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Friday, June 21, 2024

Telenor caught in cloud of suspicion

NEWS ANALYSIS: Another of Norway’s biggest state-controlled companies, Telenor, is facing serious and ever-growing corruption suspicions around its business expansion abroad. Some of the biggest names in Norwegian business are involved in the drama now spinning around Telenor, as its new chief executive announced an internal investigation over the weekend and portrayed himself as the man trying to clean things up.

Telenor's new CEO seems eager to clean up the mess created by Telenor's investment in VimpelCom, and VimpelCom's expansion into Uzbekistan, which has prompted a major corruption investigation. PHOTO: Telenor
Telenor’s new CEO, Sigve Brekke, seems eager to clean up the mess created by Telenor’s investment in VimpelCom, and VimpelCom’s expansion into Uzbekistan, which has prompted a major corruption investigation. PHOTO: Telenor

Sigve Brekke is a veteran of Telenor but so far seems to be distancing himself from the actions, or inaction, of his predecessors. After he took over as CEO succeeding Jon Fredrik Baksaas earlier this year, Brekke says he was asked by Telenor’s board to look into how Telenor has dealt with an international corruption investigation into its partly owned mobile phone firm VimpelCom’s expansion into Uzbekistan.

One major question is why Telenor’s board didn’t call for such an examination much earlier. Corruption suspicions have swirled publicly around VimpelCom for more than three years, while questions are now flying over why VimpelCom’s board of directors (which includes three top Telenor executives) didn’t react themselves when they signed off on details of the Uzbekistan deal, disclosed in VimpelCom’s own annual report of 2009.

Anger and unanswered questions
Brekke says he found out, at any rate, that someone within Telenor had information that had been passed on to criminal corruption investigators in the US (where Telenor and VimpelCom are traded), the Netherlands (where VimpelCom is now based) and Norway (where Telenor is based) but not to Telenor’s own biggest shareholder, the Norwegian government. Brekke’s findings prompted him to share this “new information” with Norway’s government minister for business and trade, Monica Mæland, who promptly fired Telenor’s chairman, Svein Aaser, on Friday. Brekke also has hired a law firm to investigate how Telenor’s management and board has handled the VimpelCom affair.

Trade Minister Mæland of the Conservative Party is clearly angry that neither Aaser nor Baksaas had shared the information earlier with either her or a parliamentary committee that’s also been probing Telenor’s VimpelCom affair. The content of the information itself is being kept secret, but newspapers Dagens Næringsliv (DN) and VG reported that it shows Telenor executives had concerns tied to the investments VimpelCom that were made in Uzbekistan back in 2006. When Aaser and Baksaas were questioned by the parliament’s disciplinary committee in January, both denied having any knowledge of possible corruption at VimpelCom or concerns about corruption. Neither Aaser nor Baksaas would respond to media inquiries on Friday or over the weekend, but members of the committee are as upset as Mæland, warning of “serious consequences” for Aaser, Baksaas and other Telenor executives if they withheld information. Another committee hearing, calling in both of them and others, looms.

Who knew what, and when
It all raises new questions over who at Telenor knew what, and when, regarding VimpelCom expansion into Uzbekistan also in the years prior to 2012. That’s when DN first wrote a lengthy article about VimpelCom’s questionable payments to a Gibraltar company called Takilant that’s been linked to the daughter of Uzbekistan’s dictator. It was also in 2012 that the government had replaced Telenor’s former chairman, Harald Norvik, with Aaser. Norvik, a former chief executive of Statoil, lost the confidence of Mæland’s predecessor at the time in another matter, and now claims no knowledge of any corruption suspicions at VimpelCom and “no further comment.”

Telenor, meanwhile, has held seats on VimpelCom’s board of directors all along and filled them with high-ranking Telenor executives. Former CEO Baksaas sat on VimpelCom’s board himself, until he resigned late last year, not long before resigning as Telenor’s CEO. Yet neither Baksaas nor his fellow VimpelCom board members are known to have blown any whistles or questioned why VimpelCom’s management was sending millions to a company in Gibraltar in order to do business in Uzbekistan.

