Risks – Sustainability

Human rights – freedom of expression

Issues related to human rights pose high risks to the telecom industry. Risks include complicity in human rights violations by operators being linked to excessive governmental demands to the detriment of privacy and freedom of expression and by telecom services being used for the sexual exploitation of children. International standards on human rights go beyond identifying and managing material risks to TeliaSonera, they also relate to the risks to individuals.

National laws and regulations on surveillance of communications or the shut-down of networks could be defined in ways that enable violations of human rights. Government monitoring, blocking or take-down requests often serve a legitimate purpose, including to protect human rights. However, there are major and problematic government requests that might conflict with freedom of expression and privacy. TeliaSonera may be legally required to comply with such requests and, like other telecom operators, only have limited leverage with which to investigate, challenge or reject the requests. In some countries, this dilemma places TeliaSonera at heightened risks of being linked to severe human rights abuses. These risks are further strengthened in relationships with state entities and the fact that major requests often are strictly confidential.

Customer privacy

Vast amounts of data are generated when customers use TeliaSonera’s services and networks. New ways of connecting and data-heavy business models make it difficult for individuals to understand and retain control over how their data is collected and used. Moreover, it is challenging to establish and uphold “bulletproof” privacy protection in increasingly sophisticated data environments and in ever-changing technical and threat landscapes. While TeliaSonera through appropriate measures avoids failure in its work to protect privacy of its customers and to secure network integrity as well as data security, external or internal factors may negatively impact data security and privacy and cause unfavorable effects on customers’ perception of how TeliaSonera handles these matters, possibly leading to an adverse impact on TeliaSonera’s business and results of operations.

Corruption and unethical business practices

Some of the countries in which TeliaSonera operates are ranked as having high levels of corruption according to sources such as Transparency International, Business Against Corruption and the World Bank. The telecom industry is particularly exposed to bribery and corruption risks due to the dependency on government granted tele-com licenses and frequency permits, as well as the need for government granted permits and approvals at several stages of the network roll-out process. In addition, there may be requests for e.g. free services and numbers as well as sponsorships and donations to facilitate operational processes. Actual or perceived corruption or unethical business practices may damage the customers’ or other stakeholders’ perception of TeliaSonera and also result in financial penalties and debarment from procurement processes.

A serious negative impact on TeliaSonera’s business operations and its brand might lead to a decision to exit one or a number of markets. Further, after making such a decision, the divestment process as such may pose risks to corruption and unethical business behavior.

Review of Eurasian transactions

In late 2012, the then Board of Directors appointed the Swedish law firm Mannheimer Swartling (MSA) to investigate allegations of corruption related to TeliaSonera’s investments in Uzbekistan. MSA’s report was made public on February 1, 2013.

In April 2013, the Board of Directors assigned the international law firm Norton Rose Fulbright (NRF) to review transactions and agreements made in Eurasia by TeliaSonera in the past years with the intention to give the Board a clear picture of the transactions and a risk assessment from a business ethics perspective. For advice on implications under Swedish legislation, the Board assigned two Swedish law firms. In consultation with the law firms, TeliaSonera has promptly taken steps, and will continue to take steps, in its business operations as well as in its governance structure and with its personnel which reflect concerns arising from the review. The Swedish Prosecution Authority’s investigation with respect to Uzbekistan is ongoing and TeliaSonera continues to cooperate with and provide assistance to the Prosecutor.

If continued assessments and investigations would lead to new observations and findings, it cannot be excluded that the consequences of such findings would be that the results of operations and financial position in TeliaSonera’s operations in the Eurasian jurisdictions are adversely impacted.

Another risk is presented by the Swedish Prosecution Authority’s notification in the beginning of 2013 within the investigation of TeliaSonera’s transactions in Uzbekistan, that the Authority is separately investigating the possibility of seeking a corporate fine against TeliaSonera, which under the Swedish Criminal Act can be levied up to a maximum amount of SEK 10 million, and forfeiture of any proceeds to TeliaSonera resulting from the alleged crimes. The Swedish Prosecution Authority may take similar actions with respect to transactions made or agreements entered into by TeliaSonera relating to operations in its other Eurasian markets.

