YOU ARE AT:Archived ArticlesGovernment requests for Sonera investigation could delay Telia merger

Government requests for Sonera investigation could delay Telia merger

HELSINKI, Finland-The Finnish government hinted on 31 July at a possible delay in the finalization of merger arrangements between Nordic telecom companies Sonera and Telia. The delay emerged following confirmation by Sonera that it has to write off $4 billion in losses sustained in Universal Mobile Telecommunications System (UMTS) bids and projects in Germany, where the company secured a UMTS mobile network license.

The degree of loss exposure in Sonera because of failed investments in third-generation (3G) projects across Europe is just one of several negatives that could force Swedish shareholders in Telia to revise the valuation of the Finnish company’s market worth.

Finland’s Justice Minister Johannes Koskinen recommended an internal audit covering Sonera’s 3G license purchases in Germany should be conducted. “I am quite certain that Sonera’s next AGM will demand an audit,” said Koskinen.

According to Koskinen, the allegations that Sonera management withheld information on the risks inherent in the UMTS deals “are particularly serious.” These claims, made in an anonymous book about Sonera that was published on the Internet in July, are being taken “very seriously by this government,” the minister said. The anonymous author is believed to be a former senior executive within the Finnish group.

The call for a “full and transparent” investigation has also come from Finland’s Prime Minister Paavo Lipponen and Minister for Transport and Communications Kimmo Sasi.

Lipponen has met with Finland’s Chancellor of Justice Paavo Nikula to examine the role, if any, played by cabinet ministers of the Lipponen administration in the German UMTS decision-making process. According to Finnish legal experts, the state may have neglected its responsibility as a shareholder in the issue, and its responsibility to secure the interests of “taxpayers’ money.”

“There is concern that Sonera’s board may have exceeded its authority in the matter of investments in German UMTS licenses. Decisions of such magnitude should be approved by shareholders. This was not done,” he said.

In the anonymous book, the writer claimed that Kaj-Erik Relander, former Sonera president and chief executive officer (CEO), pressured former Minister of Transport and Communications Olli-Pekka Heinonen to gain approval from Lipponen’s “inner circle” for the company’s participation in the German UMTS license auction.

The chancellor of justice will now attempt to determine whether the government participated in the decision-making process regarding 3G license auctions. “The investigation could take several weeks or it could take several months,” said Nikula.

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