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Tuesday, May 28, 2024

Media storm batters troubled Telenor

As reasons for a lack of confidence in Telenor CEO Sigve Brekke continued to leak out of the company this week, one of its major employee organizations tried to head off the media storm swirling around both Brekke and board leader Gunn Wærsted. It called on Telenor’s divided board of directors to retain Brekke as CEO as they huddled for the second of a two-day-long board meeting on Tuesday.

A power struggle at Telenor has dominated Norwegian media for the past week, like here on NRK's national nightly newscasts. Pictured in the background are Telenor's embattled CEO Sigve Brekke (left) and the leader of Telenor's board, Gunn Wærsted. PHOTO: NRK screen grab
A power struggle at Telenor has dominated Norwegian media for the past week, like here on NRK’s national nightly newscasts. Pictured in the background are Telenor’s embattled CEO Sigve Brekke (left) and the leader of Telenor’s board, Gunn Wærsted. PHOTO: NRK screen grab

The drama surrounding Brekke at the highest levels of one of Norway’s biggest companies seemed to be heading for a climax. Reports of mounting claims against him, regarding trouble at Telenor operations in Asia, came on top of concerns expressed by top politicians. Since the state owns 54 percent of Telenor’s stock, the government minister in charge of it was being asked to clarify her role in what’s become a major power struggle between the leader of Telenor’s board and its CEO. Both are still relatively new in their posts, with Wærsted appointed with a mandate to “clean up” Telenor after years of management conflicts and a huge corruption scandal. She reportedly has developed deep concerns about Brekke and how he did his job while head of Telenor’s Asia operations.

On Tuesday morning, a top employee representative from the labour organization Tekna Telenor, was on Norwegian Broadcasting (NRK)’s national news radio saying that the employees support Brekke. “Tekna Telenor wants Brekke to continue as chief executive, so that the work to secure Telenor’s future can continue,” said Jan Otto Eriksen of Tekna.

‘The right person’
Eriksen told NRK that his organization “felt it was right to come out” with its show of support for Brekke after the media storm around Telenor in recent days. They think it would be wrong for the board to fire Brekke since his tenure has been so short. “Sigve Brekke has, over the last year-and-a-half as Telenor’s CEO, worked in a goal-oriented manner to strengthen the company’s position in the digital development we’re in right now,” Eriksen said, calling it “a development that will influence competition in the telecoms branch more and more.”

He added that since changes occur quickly, replacing the CEO in Telenor now could cause the company to lose its momentum. “Our professional organization Tekna has confidence in Sigve Brekke and believes he is the right person as CEO for Telenor in the future,” Eriksen said. Brekke has also long been popular among employees of the international company abroad.

NRK reported that Tekna and several other organizations representing thousands of Telenor employees in Norway also retain confidence in Brekke but were reluctant to go public with it. “We just want things to settle down,” one employee representative told NRK. “There’s too much turbulence and speculation now, and we just want to lay low.”

The case against Brekke
The employee confidence in Brekke comes despite more detailed media accounts in recent days about what reportedly led board leader Wærsted to tell Brekke in August that she thought he should resign. Her concerns were based on a series of “irregularities” that occurred at Telenor subsidiaries in Thailand, Bangladesh and India while Brekke headed Telenor’s Asian operations.

Newspaper Aftenposten, for example, has reported that consulting firm PWC uncovered violations of Telenor’s internal regulations at its large mobile phone company Dtac in Thailand. Telenor’s involvement in Thailand has been extensive and important in recent years, but also has raised concerns of late.

They involved leasing agreements for base stations in Thailand in which ownership of the property used for mobile phone towers and base stations was unclear. In some cases, reported Aftenposten, the probe revealed that Dtac employees or their families owned the property that was leased to Dtac for setting up the base stations. The practice is not unusual in Asia but raises potential for conflicts of interest. Telenor itself has confirmed that Dtac, in which Telenor owns a 42.6 percent stake, has since “changed it routines” to clarify ownership and the parties to leasing agreements.

Newspaper Finansavisen, meanwhile, reported on Monday that Telenor’s troubled Indian operations included dealings with a partner in Unitech who has since been slapped with another jail term. Brekke and Telenor chose, in 2008, to set up what became a troubled joint veture with Unitech, reportedly despite warnings about the players involved and from security analysts. Unitech ended up landing in what’s been described as one of the largest corruption cases in India and Telenor now faces heavy losses in the country.

On Tuesday, newspaper Dagens Næringsliv (DN), which broke news of the conflict between Brekke and Wærsted last week, reported that Telenor’s Grameenphone subsidiary in Bangladesh has sponsored both a controversial special police force unit and the military in the country, while also receiving assistance from the same authorities. DN reported that confirmed payments to both the Rapid Action Battalion, which has been accused of serious human rights violations in Bangladesh, and the military have been central in how Telenor’s board has been evaluating Brekke’s position this fall. Telenor owns 55.8 percent of the shares in Grameenphone, whose founder won a Nobel Peace Prize in 2006 but later ended up in an ownership conflict with Telenor. Both also caught criticism after a Danish TV documentary revealed child labour at Grameenphone suppliers.

More may come
Professors at various Norwegian colleges and universities have been following the drama around Telenor closely and were quick to offer various evaluations of their own. Most agree that either Brekke or Wærsted, or possibly both, will likely need to leave the company given all the turmoil. Others think both may hang on, and that the turmoil will eventually die down until management and board issues are taken up at Telenor’s annual meeting next spring.

Still others were bracing for more “irregularities” that may emerge from Telenor’s operations in countries where corruption is common and business practices different from those in Norway. “Various investigations are underway and all the conclusions haven’t been reached yet,” Tore Bråthen, a professor at the Norwegian business school BI, told Aftenposten on Tuesday. He noted that Norwegian business’ own tolerance for corruption has changed (and sunk) dramatically just in the past 10 years. “Until the end of the 1990s, it was possible to write off corruption as a business expense,” Bråthen recalled. “We’re not more hypocritical than that.” Others worry that Telenor risks losing its standing and confidence among investors because of the conflict between its board leader and CEO.

The fate of both Brekke, Wærsted and other board members thus remained unclear after all the turbulence of the past few months that was made public last week. Brekke, who refused to resign voluntarily, and Wærsted remained tight-lipped as they’ve been confronted by reporters and camera crews in recent days.

“We are having a board meeting that was called in an ordinary manner, and we have an ordinary agenda,” Wærsted said as she headed into the meeting on Monday. “But we will of course discuss the media situation. I have no further comment beyond that.” Berglund



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