Fredriksen's group called the hiring of Lunder "exciting." He's shown here, at right, sitting at the table with Telenor's now-retiring CEO Jon Fredrik Baksaas (center) and Telenor's partner in VimpelCom, Mikhail Fridman of Russia, signing a deal to extend investment in VimpelCom in November 2002. Standing behind them, Russian President Vladimir Putin and, at right, Kjell Magne Bondevik, who was Norway's prime minister at the time. PHOTO: Telenor/Bo Mathisen
Here’s where Telenor’s current and most pressing troubles arguably began, at a ceremony in November 2002 when investment in mobile phone firm VimpelCom was extended by Telenor and Russian oligarch Mikhail Fridman. Sitting at the table (from left) are Fridman, Telenor’s CEO at the time Jon Fredrik Baksaas (center) and Jo Lunder, a top Telenor executive who was dispatched to oversee the VimpelCom stake and later became VimpelCom’s CEO. Standing behind them are Russian President Vladimir Putin and, at right, Kjell Magne Bondevik, who was Norway’s prime minister at the time. Lunder, who left VimpelCom last year, has refused to answer media inquiries about VimpelCom. He now works for Norwegian shipowner and industrial magnate John Fredriksen. PHOTO: Telenor/Bo Mathisen

There’s no question that Telenor’s involvement in VimpelCom has been troubled from the very start, when Telenor first bought what was a nearly bankrupt Russian telecoms firm in 1998. In 2001, when Baksaas was already part of top management at Telenor and just a year before he took over as CEO, Telenor brought in Russian oligarch Mikhail Fridman and his Alfa Gruppen as co-owners of VimpelCom. That led to years of conflicts between Telenor and Alfa. VimpelCom’s board meanwhile ordered expansion outside of Russia, at a time when Baksaas was also actively expanding Telenor’s own international operations, paving the way for VimpelCom’s investments in places like Kazakhstan, Tajikistan, Armenia, Georgia and Uzbekistan.

And so fly all the unanswered questions now, among the top Norwegian politicians who serve as the shephards of the state’s 54 percent stake in Telenor. Telenor uses every opportunity to stress that it doesn’t control VimpelCom, with its stake now 33 percent, but as newspaper DN noted on Monday, that doesn’t absolve Telenor and its members of VimpelCom’s board of the legal, business and ethical responsibility tied to VimpelCom’s operations.

“What’s worse? To overlook possible corruption, or suspect something but not do anything about it?” mused one of Norway’s leading financial editors and commentators , Terje Erikstad of DN, on Monday. Erikstad, a veteran himself of the newspaper that also has revealed corruption at both Statoil and Yara in recent years, stressed that no one in VimpelCom has been indicted or convicted of corruption. He also stressed, though, that the VimpelCom case has been “stinking of corruption” since the facts behind its purchase of mobile phone licensing in Uzbekistan were uncovered.

Following Yara’s example
It’s possible Brekke is now trying to more quickly do what a new CEO at Yara did when confronted with corruption allegations: launch an internal investigation, cooperate fully with criminal investigators, communicate better with government owners and regulators and, if the company is ultimately found guilty, pay a big fine and try to move on. Brekke must be more successful, however, since Yara’s new CEO made the mistake of hesitating with the internal investigation, having to endure a lengthy corruption trial and then ultimately getting fired himself.

Brekke has denied allegations made by members of the parliament’s disciplinary committee that Telenor has withheld information to protect its share price. “That’s completely incorrect,” Brekke told newspaper Aftenposten on Monday. “We have interests in a process that’s as open as possible.” Brekke has also claimed repeatedly that Telenor isn’t sitting on any other information it hasn’t now revealed.

Brekke, who led Telenor operations in South- and Southeast Asia before becoming CEO, admits that “we can’t guarantee there’s no corruption in our markets.” He’s worked in countries where bribery is rampant, and has no doubt it’s difficult to operate in such markets. “It’s possible,” he told Aftenposten, but we have to be wide awake to ensure that we don’t become part of it.” Berglund



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