Don’t feel that you were out of touch if you didn’t pick up on any rumours that Telia Carrier, the international wholesale arm of the Swedish incumbent, was up for sale. Not many people did, even inside the company, says Staffan Göjeryd, CEO of the division for the past four years.
Telia Company, the parent company, announced the sale in early October of Telia Carrier to Polhem Infra, an infrastructure investor owned by Swedish pension funds, for 9.45 billion Swedish kronor (€900 million).
“I’ve been part of the process for the whole time,” Göjeryd tells me from his office just outside Stockholm. The process started earlier in 2020, when CFO Christian Luiga was acting group CEO and continued after May, when Allison Kirkby took over at the top of Telia Company.
“They were all part of the process,” adds Göjeryd.
Luiga, Kirkby and Luiga’s predecessor Johan Dennelind — CEO for eight years until August 2019 — had all been part of a long project to dispose of Telia Company’s interests outside the Nordic and Baltic countries.
The reason? Telia had ended up paying almost $1 billion in fines for involvement in the corrupt acquisition of a telecoms licence for Uzbekistan. The company’s leading executives at the time left and Dennelind, a former Vodacom executive, led a clean-up operation.
That saw Telia decide to sell its stakes in all its operations outside its home region, so it could focus on its home market. The last to go, in June 2020, was its 47.1% stake in Turkcell Holding, which owns 51% in Turkcell. State-owned Turkey Wealth Fund bought it for $530 million.
Legal deadlock
Kirkby, just weeks into her new job at the time, said: “Over the past few years, our focus has been our core Nordic and Baltic markets. Through this [Turkcell] divestment, we unwind a long-lasting legal deadlock; we reduce risk, improve leverage and increase liquidity which will generate better shareholder returns in our core markets.”
No one — not even us on Capacity — thought to ask: “Is that it? What about Telia Carrier, a global operation, with interests far from Stockholm?” In a business that is rife with rumours, none came our way. Maybe that has been helped by the fact that no one has met face-to-face at Capacity events since early March.
Crystallise the value
The idea of selling Telia Carrier, says Göjeryd, is to “crystallise the value” and have the company “grow into a standalone entity”.
Polhem Infra is jointly owned by three Swedish pension funds — the first, third and fourth AP funds, known as AP1, AP3 and AP4.
According to the Swedish government, the funds are required to manage the capital in order to maximise the benefit to the pension system. They have a mandate to invest their capital to achieve high returns over the long term at low risk.
Did the group look at other potential purchasers before settling on Polhem? Telia was “not actively entertaining” the idea of other buyers, Göjeryd smiles.
“There was an element of pressure testing” the proposed deal — perhaps especially as this was Polhem’s first move into digital infrastructure. But any more and “it would have leaked”, he adds.
It didn’t leak. “Everyone in the company was pretty much unaware of it” until the announcement.
Pressure testing
Pressure testing? “You have to, right? It is an asset that is not just in the Swedish context.” In other words, it’s a global network, with 67,000km of fibre and more than 300 points of presence in 35 countries across Europe, North America and Asia.
“We’ve managed to build something really solid over the past 20 years,” says Göjeryd, who joined the group in 1995 and has been there ever since. He worked three years in the US for what was then TeliaSonera International Carrier — a name adopted after Telia of Sweden merged with Sonera of Finland in 2002.
“I’m been around this area, setting up the international network, separate from the Swedish operations. I project managed the first transit point in the European network in 1997.”
Göjeryd’s baby
I ask: “It’s your baby, isn’t it?” Göjeryd beams: “In some ways it is. I take great pride in that position.”
The deal has to go through international regulators in the countries where Telia Carrier operates, a process that’s likely to last until the first half of 2021. Until then, there will be no named appointments to the board, he suggests.
But what about a new name? “That’s not the first thing on the list but it’s one of the things that is going to happen. It’s something that we want to create with the culture,” says Göjeryd.
A different name
“In a year and a half from now I assume we will have a different name to build on the culture of Telia Carrier. We have a unique culture to start with.”
So what are the first items on his agenda? First, Telia Carrier has to be able to function as a self-contained company. “But it’s a lot about informing the staff and making sure they’re a part of this journey and have a great opportunity.”
There are 500 staff. What’s been their first reaction? “The staff are very pumped up about this. We can do our business even better than before. Everyone is very excited about what it means to be a standalone company. But what does it really mean? Everyone is curious about that.”
And the other item on the to-do list “is toget to know the new owner”. Telia Carrier is Polhem’s first investment in digital infrastructure, so both sides are new to each other. Göjeryd knows that Polhem will want to work with him and his colleagues to develop a business plan, “not just in the wholesale space but in the enterprise space”, he says.
“They will have a different view [from Telia Company] as an owner of Telia Carrier and a different view in the long term. The pension fund has a long-term view.”
Is Polhem looking at other digital infrastructure investments? “That’s part of those questions,” he smiles. Until now it’s invested in energy, transport and similar areas. “This is their first” in digital infrastructure.
“It’s not a discussion I’ve been privy to so far, but if you are in the area of infrastructure space you might look at others. But honestly I don’t know.”
The pandemic has highlighted the need for digital infrastructure, we agree, and he doesn’t think it has affected the price tag for Telia Carrier. Covid-19 “has reinforced the view that digital infrastructure is important”.
Companies that work digitally are coming through the pandemic better than those that don’t. Again, we agree.
The change of ownership “is a fantastic opportunity”, he says, and he has no thoughts of using this deal to leave after 25 years.
“I want to stay with my baby, right? The people we have in Telia Carrier are fantastic. It’s a great opportunity for us.”
Will he be presenting Polhem with a shopping list of things he’d like to see? “It’s more a matter of looking at the business in a slightly different manner,” he says. A pause: “And maybe being opportunistic and not so long-term in the way we do things.”
Opportunity for enterprise
Enterprise will be part of the mix in the future. “Building purely for wholesale is more challenging than it was before.”
As the company expands — as it has done to places such as Mexico — “it needs multiple revenue streams, including connectivity-based enterprise”.
But “we won’t see Telia Carrier as a full-service carrier”, he adds. Enterprise means security “as a basic requirement”, but he doesn’t see the company becoming “a fully-fledged systems integrator: that’s a completely different strategy”.
Enterprises are becoming more data centre-centric, especially “some of the larger content companies”, and there is “a different buying behaviour”. We’ve already seen the early stages, he notes, “but the pandemic has accelerated that. People are thinking how to conduct business in the future.”
