AT&T offloads Puerto Rico and the US Virgin Islands units to Liberty LATAM

Some might suggest this is a knee-jerk reaction to the intentions of an activist investor, though the vulture fund should not be able to claim credit for this one.

AT&T has announced it will sell its wireless and wireline operations in Puerto Rico and the US Virgin Islands to Liberty LATAM for $1.95 billion. The transaction is expected to close in six to nine months, depending on approvals from the FCC and the Department of Justice.

“I’m especially proud of our network and the recent network enhancements that have helped AT&T rank as the fastest network in Puerto Rico,” said Jose J. Davila, AT&T’s GM for the region. “AT&T also has the most coverage on the island, according to Mosaik.

“Our experienced and committed team members will continue to support these operations as we join Liberty Latin America. Liberty Latin America has expressed its commitment to provide high-quality communications services to the people of Puerto Rico and the U.S. Virgin Islands. And we’re confident that it is equally committed to supporting these communities.”

Although pressure is being applied to the AT&T management team by activist investor Elliott Management, this perhaps not a move which would have been seen as attractive. The vulture fund does often approve of asset divestment in the pursuit of increased dividends and a higher share price, but the intricacies of this deal does not add up.

In an open letter to AT&T investors, Elliott Management did call for divestment but only in pursuit of refocusing the business on core activities. In other words, Elliott Management wants AT&T to focus more acutely on connectivity products and services.

Looking at this deal with Liberty LATAM, AT&T is proposing the sale of core connectivity assets but retaining the service and responsibility of FirstNet and DirecTV assets in the region. What is being released and what is being retained does not make sense if this is the influence of Elliott Management. What is more likely is this transaction would have gone ahead irrelevant of outside influences.

“This transaction is a result of our ongoing strategic review of our balance sheet and assets to identify opportunities for monetization,” said AT&T CFO John Stevens.

“But doing so only made sense if we received a fair value from a buyer that is committed to taking this well-run business, with its skilled employees and loyal customer base, and help it thrive. Liberty Latin America has a strong reputation for quality of service, and we believe they have the experience to build on the success of these operations.”

As of June 2019, AT&T’s debt stood at $158 billion, largely thanks to expensive acquisitions in the pursuit of diversification. The team has said it plans to lower its debt by $20 billion over the course of the year. The team now claims to have completed or announced monetization efforts totalling more than $11 billion.

On the other side of the transaction, Liberty LATAM is continuing its quest to reprioritise the business. Following a number of divestments in the European region, the telco has been attempting to gather momentum in the LATAM markets. This is another deal which will improve the position of the firm.

“The combination of AT&T’s leading mobile and wired businesses with Liberty Puerto Rico’s leading high-speed broadband and TV business will create a strong and competitive integrated communications player,” said Balan Nair, CEO of Liberty Latin America.

“At Liberty Latin America, we are focused on investing in digital infrastructure, innovation and 5G networks and on delivering a friendly customer service experience. This transaction is evidence of that, and we are confident that this new combination will be good for our customers and our employees, including those joining us from AT&T.”

Looking at the Liberty LATAM business, the team is certainly not shying away from investments. Aside from this deal, the team also completed the acquisition of the remaining 12.5% of United Telecommunication Services, increasing the presence across several Caribbean islands. In August, the telco also announced aggressive expansion plans for broadband in Chile and was in discussion to acquire Millicom International earlier this year.

Elliott starts calling for AT&T CEOs head – report

Elliott Management, the activist investor which steamrolled into the AT&T business, has called for the replacement of CEO Randall Stephenson.

Stephenson, who has been running the telco since 2007, will hopefully have seen this move coming. The vulture fund has somewhat of an action-plan template when attempting to cause chaos, and a complete restructure of the management team is a tried and testing phase of the battleplan.

According to Fox News, Elliott Management is not only calling for the resignation of Stephenson, it is requesting it be made responsible for sourcing his replacement and demanding representatives on the Board of Directors.

