FORNEBU -- Deloitte Advokatfirma (Deloitte) has today delivered its final report with a review of how Telenor has handled the VimpelCom ownership, a company partly owned by Telenor (33%). Deloitte has not found that any Telenor employees have been involved in corrupt actions or any other legal offences, but the report does uncover internal weaknesses in Telenor.
"The report states that no Telenor employees have been involved in corrupt actions. It gives Telenor partial credit for its handling of the ownership in VimpelCom, but also points to weaknesses in organisational structure, communication and leadership in this matter. This is serious. The Board and the management recognise that we must improve how we work. It is obvious to follow laws and regulations, but we have to reach further. There should never be any doubt that we in Telenor are fully compliant with our ethical guidelines," says Gunn Wærsted, Chair of the Board of Telenor.
In November 2015, the Board of Directors of Telenor ASA engaged Deloitte to conduct a review of Telenor's follow up and handling of its VimpelCom ownership, which the report characterises as complex and demanding. Telenor's handling of the VimpelCom ownership is described as insufficient.
"We shall learn from this demanding case and use it to build an even stronger Telenor. We have already implemented actions to strengthen governance procedures and the awareness of what our ethical guidelines demand of our leaders. Now we will thoroughly study the report and consider if the initiatives are sufficient," says Gunn Wærsted.
A central part of the report relates to Telenor's handling of a serious matter in 2011, from an employee seconded to VimpelCom. The person raised concerns of potential corruption to executives in Telenor and to Telenor nominated board members in VimpelCom. This concern, however, was not shared with Telenor's then CEO, Jon Fredrik Baksaas, until March 2014 and then to the Telenor Board of Directors in December 2014. The Ministry of Trade, Industry and Fisheries was informed in October 2015.
Telenor has today reached an agreement of resignation with CFO, Richard Olav Aa and General Councel Pål Wien Espen. Fridtjof Rusten and Ole Bjørn Sjulstad, who have also been temporarily relieved of their responsibilities during the Deloitte review, will revert to their former positions in Telenor.
"We acknowledge that on this occasion we were unsuccessful in handling an important concern according to Telenor's ethical standards. It is however good to see that a Telenor employee noticed unacceptable practices and spoke up about them," said Sigve Brekke, CEO and President of Telenor.
The Telenor Board and management have initiated several measures to improve the company's work with governance, compliance and transparency (see facts). The Deloitte review is presented in its entirety.
"For all of us in Telenor, this is a challenging day. To get detailed information about a very difficult and complex case unfolded in public, is hard. But we have to face up to the criticism and learn from it. We take the findings seriously and will use this case to learn and improve," said Sigve Brekke.
Telenor operates in markets where issues that raise ethical concerns will occur. The company handles ethical issues on an ongoing basis. The board and management have recently initiated reviews of these and uncovered possible misconduct in other parts of the business. One case involves suspicions of financial crimes and has been reported to the local police. Due to the investigation, Telenor has been asked by local authorities to not comment any further on the case at this point.
The other case is from Thailand, where dtac's internal audit uncovered deviations from the company's guidelines relating to some site lease agreements. Further review will show if these agreements have been in accordance with existing guidelines. The review will be finalised at the end of 2016.
The National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim) and The Ministry of Trade, Industry and Fisheries have been briefed on both matters.
"Telenor is present in many markets with heightened risk. Our job is to secure sound business practice through identifying, reporting and handling demanding issues according to our ethical guidelines. High ethical standards among all our employees is a vital part of our safety net," concludes Sigve Brekke.
About changes Telenor is implementing to strengthen governance structures and compliance
About the Deloitte Advokatfirma Review
Deloitte has focused on Telenor's handling of its minority shareholding in VimpelCom from 2005 to 4 November 2015. Deloitte has assessed the facts and identified learning points for governance and organisation of ownership. The independent review has been conducted over the past six months. The final report with Deloitte's recommendations is based on 46 interviews and the review of relevant documents.
Deloitte has not had access to VimpelCom documents. Hence, the report does not deal with decisions and discussions in VimpelCom or the VimpelCom board when the company entered into corrupt deals with the Uzbek company Takilant.
About the VimpelCom investigation
On 12 March 2014, US and Dutch authorities announced that they had initiated an investigation into VimpelCom's operations in Uzbekistan and its business with Takilant Ltd. On 17 February 2016, VimpelCom announced that it had entered into a settlement, admitting to violating US anti-corruption laws and paying a fine of USD 795 million. Telenor has cooperated with investigating authorities as a witness in the case.
Telenor Group (Nasdaq: TELN)