Johan Dennelind is just a few months into one of the most challenging leadership positions in the industry, following the scandal that caused TeliaSonera’s previous CEO to quit. Now Dennelind tells Alan Burkitt-Gray how he is introducing new transparent policies
Johan Dennelind: The Uzbekistan scandal is part of the history
and part of the future. We need to do things in a more thorough
way and carry out our transactions in a more transparent
manner. TeliaSonera is looking at all of our sustainability issues
in the broader sense. We are going through key areas of the
sustainability field and embedding that into company policy
It’s just over a year since the then CEO of TeliaSonera, Lars Nyberg, paid the penalty for the company’s unfortunate relationship with its business partner in Uzbekistan.
The new CEO, Johan Dennelind, is several months into a new company-wide strategy to make sure nothing like that happens again. It is part of his corporate sustainability policy, he says – because it’s clear that the sustainability of the company depends on a set of clearly understood measures to keep it well clear of any further allegations of that kind.
An investigation did not find anything to show that either TeliaSonera or any of executives had committed bribery or taken part in money laundering over the acquisition of Uzbekistan operator Coscom in July 2007. But Nyberg resigned the moment the investigators – from Swedish law firm Mannheimer Swartling – reported on the scandal.
TeliaSonera “did not conduct a sufficiently in-depth analysis into the identity of our local partner in Uzbekistan before we invested in the country or into how this partner came to own the assets that were later obtained by TeliaSonera”, said Nyberg in his 2013 resignation statement.
It was clearly a shock to the whole company. It did not do anything illegal, but was careless in its acquisition of Coscom, which was rebranded to Ucell in 2008.
As a result the CEO left after six years at the top of TeliaSonera and after a long earlier career with Philips and NCR – even though he did not take office until September 2007, two months after TeliaSonera bought a 94% stake in Coscom through its subsidiary Fintur Holdings.
That story clearly makes the new CEO wary of questions about Uzbekistan and corruption. “I was hoping no one would ask about that,” said Dennelind at the TeliaSonera press conference at the start of day two of Mobile World Congress in Barcelona in February 2014.
Nevertheless he agreed to set aside time later in the same day for a one-to-one interview with Global Telecoms Business. What is TeliaSonera doing to ensure that it won’t get caught out again?
“The short answer is that we’re doing a lot,” says Dennelind, who became CEO in September 2013 after three years as international CEO at Vodacom in South Africa, following many years with the Telenor group in Sweden and Malaysia.
“It’s part of the history and it’s part of the future. We need to do things in a more thorough way and carry out our transactions in a more transparent manner.”
And it was the Uzbekistan transaction that caused problems for TeliaSonera and Nyberg in 2013.
A report by Swedish Television in September 2012 alleged that TeliaSonera paid $320 million for its Uzbekistan licences through Gayane Avakyan, an Uzbek woman in her late 20s described as having “close ties” to Gulnara Karimova, the daughter of Islam Karimov, who has been president of Uzbekistan since 1991.
Karimov, incidentally, seems to have inherited that position after a spell as first secretary of the Uzbekistan branch of the Communist Party of the Soviet Union followed by a year as president of the Uzbekistan Soviet Socialist Republic. When the USSR broke up and Uzbekistan became independent, he transferred his role into the leadership of the new republic, having won a remarkable 86% of the vote in the 1991 election.
After the allegations emerged, TeliaSonera commissioned Mannheimer Swartling to investigate. When asked by a Swedish radio station in September 2012 what he would do if the allegations were true, Nyberg is reported to have said: “I’d resign, I suppose.”
And he was true to his word. Nyberg resigned immediately after the report criticised the company.
Nyberg said at the time: “The Mannheimer Swartling review criticises TeliaSonera, not least that we did not conduct a sufficiently in-depth analysis into the identity of our local partner in Uzbekistan before we invested in the country or into how this partner came to own the assets that were later obtained by TeliaSonera. Even if this transaction was legal, we should not have gone ahead without learning more about the identity of our counterparty. This is something I regret.”