After announcing it had snapped up a $3.2 billion stake in the telco, Elliott Management set to work. As with other companies the vulture fund has invested in, the objective is disruption, slimming back the focus of the business to realise value for the shareholder. This value will take the form of increased dividends and a bump in share price.

The first phase of the Elliott Management plan has already been set into play. Uncertainty has been placed in the mind of investors with the suggestion of a new strategy for AT&T. Elliott did the same at Telecom Italia when it bought its way into the debate. At AT&T, this is a divestment in the media business and a refocus on more traditional telco business activities.

The second and third phases of the disruptive battleplan are plain for everyone to see here. Elliott Management wants to appoint friendlies on the Board of Directors, and it wants to reform the executive team. Both of these phases of the plan will put the right people in the right place to act as internal champions of the Elliott Management approach to telecommunications.

The strategy being proposed is a very simple one, though it will fundamentally alter the direction of the AT&T business. Through the acquisition of both DirecTV and Time Warner, AT&T was looking like a digital services giant with connectivity at the route of the various different products. Elliott Management wants to get rid of these added value components.

Let’s not underestimate or underappreciate how much of a drastic change to the AT&T business this is.

How this saga will evolve remains to be seen. Perhaps the content businesses will be spun-off. One insider is suggesting a JV with a private equity partner and Dish. Some might assume this would be a complete divestment. Maybe a spin-off and an IPO is on the cards to recover funds and reduce AT&T debt?

There are a lot of options, but AT&T will fundamentally be a different business. It will be one which is focused on the commoditised business of connectivity. However, if Elliott Management want to succeed in their ambition, they will need some internal friendlies at the telco. For Stephenson and other executives, this might well mean a new job.

Elliott’s vultures are circling AT&T

Activist investor Elliott Management has set its eyes on AT&T, suggesting the firm is bloated and undervalued, with ambitions to cut staff, clear out the leadership team and sell-off non-core assets.

In a letter sent to AT&T investors, Partner Jesse Cohn and Associate Portfolio Manager Marc Steinberg have attacked the firm and suggested a drastic turnaround strategy which includes divestments, retail location closures, job cuts and a change in mentality. It does appear shareholders are intrigued by the idea, with share price increasing 6% in pre-market trading.

“The purpose of today’s letter is to share our thoughts on how AT&T can improve its business and realize a historic increase in value for its shareholders,” the letter states.

“Elliott believes that through readily achievable initiatives – increased strategic focus, improved operational efficiency, a formal capital allocation framework, and enhanced leadership and oversight – AT&T can achieve $60+ per share of value by the end of 2021. This represents 65%+ upside to today’s share price – a rare opportunity for any company, let alone one of the world’s largest.”

For those who aren’t familiar with Elliott Management, this is not necessarily a move which is out of character.

Known as a ‘vulture fund’, the team search for businesses which it deems are undervalued and effectively enter to cause chaos. More often than not, the team suggests a complete overhaul of senior managers and a new strategy. This strategy often involves job cuts and asset stripping. Shareholders are brought on board with the promise of increased dividends and a boost in share price.

There are numerous examples where the team has attempted to muscle in on operations, with Telecom Italia (TIM) being the most relevant in recent history. At TIM, Elliott Management has been battling with Vivendi for control and a new strategy, and it does appear to be winning.

In the case of AT&T, Elliott Management is promising a 65% increase in share price by the end of 2021. This is an attractive promise as share price has barely moved over the last five years, from $34.50 on September 12, 2014 to $36.25 at the close of the markets on Friday (September 6, 2019). During this period, a high of $43.28 was experienced on August 12, 2016, and a low of $28.31 on December 21, 2018.

But how do these numbers compare to the share price of AT&T’s rivals over the last five years?