Further, actions taken, or to be taken, by the police, prosecution or regulatory authorities in other jurisdictions against TeliaSonera’s operations or transactions, or against third parties, whether they be Swedish or non-Swedish individuals or legal entities, might directly or indirectly harm TeliaSonera’s business, results of operations, financial position, cash flows or brand reputation. As examples, investigations concerning bribery and money laundering in connection with the transactions in Uzbekistan are conducted by the Dutch prosecutor and police authorities, and by the U.S. Department of Justice and the U.S. Securities and Exchange Commission. As requested by the Dutch authorities, TeliaSonera has provided a bank guarantee of EUR 10 million as collateral for any financial claims which may be decided against one of its Dutch subsidiaries. TeliaSonera is cooperating fully with the Dutch and U.S. authorities. The investigations were initiated in March 2014 and are still ongoing. At this point in time, it is not possible to assess how or when the investigations will be resolved. TeliaSonera has not received any formal or indicative claims or requests for penalties or other monetary sanctions from the authorities, but there is a risk that the investigations will result in some form of sanctions, monetary and/or otherwise. The outcome of the investigations may have a material adverse effect on TeliaSonera’s financials.

TeliaSonera has received requests to make public the reviews made by NRF and other law firms. However, despite risking criticism, it is not possible to publish the reviews with respect to people, companies, business agreements, privacy and thus the risk of TeliaSonera incurring lawsuits as the law firms views are not necessarily shared by those implicated. As already stated, TeliaSonera continuously hand over information to law enforcement agencies, who are better equipped to assess whether any criminal acts have occurred.

Supply chain

TeliaSonera needs to ensure that its policies on ethical business practices, environmental issues, human rights and labor laws are all fully respected by its suppliers and their sub-suppliers. Failure or perception of failure of TeliaSonera’s suppliers to adhere to these requirements may damage the customers’ or other stakeholders’ perception of TeliaSonera and negatively impact TeliaSonera’s business operations and its brand.

Environment and climate change

TeliaSonera expects increasing regulation and taxation of fossil fuel usage, greenhouse gas emissions and electronic waste. Energy shortages and increasing energy costs may incur additional costs or lost revenues for TeliaSonera.

As a consequence of climate change, extreme weather conditions such as storms, heavy rainfalls and floods will be more common and may prevent TeliaSonera from keeping its networks running, negatively affecting its results of operations.

Occupational health and safety

Serious risks related to occupational health and safety (OHS) are generally linked to construction and maintenance work. Such work is mainly carried out by contractors, but TeliaSonera must ensure that these suppliers have proper OHS practices, as accidents or malpractice might damage TeliaSonera’s operations and/or reputation. Most TeliaSonera employees work in office or store environments, where the main risks are psycho-social wellbeing and ergonomics. If not managed properly, these risks may lead to increasing sick leave and a higher number of accidents and injuries, potentially incurring significant costs.

Electromagnetic fields

Concerns have been expressed that the electromagnetic fields from mobile handsets and base stations, which serve as the platform for transmitting radio signals, may pose health risks and interfere with the operation of electronic equipment. Actual or perceived risks of mobile handsets or base stations and related publicity or litigation could reduce the growth rate, customer base or average usage per customer of TeliaSonera’s mobile communications services, may result in restrictions on the location and operation of base stations, or could subject TeliaSonera to claims for damages, any of which could have a negative impact on its business, financial position and results of operations.

Labor practices

Within TeliaSonera’s geographical footprint, region Eurasia presents the highest risks related to substandard labor practices. The right to freedom of association and collective bargaining may be restricted by the national governments in the Eurasian countries. Although most of the countries have ratified all Core Conventions of the International Labour Organization (ILO), which signifies a public commitment to respect labor rights, there is no guarantee that these rights are fully realized. In these countries, there are also risks related to child, forced and compulsory labor, especially in impoverished areas or during national events. In a country with deficient labor practices, TeliaSonera may, through no fault by itself, anyway be involved and as a consequence be subject to criticism or official actions that may negatively impact its brand reputation and business operations in this and in other countries.

© TeliaSonera 2015
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