Swedish telco denies wrongdoing after scathing open letter says it is being opaque about its Eurasian misdeeds.
TeliaSonera was left reeling on Thursday after research firm Muddy Waters accused it of making corrupt payments related to its operations in Nepal and Eurasia.
“We believe the amount of transactions and dividends that might be seen as corrupt payments [totals] SEK17 billion (€1.8 billion),” said Muddy Waters, in a scathing letter to the Sweden-based telco’s board. “In addition, TeliaSonera is potentially obligated to make [an] additional payment to a problematic partner in Azerbaijan of up to SEK7.6 billion.”
San Francisco-based Muddy Waters accused the company of not being transparent enough about the scale of its problems.
If information is being withheld, Muddy Waters said it implies that TeliaSonera’s financial statements are misleading, and that it might be liable for a large payment to settle an ongoing investigation by the U.S. Department of Justice (DoJ).
Furthermore, Muddy Waters believes that the sale of TeliaSonera’s Eurasian and Nepalese businesses will fetch far less than the SEK20 billion estimated by analysts, and noted that once disposed of, the telco will have lost 33% of its consolidated 2013 free cash flow.
Muddy Waters also claims that TeliaSonera may have to make write-downs of up to SEK20 billion.
“You would do your investors a significant service by being more forthcoming about Telia’s problems,” Muddy Waters said. “This way, they would have the benefit of being able to make more informed judgements.”
TeliaSonera’s share price fell 6% on the news.
In a statement, TeliaSonera disputed Muddy Waters’ assertions.
“TeliaSonera fully cooperates with ongoing investigations in Sweden, the Netherlands and the United States. TeliaSonera is as open and transparent as possible with respect to listing requirements and the investigations,” the telco said, adding that it has not received any claims from the DoJ.
TeliaSonera also defended its financial statements, pointing out they are in accordance with international financial reporting standards (IFRS), and are audited by Deloitte in accordance with international auditing standards (IAS).
Thursday’s accusations were made a month after TeliaSonera announced plans to sell off its entire Eurasia business. Comprised of operations in Nepal, Kazakhstan, Uzbekistan, Azerbaijan, Georgia, Moldova and Tajikistan, it is a part of the company that has weighed on recent results and dragged the telco into several corruption investigations.
In Thursday’s letter, Muddy Waters pointed out that TeliaSonera’s announcement about exiting Eurasia was made the same day that Swedish journalist Patricia Hedelius announced the impending publication of a book entitled Telia: Alliance of Government and Corruption.
“This date was about two years after you and the current management took office, and about one and a half years since you confidently stated that Telia would continue to do business in Eurasia,” Muddy Waters said.
The book is due to go on sale on Friday. TeliaSonera is due to publish its interim financial results on Tuesday.