Telco Today 12 Sept, 2014 High Low
AT&T $36.25 $34.50 $43.28 $28.31
Verizon $59.06 $48.40 $60.30 $42.84
T-Mobile US $79.15 $30.83 $84.25 $25.31
Sprint $6.82 $7.00 $9.30 $2.66

Although AT&T is a dominant force in the US telco industry, it has seemingly not capitalised on the 4G revolution in the same way some of its rivals have, most notably T-Mobile US. To rub salt into the wounds, AT&T failed to acquire T-Mobile US in 2011, had to pay the largest break-up fee to date (at the time), and then provided the firm with a seven-year roaming deal and spectrum. This could perhaps be viewed as the turning point for the struggling T-Mobile US.

Another interesting assertion from the Elliott Management team is inability of the AT&T business to act in a timely fashion. This is another point CEO Randall Stephenson should be worried about, as Elliott Management claims AT&T did not deploy 4G aggressively enough and lost out to Verizon in the battle for first place. With 5G on the horizon, investors might well be worried about a repeat.

Ultimately, the biggest criticism is one of poor performance. Despite some very attractive numbers in the 90s and 00s, AT&T hasn’t really pushed on to capitalise on this momentum. In fairness, every telco around the world has suffered over the course of the last decade thanks to the growing influence of the OTTs, but this point has been conveniently ignored in the Cohn and Steinberg letter.

However, it is the acquisition strategy is one of the biggest points made.

“In recent periods, however, AT&T has embarked upon a very different sort of M&A strategy,” the letter states. “Over a series of deals totalling nearly $200 billion, AT&T built a diversified conglomerate by pushing into multiple new markets.

“In each case, the push was as significant as possible. Beginning the decade as a pure-play telecom company with leading wireless and wireline franchises, AT&T has transformed itself into a sprawling collection of businesses battling well-funded competitors, in new markets, with different regulations, and saddled with the financial repercussions of its choices.”

The telco industry has changed in the last decade, and Elliott Management clearly doesn’t agree it is for the better. In the 90s and 00s, acquisitions were connectivity orientated, while recent years have seen an aggressive push into the world of digital services, diversifying products which can be offered to the consumer.

This is one of the critical points the Elliott Management team is levying towards AT&T; its acquisition strategy has not been effective. The failure to merge with T-Mobile US is a critical point, but since that point the team has spend more than $200 billion to create a beast of a business. Some have suggested this was necessary to diversify the business in preparation for the digital economy, however this is not the opinion of Elliott Management.

We do not agree with Elliott Management here. Convergence is a sound business model which moves the telco into the value-add column. A more stringent focus on connectivity will walk the telco down the road of utilitisation, opening the industry up to more aggressive regulations and price controls. This is not the direction many telcos want to head, but Elliott Management does seem to like the profits driven out of a business which focuses on operational efficiencies and little else.

Let’s not forget the Elliott Management business model after all. Identify underperforming shares, disrupt the business model for short-term share price rises and then sell the stock, while collecting meaty dividends along the way. If Elliott Management gets it way, AT&T will be a utilitised business, with fewer assets. It might not be a competitive force in a decade, when other telcos are reaping the benefits of diversification. However, Elliott Management will not care by that point.

Perhaps the three most important points of the plan set forward by Elliott Management are:

  1. A change in strategic direction from acquisition to executive
  2. Clearing out the current management team
  3. Divestment in non-core assets

There are other points made, such as closing redundant retail locations, negotiating more authorised third-party retailers, cutting back on the over-bureaucracy, simplifying the management structure and redundancies. However, we feel the three mentioned above are perhaps the most important for investors.

By shifting from an acquisition mind-set to an execution one, and making the suggestion of divestments, it would appear the AT&T business is one which will be focused more acutely on traditional telecommunications services. The tone of the letter does not suggest Elliott Management believe the content world is one which can bring fortunes, and the way in which the team discuss the success of T-Mobile US also alludes to this new, narrowed focus.

What does this mean for the very expensive content acquisitions? Perhaps nothing, or perhaps everything. We suspect the idea from Elliott Management would be to silo each of the business units, allowing a more lasered focus on core revenues in the siloes. There might well be cross-selling opportunities, but the language used by Cohn and Steinberg suggests digital services and ambitious convergence is not on the agenda.

