• Core operations' P/E ratio too high at about 20, Gardell says
  • Cevian was a TeliaSonera shareholder from 2006 to 2010

TeliaSonera AB is still overpriced after losing almost a third of its market value -- about $8 billion -- because of bribe allegations in Asia and a failed merger in Denmark with its Norwegian rival, according to activist investor Cevian Capital’s Christer Gardell.

Cevian, which owned shares in the Swedish state-controlled phone carrier from 2006 to 2010, is always sifting through companies, on the prowl for opportunities to shake things up and create value.

“We’ll look at any company that stumbles, like TeliaSonera has done in central Asia,” he said in an interview in Stockholm Friday. “Our conclusion was that it looked fairly expensive, despite the decline.” 

According to Gardell, TeliaSonera’s core operations are trading at a ratio of about 20 times earnings, compared with about 12 for other carriers. Until the former Swedish monopoly’s valuation is in line with peers, there’s “room for decline,” he said.

A spokesman for TeliaSonera didn’t immediately respond to a request for comment on Gardell’s valuation.

The Stockholm-based carrier has been under pressure from investigators since 2013 when it was alleged the company paid bribes to win a phone license in Uzbekistan. Former Chief Executive Officer Lars Nyberg resigned then-Chief Financial Officer Per-Arne Blomquist was fired in November 2013 and three other senior executives left as the fallout from the ethics investigation in former Soviet republics widened.

A new board was hired and current CEO Johan Dennelind started a process to sell off assets in the troubled region to focus on TeliaSonera’s Nordic and Baltic markets. Dennelind’s plan to merge Danish operations with those of Norway’s Telenor ASA were scrapped after opposition from EU Competition Commissioner Margrethe Vestager.

TeliaSonera is struggling to regain the market’s confidence as investors continue to worry over what the full financial impact of the probes could mean for the carrier. Earlier this month, it wrote down the value of operations in Uzbekistan by 5.3 billion kronor ($620 million) as it prepares to pull out of the country.

Research firm Muddy Waters LLC last year published a report questioning the extent of TeliaSonera’s transparency about its Eurasian businesses, and argued the company could be forced to writedowns totaling 20 billion kronor.

TeliaSonera’s stock rose Friday after it posted fourth-quarter earnings that topped analysts’ estimates. The stock advanced as much as 3.6 percent, and was up 1.8 percent at 39.28 kronor at 1:13 p.m. in Stockholm, giving the phone company a market value of 170 billion kronor.

Activist Tactics

An investment in TeliaSonera would be close to home for Gardell, given Cevian’s previous holding. In an early display of the fund’s activist tactics, Cevian repeatedly called for a merger with Telenor, and persuaded shareholders to oust half of the eight-member board at the Swedish company.

In recent years,  Gardell has invested in manufacturing companies like German conglomerate Thyssenkrupp AG, Swiss engineering giant ABB Ltd., and Swedish truckmaker Volvo AB. Cevian has often pushed for changes including divestments and breakups, like the spinoff of Metso Oyj’s paper, pulp and energy unit, which was completed two years ago.

At ABB, a strategic review of the company’s Power Grids division was announced last year after Cevian built the second-biggest stake in the company. Gardell said he’s hoping for “something good” to come out of the review, which is set to be completed this year. The company will “not be pushed into or rushed” in this process, ABB CEO Ulrich Spiesshofer said in October.

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