- Risk of new probes said to cloud talks on sale to Turkcell
- Turkcell Chairman: ‘Deal should have been finalized by now’
A U.S. probe of phone-industry corruption allegations in Uzbekistan is among the factors slowing down talks for Telia AB to sell its wireless business in four other former Soviet countries, according to people familiar with the matter.
Telia has been negotiating to sell its controlling 59 percent stake in a joint venture that operates in in Azerbaijan, Kazakhstan, Moldavia and Georgia to minority partner Turkcell Iletisim Hizmetleri AS. The business, called Fintur Holdings BV, has a valuation of just under $1 billion, according to the people, who asked not to be named because the negotiations are private.
Turkcell and its lawyers have raised concerns over whether Fintur could also attract the attention of U.S. authorities, and whether it will manage to renew its license in Azerbaijan, the people said. Stockholm-based Telia, which runs the both the Fintur and the Uzbekistan operations, is in retreat in the region, where it has come under scrutiny from U.S. and European governments.
In Uzbekistan, Telia has been awaiting the outcome of a multi-year probe led by the U.S., but also involving Dutch, Swedish and Swiss authorities. Prosecutors in Sweden separately opened a preliminary investigation, later dropped, into whether Telia’s purchase of its controlling stake in Azercell, the Fintur operation in Azerbaijan, constituted a bribe, local newswire TT reported in May.
There is no evidence of a probe by the U.S. or any other authority in Azerbaijan or the other Fintur territories, the people said. Rather, Turkcell and its lawyers have identified this as a risk that could materialize later and are seeking to address it through the negotiations, they said. The principal concerns revolve around the potential for future scrutiny or fines from the U.S. or other governments, and the risk that Azercell could fail to win renewal of its license in Azerbaijan expiring at the end of this year, they said.
A Justice Department spokesman, Peter Carr, declined to comment. Henrik Westman, a spokesman for Telia, said there are several parties interested in Fintur, including Turkcell, and declined further comment. An Azercell official declined to comment.
Telia rose as much as 1.4 percent to 39.34 kronor in Stockholm, the steepest intraday advance since May 25. Turkcell shares fell as much as 2.6 percent to 10.65 liras in Istanbul, the most since May 26.
Turkcell and Telia are discussing several matters including the Fintur stake, Ahmet Akca, Turkcell’s chairman, said in an interview on May 31. He declined to comment on details of the negotiations or any contacts with U.S. officials.
“The deal should have been finalized by now,” Akca said. “We are working hard and the chairpersons of the two companies have met and are meeting on this and other matters all the time.”
Turkcell’s concerns are among the final hurdles to reaching an agreement, according to two of the people. The sides are discussing a price cut or including language in the agreement to protect the buyer, they said.
Investigators from the U.S., the Netherlands, Sweden and Switzerland have spent years looking into whether Telia, VimpelCom Ltd. and Mobile TeleSystems PJSC paid bribes in exchange for business and investment opportunities in Uzbekistan. In February, VimpelCom agreed to pay a $795 million fine to settle the case and plead guilty to violating U.S. corruption laws.
Telia has been in talks with U.S. authorities over the Uzbekistan probe, and in April, Chief Executive Officer Johan Eric Dennelind said on a conference call that the company hopes to resolve the matter this year, and expects a “not insignificant economic impact.”
Telia said in September that it plans to exit Asia and ex-Soviet markets, providing an opening for Turkcell, Turkey’s biggest phone company, to bid on the Fintur stake and expand in those markets.
Telia’s activities in Azerbaijan have attracted the attention of authorities before. Telia hired a law firm to investigate Azercell’s past deals in Eurasia, including the 2008 purchase of its stake in the company, and turned its findings over to Swedish prosecutors, who dropped their investigation of the purchase with no action.
Dennelind, who joined Telia in 2013, said after media reports in 2015 that the deal was "disturbing" and the carrier would strive to be "open and transparent."
Turkcell, based in Istanbul, is owned by Telia, Mikhail Fridman’s Alfa Telecom Ltd. and Turkish founder Cukurova Holding AS. Fridman is a part-owner of VimpelCom.