The proposed strategy to realise the 65% increase in share price is one of simplicity, enhancing what is currently in the armoury and taking a more traditional approach to the business of connectivity.

And while there might be thousands of nervous employees throughout the organization worried of the prospect of job cuts, the senior management team should be much more concerned. After interviewing various former-executives, Elliott Management has come to conclusion that the executive management team does not have the right skillset to tackle the challenges which AT&T is facing today.

Should Elliott Management get its way, heads could roll, and the leadership team could look remarkably different. Elliott Management is also seeking greater influence for the Board of Directors, another common play from the team. The activist investor often looks to secure positions to friendlies at the companies it has in its crosshairs, and it will certainly want to exert more control on the strategy moving forward.

If Elliott Management gains control and influence at AT&T, it could look like a very different business. The investor believes it has identified $10 billion in cost-efficiencies would can be realised through spending $5 billion. This does not account for any divestments which would be made though. AT&T might well have fewer retail locations, a smaller headcount, a new management team, a lessened focus on content and digital services and a more utilised business model in the near future.

This is only the beginning of this saga, Elliott Management will certainly have a wrestle on its hands to gain control, but it does have good form when it comes to forcing through disruption.

FTC warns of break-up of big tech

The technology industry has often been a political punching bag over the last 18-24 months, and now the Federal Trade Commission (FTC) is adding to the misery.

In an interview with Bloomberg, FTC Chairman Joe Simons has suggested his agency would be prepared to break-up big tech, undoing previous acquisitions, should it prove to be the best means to prevent anti-competitive activities. This would be a monumental task, though it seems the tides of favour have turned against Silicon Valley.

This is not the first time the internet giants have faced criticism, and it won’t be the last, but what is worth noting is the industry has not endeared itself to friendly comments from political offices around the world. Recent events and scandals, as well as the exploitation of grey areas in the law, have hindered the relationship between Silicon Valley and ambitious politicians.

In this instance, the FTC is currently undertaking an investigation to understand the impact the internet giants are having on competition and the creation of new businesses. Let’s not forget, supporting the little man and small businesses is a key component of the political armoury, and with a Presidential Election around the corner, PR plugs will be popping up all over the place.

Looking at one of those plugs, Democrat candidate-hopeful Elizabeth Warren has already made this promise. Back in March, Warren launched her own Presidential ambitions with the promise to hold the internet giants accountable to the rules. Not only does this mean adding bills to the legislative chalkboard, but potentially breaking up those companies which are deemed ‘monopolistic’.

This has of course been an issue for years in Europe. The European Commission has stopped short of pushing for a break-up, though Google constantly seems to be in the antitrust spotlight for one reason or another. Whether it is default applications through Android or preferential treatment for shopping algorithms, it is under investigation. The latest investigation has seen job recruiters moaning over anti-competitive activities for job sites.

What is also worth noting is that the US has a habit of diluting the concentration of power in certain segments throughout its history. The US Government seems to be tolerant of monopolies while the industry is being normalised and infrastructure is being deployed, before opening-up the segment.

During the early 1910s, Standard Oil was being attacked as a monopoly, though this was only after it has finished establishing the rail network to efficiently transport products throughout the US. In the 1980s, the Bell System was broken-up into the regional ‘Baby Bells’ to increase competition throughout the US telco market.

The internet could be said to have reached this point also. A concentration of power might have been accepted as a necessary evil to ensure economy of scale, to accelerate the development and normalisation of the internet economy, though it might have reached the tipping point.

That said, despite the intentions of US politicians, this might be a task which is much more difficult to complete. It has been suggested Facebook has been restructuring its business and processes to make it more difficult to break-up. It also allegedly backed out of the acquisition of video-focused social network Houseparty for fears it would raise an antitrust red-flag and prompt deeper investigations.

