Norway’s international telecoms firm Telenor, now under a new CEO, appears keen to cut off its profitable but long-troubled involvement in the Russian-dominated mobile phone company VimpelCom Ltd. Telenor announced Monday morning that it intends to sell all its shares in VimpelCom, which has been under investigation for corruption and money-laundering in several countries.
Telenor’s press release early Monday doesn’t mention the ongoing investigation into the questions swirling around how VimpelCom went about buying mobile phone firms and licenses in Uzbekistan and other central Asia nations. Instead, the company claims it’s selling out because VimpelCom isn’t as important to Telenor as it once was and because Telenor wants to concentrate on its own core operations.
There’s no question, though, that the serious allegations swirling around VimpelCom, and Telenor’s earlier reluctance to address them, have been a problem for Telenor and the Norwegian state, which still holds 54 percent of Telenor’s shares. Telenor in turn currently holds a 33 percent stake in VimpelCom after years of also-troubled relations with the company’s majority owner, Alfa Group, led by Russian oligarch Mikhail Fridman.
VimpelCom, meanwhile, is suspected of paying bribes. Its expansion into Uzbekistan has prompted Norwegian white-collar crime investigators to also question top Telenor officials on behalf of investigators in Switzerland, the Netherlands and the US, since the expansion occurred while Telenor had top representation on VimpelCom’s board and while one of its own top executives, Jo Lunder, had been dispatched to VimpelCom. Telenor’s newly retired chief executive Jon Fredrik Baksaas resigned from VimpelCom’s board in December of last year, while Lunder stepped down as VimpelCom’s own chief executive just last spring.
Now Telenor has a new chief executive, Sigve Brekke, and selling off the VimpelCom stake could help him start with a cleaner slate. As he explains it, exiting VimpelCom is the result of a revelation that Telenor hasn’t had control over VimpelCom and was unlikely to get any.
Brekke, who formally took over as Telenor’s new CEO in mid-August, continued to distance both Telenor and himself from all the corruption allegations during a live interview on Norwegian Broadcasting (NRK) Monday morning. He explained the decision to sell out as the result of a review Telenor’s board had asked him to make of Telenor’s position in VimpelCom. The conclusion, Brekke told NRK, was that Telenor held a “demanding minority stake (in VimpelCom) where we haven’t had the possibility to control the company.” He said Telenor instead wants to “focus our energy where we have our core operations: 13 large companies, 200 million customers, in Asia and Europe.”
The VimpelCom stake apparently has become more trouble than it was worth, even though that’s been quite a lot. Telenor has earned billions on VimpelCom, investing NOK 15 billion over the years and receiving NOK 20 billion in dividends, reported NRK. “It has been a good investment for Telenor,” Brekke himself concluded. Telenor noted in its press release, though, that the stake now has less impact on the overall value of Telenor. The market value of the stake now accounts for around 8 percent of Telenor’s total market value.
Brekke refused to say how damaging the VimpelCom stake has been for Telenor, given earlier legal quarreling over ownership stakes in the company and the current corruption probe. “I don’t think I want to speculate on that,” Brekke said. “This has been a position that has been very demanding and difficult for us.” He repeated, though, that it was “demanding and difficult” because Telenor couldn’t control the company with its minority stake. Telenor’s own former “wonderboy” Jo Lunder was its CEO, however, and Telenor’s board hung on to its stake through years of turmoil.
The sudden concern for an alleged lack of control at VimpelCom (even though Telenor’s Lunder became its CEO and Telenor had top representation on Vimpelcom’s board) comes after Telenor had to answer questions in Parliament about VimpelCom’ role in Uzbekistan and before all the other investigators reach any conclusions. “You can say this this (selling off the VimelCom stake) could have been done earlier,” Brekke conceded to NRK, “but we have at any rate concluded with this decision here.”