence in Brekke last spring, but now DN has reported that’s changed after she’s apparently delved further into Telenor’s and Brekke’s past. Brekke was in charge, for example, when Telenor got involved in ill-fated and hugely expensive investments in India that so far have cost the company nearly NOK 25 billion. In April Telenor reported problems at its mobile phone firm Dtac in Thailand. Brekke, a former Labour Party politician, also got in trouble after it emerged that he had embellished his own CV after making the transition from politics to business. He was also criticized for how he handled the VimpelCom crisis last fall that resulted in the departures of two top executives.

Brekke is popular among employees, though, and was greeted like a rock star when he formally took over as CEO in August of last year. Even though Telenor’s share price has declined by around 20 percent since Brekke became CEO, he has retained support from Telenor’s board, and that’s where the current conflict with Wærsted rests.

Sigve Brekke (at left in black shirt) has been a popular leader in Telenor, shown here with employees in India, where the company ended up suffering huge losses. PHOTO: Telenor

Sigve Brekke (at left in black shirt) has been a popular leader in Telenor, shown here with employees in India, where the company ended up suffering huge losses. PHOTO: Telenor

DN reported this week that Wærsted allegedly told Brekke in a conversation earlier this autumn that she thought he should resign as Telenor’s CEO. Brekke chose not to follow Wærsted’s advice, according to DN, and the matter eventually reached Telenor’s board.

Suddenly it was Wærsted who was put on the defensive, when a majority of Telenor’s board members backed Brekke and did not want to call for his resignation. Not only did they not support Wærsted’s evaluation of the situation, they think Brekke is still the right man to lead Telenor during challenging times.

That leaves the company in an extremely difficult situation. A stream of business professors and management experts claimed on Thursday that a situation involving a lack of confidence between a chairman and a chief executive can’t continue. “It’s always wiser to resign, instead of being forced out,” Professor Gottschalk at the Norwegian business school BI told news bureau NTB. He has long been critical of Brekke’s leadership and agrees he should resign as CEO.

Gunn Wærsted will take over as chairman of troubled Telenor in mid-January. PHOTO: Nordea Norge

Gunn Wærsted took over as chairman of troubled Telenor in mid-January. Now she has expressed a lack of confidence in Telenor’s CEO but lacks support for her view from the board she leads. PHOTO: Nordea Norge

Others think Wærsted has painted herself into a corner and may be the one who needs to leave. DN reported that a majority of Telenor’s board members don’t think the “serious matters” that have arisen from Brekke’s past are serious enough to warrant his resignation. The board also hired in external legal consultants who concluded that Brekke could not be held responsible for them. Wærsted reportedly was thus alone in her negative evaluation of Brekke, and lacks support from the board she leads. DN reported Friday that a new evaluation of Telenor’s board carried out by one of its committees and an external consulting firm described the conflict between Wærsted, Brekke and the rest of the board as a problem.

Top politicians who are part of the opposition in Parliament are thus calling for a resolution of the new crisis at Telenor. “We can’t accept that such an important company (as Telenor) is subject to a lack of confidence or a bad mood between its management and its board of directors,” Geir Pollestad of the Center Party, who leads the Parliament’s standing committee on business and trade, told Norwegian Broadcasting (NRK) on Thursday.

Neither Wærsted, Brekke, other Telenor officials nor Trade Minister Mæland would comment on the conflict. MP Knut Storberget, a former justice minister for the Labour Party, has thus formally called upon Trade Minister Mæland of the Conservative Party to respond.

“I want to know what Minister Monica Mæland has known about this issue and how she has followed it up,” Storberget told DN on Friday. In a letter to the president of the Parliament, Storberget has asked whether Mæland knew about Wærsted’s “initiative” towards Telenor’s CEO, and whether Mæland has had contact with Wærsted over the issue before or after. Storberget also asked Mæland for her opinion on whether Wærsted’s lack of support on the board is “optimal” for management of the company and for management of the state’s ownership interests in Telenor.

Telenor’s board was called in for a special meeting on Thursday and is due to gather for an ordinary meeting on Monday. In the meantime, a weekend ceasefire was expected since they’re all invited to the annual Nobel Concert at the Telenor Arena adjacent to Telenor’s headquarters at Fornebu, just west of Oslo, on Sunday evening. It’s held in conjunction with the awarding of the Nobel Peace Prize in Oslo on Saturday.

newsinenglish.no/Nina Berglund