You have to wonder whether the other internet giants are making the same efforts. For example, IBM’s Watson, its AI flagship, has been integrated throughout its entire portfolio, DeepMind has been equally entwined throughout Google, while the Amazon video business is heavily linked to the eCommerce platform. These companies could argue the removal of certain aspect would be overly damaging to the prospects of the business and also a bureaucratic nightmare to untangle.

The more deeply embedded some of these acquisitions are throughout all elements of the business, the more difficult it becomes to separate them. It creates a position where the internet giants can fight back against any new regulation, as these politicians would not want to harm the overarching global leadership position. Evening competition is one thing but sacrificing a global leadership position in the technology industry defending the consumer would be unthinkable.

This is where you have to take these claims from the FTC and ambitious politicians with a pinch-of-salt. These might be very intelligent people, but they will have other jobs aside from breaking-up big tech. The internet giants will have incredibly intelligent people who will have the sole-task of making it impossible to achieve these aims.

Verizon correcting the mistakes of yesteryear with Tumblr sale

There are good acquisitions and bad acquisitions, and then there was the prolonged saga with Verizon acquiring Yahoo’s media assets.

In 2017, Verizon decided it wanted to scrap with Google and Facebook to secure a slice of the lucrative online advertising bonanza. Its route to these riches was acquiring Yahoo’s media assets, an on-going saga was has led to little more than headaches for the telco. Now Verizon has announced it will get rid of one of the adopted problem children.

Financials of the deal have not been announced, though WordPress owner Automattic will acquire Tumblr.

“Tumblr is one of the Web’s most iconic brands,” said Automattic CEO Matt Mullenweg. “It is an essential venue to share new ideas, cultures and experiences, helping millions create and build communities around their shared interests. We are excited to add it to our lineup, which already includes WordPress.com, WooCommerce, Jetpack, Simplenote, Longreads, and more.”

Perhaps one of the biggest problems with Tumblr is figuring out what to do with it. In its own right, Tumblr is a very successful platform, home to 475 million blogs, though translating such potential is often a difficult task, requiring forward- and out-of-the-box thinking. Automattic looks to be a much more suited business to realise this ambition than the traditional telco.

“Tumblr is a marquee brand that has started movements, allowed for true identities to blossom and become home to many creative communities and fandoms,” said Verizon Media CEO Guru Gowrappan.

“We are proud of what the team has accomplished and are happy to have found the perfect partner in Automattic, whose expertise and track record will unlock new and exciting possibilities for Tumblr and its users.”

For Verizon, this is another chapter is a pretty miserable story so far. The entry into the media world started on shaky grounds with huge data leaks and hasn’t got much better. It does still own some very attractive titles, TechCrunch and Huffington Post for example, though in laying off 7% of staff last October as well as 15% of UK staff in January demonstrates the pain.

The telco has to make the media business work for it, it did make a $5 billion bet after all, but it has not been a simple quest to date.

Huawei gets out of the subsea game

A filing with the Shanghai Stock Exchange has revealed Huawei will be selling its marine cabling business, the first divestment since relationships turned sour with the White House.

Hengtong Optic-Electric is the kind recipient of the marine business, according to Reuters, claiming a 51% stake. Although the business is profitable, $16.66 million in 2018 according to Huawei’s annual report, removing a distraction of a capital-intensive unit might be what the wider business needs in this tenuous period of international dispute.

Huawei’s marine business has been up-and-running since announcing a joint venture with Global Marine in 2008. Over the last decade, Huawei has slowly been eating up more market share, with the firm participating in 90 projects worldwide, building more than 50k kilometres of the undersea cables. It was one of the participants which built the first cable connecting Africa and South America, completed in September.

While it is a firm under pressure on the international political scene, it does have a tendency to be very competitive in all the segments which it casts an eye to. The same could be said regarding the subsea world, and there may be a few parties happy to see the bad of it.

Aside from Huawei, NEC and Alcatel-Lucent are big players in the market, though there are certainly some US names in the mix. SubCom is a big name, while Infinera and Ciena are also players.