Guidelines not followed
The law firm told TeliaSonera “that the internal controls were not sufficient to ensure that it did not risk becoming involved in any unethical business, and that thereby the company’s internal ethical guidelines were not followed completely”.
The board concluded that “the investments were not carried out in a satisfactory manner” and added: “In hindsight, it is evident that a more stringent investigation of the counterparties should have been conducted. One consequence of this was that subsequent investments were also not subjected to proper examination. The board concurs with and shares Mannheimer Swartling’s criticism.”
The company’s CFO, Per-Arne Blomquist, took over as acting president and CEO, but he lasted only a few weeks after he went back to being CFO when Dennelind took over. After a further investigation into the group’s business practices, this time by law firm Norton Rose, TeliaSonera fired Blomquist and three other executives.
Christian Luiga is now acting CFO – as he had been earlier in 2013 during Blomquist’s spell as acting CEO.
Clearly the scandal has shaken up TeliaSonera right at the top – though it has to be said that there are few other companies in the world that would take such a rigorous attitude to allegations of this kind. And few C-level executives who would resign in the way that Nyberg did a year ago, for something that had happened before he even took office.
Dennelind is completely untainted by any of the allegations. He has worked for the group before, but a long time ago, when it was simply Swedish incumbent Telia, before its merger in 2002 with Finnish operator Sonera.
TeliaSonera said a year ago it has “started to work with Transparency International Sweden as advisors, with the goal of ensuring that our anti-corruption efforts attain high standards and stand up to a stringent international comparison”.
But the company pointed out at the time that “Sweden exports more than half its GDP. As a country we are entirely dependent on exports to the world’s countries, the majority of which are characterised by non-democratic systems and widespread corruption.”
And now Dennelind says that TeliaSonera is using the opportunity “to look at all of our sustainability issues in the broader sense – not just the anti-corruption issue and not just freedom of expression. We are going through key areas of the sustainability field and embedding that [into the company’s policy].”
The logic is clear: a company’s anti-corruption policy should be regarded as part of its sustainability strategy. “If you don’t do things properly you’re not long-term sustainable and profitable,” he says.
“I think we’ve learned the hard way and we need to come out with the right framework.” And he’s happy to talk about the framework and the values behind them.
“For the framework, we’ve done quite a lot to implement new structures, new frameworks, new policies and new procedures, new functions.” The is “a new structure of the organisation, with new reporting lines and compliance functions, which we didn’t have properly before”, he says.
Culture and leadership
“All of that is a big initiative which we started when I came. At the same time, even more important, is to have the right culture and leadership.”
These are difficult topics, he agrees, “but that needs to come from the top and down”. The company “needs to protect the individuals” who work for it, “so that the individuals, the employees, know what to do in these dilemma situations”, he explains. “Because we are facing difficult dilemmas every day – not just in the difficult markets but also in the more mature markets.”
The company must find a way to talk about these issues, and to train people “to measure, commit, take actions. That’s all part of the leadership culture we are establishing. Having said that, we still have a long way to go.”
But maybe TeliaSonera has come further than most? “We have come a long way, and we have great commitment, from the board and from the management in conducting long-term sustainable, proper business.”
The company “faced the situation where our reputation was dented” and “we just need to be humble about what we are doing about our reputation and we should start by regaining trust”.
This means working day by day “and talking about it openly and showing that we’re serious”, says Dennelind. “An example of this – though in a slightly different area -is freedom of expression. We have a forward-leaning new policy where we lead the industry.” He notes that Vodafone chief Vittorio Colao is also talking about the same sort of issues of transparency.
TeliaSonera’s policy is to take the load off individuals, he says, so they’re not under pressure to make decisions locally. Difficult decisions should be taken further up the system. But at the same time “we have to live by local laws”, he notes, “but if that’s not the way we want to run the business we should say so and we should be open about that.”