Despite many suggesting US Government actions against Huawei, and Chinese companies more generically, have been to reassert the US’ position in the technology industry. That said, while this is one of the scenarios which seem to benefit US firms, there has been plenty of collateral damage, not least to mention the number of US companies in the Huawei supply chain who are watching their business crumble away day-by-day.

It’ll vary from person to person if you believe the link between the trade war and this sale, but you can’t argue about the material impact President Trump is having on the telecoms industry.

Vodafone ditches Kiwis and cuts dividend in search of ‘financial headroom’

Vodafone has announced the sale of its New Zealand arm and a cut to the dividend as the firm searches for breathing room on the spreadsheets amid its Liberty Global acquisition and annual loss.

Such is the precarious position Vodafone is under, a cut to the dividend was expected by many analysts, though the sale of its Kiwi business unit compounds the misery. Facing various challenges around the world, including expensive spectrum auctions in Europe, the telco giant is searching for financial relief, though whether these moves prove to be adequate remains to be seen.

“We are executing our strategy at pace and have achieved our guidance for the year, with good growth in most markets but also increased competition in Spain and Italy and headwinds in South Africa,” said Group CEO Nick Read. “These challenges weighed on our service revenue growth during the year, and together with high spectrum auction costs have reduced our financial headroom.

“The Group is at a key point of transformation – deepening customer engagement, accelerating digital transformation, radically simplifying our operations, generating better returns from our infrastructure assets and continuing to optimise our portfolio. To support these goals and to rebuild headroom, the Board has made the decision to rebase the dividend, helping us to reduce debt and deliver to the low end of our target range in the next few years.”

While the news of a dividend cut saw share price drop by more than 5%, trading prior to markets opening has seen a slight recovery (at the time of writing). The dividend cut is not as drastic as some had forecast, down to 9 euro cents from 15, while an additional €2.1 billion from the New Zealand sale will provide some relief.

Looking at the financials for the year ending March 31, group revenues declined by 6.2% to €43.666 billion, while the operating loss stood at a weighty €7.644 billion. This compares to a profit of €2.788 billion across the previous year, though there are several different factors to take into consideration such as the merger with Idea Cellular in India and a change in accounting standards.

The loss might shock some for the moment, though this is likely to balance out in the long-run. In changing from the IAS18 accounting standard to IFRS15, Vodafone is altering how it is realising revenue on the spreadsheets. From here on forward, revenues are only reported as each stage of the contract is completed. It might be a shock for the moment, but more revenue is there to be realised in the future.

Although these numbers are the not the most positive, there is a hope on the horizon.

“The dividend cut is a massive blow for investors, while the results highlight the on-going challenges facing the company in its quest to turnaround its fortunes,” said Paolo Pescatore of analyst firm PP Foresight. “All hopes seem to be pinned on 5G, but the business model is unproven. Huge investment is required to roll out these new ultra-fast networks, but it comes at a cost.”

On the 5G front, Vodafone UK has announced it will go live on July 3, initially launching in seven cities, with an additional 12 live by the end of the year. Vodafone will also offer 5G roaming in the UK, Germany, Italy and Spain over the summer period. Interestingly enough, the firm has said it will price 5G at the levels as 4G.

Although this is a minor consolation set against the backdrop of a monstrous loss, it is at least something to hold onto. As it stands, Vodafone is winning the 5G race in the UK, while the roaming claim is another which gives the firm something to shout about. Vodafone is not in a terrible position, though many will be wary of the daunting spectrum auctions it faces over the coming months.

Verizon continues quest to correct content car crash

The Verizon mission to conquer the content world has been anything but a smooth ride to date, and now it is reportedly searching for a buyer for Tumblr.

According to the Wall Street Journal, Verizon executives are on the search to offload the platform. The Verizon Media Group has been under considerable pressure in recent months, as the promise of value through content and diversification has eluded the telco.

Looking at the most recent earnings call, Verizon Media Group revenue was $1.8 billion, down 7.2% year-on-year for the quarter. Declines in desktop advertising were primarily blamed, with the dip continuing to more than offset growth in mobile and native advertising. Considering the effort the telco had to exert to acquire Yahoo, not to mention the headaches it had to endure, some might have hoped there would be more immediate value.

The last couple of months have seen Verizon attempt to make money from the mockery, with a particular focus on job cuts. In January, it was announced 7% of the media unit’s workforce, some 800 roles, would be sacrificed to the gods of profits, and now it seems Tumblr is being marshalled to the alter.

What is worth noting is this is a platform which has promise.

After being acquired by Yahoo during 2013 for $1.1 billion, Verizon inherited Tumblr through the much mangled $4.8 billion acquisition of Yahoo in 2017. Although some might struggle to understand what Tumblr does, the all-encompassing blogging platform currently has 465.4 million blogs and 172 billion posts.

Tumblr is a tricky one to understand what it actually does, but instead of trying to pigeon hole it into a definition perhaps the better approach would be to let it just be itself. Tumblr defines itself as a blank canvas, allowing users to post text, photos, GIFs, videos, live videos and audio, or pretty much anything the user wants to.

Perhaps this is why Verizon has struggled with the brand and presumably failing to realise the potential. Telcos generally cultivate traditional and relatively closed-minded cultures. With Tumblr just being itself, rather than fitting into a tidy tick-box exercise, Verizon may be struggling to communicate the value to customers or even devise an out-of-the-box business model to monetize it effectively.

This assessment is perhaps supported by where the media business has seen success. Financial news for example, or the delivery of sports content. These are not exactly complex business models to understand, more difficult to deliver however, as they are more functional. These are the areas CFO Matt Ellis was boasting about during the earnings call.

While there has not been any official commitment or denial to the rumours from Verizon so far, there does seem to be some appetite from the industry. According to Buzzfeed, Pornhub VP Corey Price is ‘extremely interested’ in potentially acquiring Tumblr, promising to re-discover the NSFW edge, one of the factors which drove the popularity of Tumblr during the early days.

The future of Tumblr might be a bit hazy for the moment, but one thing is clear. Verizon is mapping out a very effective usecase on how not to diversify into the content world.

Telenor says enough is enough with troubled Veon

Most Norwegians we’ve met to date have been nice, relatively laid back people, but the execs at Telenor have seemingly been pushed to breaking point, resulting in the divestment of Veon.

It’s been in the works for a while, and it would appear Telenor has finally gotten sick of dealing with Veon. There has been ‘debate’ over the future strategic direction of the company, but it won’t be long before the Norwegians finally ditch their final 19.7% stake in Veon.

Telenor has announced it has begun an offering of 90 million Veon shares, roughly a 5.1% stake in the telco, priced at $4.15, with the offering expected to close on September 25. This will leave Telenor holding onto 14.6% of Veon, though plans are to transfer this stake to an exchangeable bond. Telenor will be able to clean its hands of any association.

This should come as little surprise considering the saga which played out in Uzbekistan back in years gone, when the business was known as Vimpelcom. Back in 2015, Telenor announced plans to divest its stake in the business, citing ‘challenging’ conditions. Apparently paying hundreds of millions of dollars to firms controlled by Uzbekistan’s President Islam Karimov for a leg-up in the country, is a no-no in Oslo.

And while many might view this as an admirable move by a telco wanted to keep its hands clean, let’s not forget Telenor was not completely absent of wrong-doing. A seconded Telenor employee raised concerns of corruption back in 2011, but this news didn’t make it to the CEO until March 2014, and then onto the board in December later that year. From there the memo was lost until October 2015 when it made its way to the Norwegian government, the majority shareholder of Telenor. Negligence or incompetence – we’ll let you decide, but neither should be present.

Telenor is on the verge of getting rid of the headache, which also blamed Uzbekistan for a recent profit warning, and it will receive a nice little $365 million boost in cash in the first instance. Seems a bit backward to be rewarding the telco when you look at the saga from angles, but hey-ho.