This strategy is in harmony with that of the Telecommunications Industry Dialogue, a group of operators and vendors that works alongside the Global Network Initiative, set up in 2008 by companies in the information technology and telecoms industries that see themselves facing increasing government pressure to comply with domestic laws and policies in ways that may conflict with human rights of freedom of expression and privacy.
“We also realise that this is not changing overnight. Some of the problems are still there the day after we have introduced our new policy. But the fact that we are bringing this into the open will help – improving the transparency across our footprint.”
And does it also help if corrupt politicians around the world know what TeliaSonera’s policy is on such matters.
“We are a little bit more diplomatic than that,” says Dennelind. “But the message is the same. We shouldn’t be afraid of what we stand for. At the same time we always respect local laws and we will do what is required. It’s important that we know that there is a difference of opinion and that we are driving to change that.”
This means – more diplomatically – that TeliaSonera’s opinion is taken seriously, he says, and the policy leads to constructive dialogues with some governments. The Georgian government, for example, on issues such as data privacy, transparency and freedom of expression. “We encourage that discussion.”
And at that point, with possibly a sigh of relief on both sides, we turn to safer areas. The company is one of the first to come to a deal with streaming music service Spotify – a deal that might set a standard for other operators facing competition from over-the-top players.
“We are being attacked every day every second by players who want to be in our industry,” says Dennelind. “We need to widen our view of how we defend and how we attack. It was easier before to be a telecoms operator. We didn’t have to take account of the adjacencies’ impact.” By “adjacencies”, Dennelind means OTT companies.
New revenue streams
“We were the first to launch a Spotify partnership. Now every operator in every country wants a partnership,” he says. “But many of the partnerships in the pasts were for loyalty, not for new revenue streams. We need to think about new revenue streams.”
Spotify is a Swedish company “and we have a good relationship with them”, says Dennelind. “What we can do is strengthen the proposition when we go to market. It has to be specific, with a local dynamic.”
The deal helped Spotify establish itself in the Swedish market, he says, “and we are looking where to take it next. We want to be more of a partner and a catalyst, and to offer a better experience.”
TeliaSonera is working closely with the Nordic operation of US pay-TV network HBO, he says, “and with other local content players”.
The company is possibly aided in this strategy because “we have been early in data-centric pricing”, he says. That means “free voice, free texts, and you pay for the amount of data you use”.
TeliaSonera’s mobile operators have introduced this policy in Denmark, Norway and Finland, he says. “We are starting to find a formula where we monetise data. In the consumer space in the Nordics it’s paying.”
At the same time “the traditional revenues are going down, so the growth has to be stronger. People are using WhatsApp and Skype – well, the customer has to decide.”
Innovate to be relevant
The “main driver” to succeed in the face of what he calls “adjacencies” is “to stay relevant in the consumer space. If we don’t innovate we don’t stay relevant.”
One of TeliaSonera’s recent successes is Spanish operator Yoigo, which has “close to four million customers and a 7.5% market share, and €1 billion in revenue but only 105 employees”, he says. “The company broke even in four years.” Spain “is a very advanced market in terms of convergence” he says. It is innovating, “and Yoigo is a very well positioned brand to deliver this converged service”.
TeliaSonera’s businesses stretch across Europe, with a focus in the Nordic and Baltic countries and in central Asia, countries such as Azerbaijan, Kazakhstan, Tajikistan and Uzbekistan, plus a small business in Nepal.
“Kazakhstan, Uzbekistan and so on have underlying growth,” he says. “In these markets we are leading or chasing the number one operator. Our margins are 52-53% and we have a fantastic underlying business.”
Kcell, the Kazakhstan operator, sold 25% of its shares on the London and Kazakh stock markets at the end of 2012, but TeliaSonera seems to have no active plans to look at floating other operations.
“We have opportunities to look into adjacencies,” he says, using that word again. “We can do much more. The underlying assets are really, really strong and they’re fantastic markets.”
Which is, no doubt, why he and his colleagues in TeliaSonera will be scrupulous in applying good corporate governance practices in the future. And, in doing so, perhaps be a great example to some other operators around the world.