C34. Discontinued operations and assets classified as held for sale

Disposal of region Eurasia


As of December 31, 2015, segment region Eurasia is classified as held for sale and discontinued operations. On September 17, 2015, TeliaSonera announced that it is not a long-term owner in region Eurasia and that a process had been initiated in order to reduce the presence in region Eurasia and over time fully leave. During the fourth quarter of 2015, the sales process in all the Eurasian markets progressed and in December, TeliaSonera signed an agreement to sell its ownership in the Nepalese operator Ncell. As a consequence of this progress, the current status in the overall divestment process and an assessment of the circumstances in each market and the complex owner structures, TeliaSonera has made the judgment that a divestment of the operations in region Eurasia is deemed highly probable within one year and that region Eurasia therefore should be classified as held for sale and reported as discontinued operations as of December 31, 2015.


Region Eurasia is classified as held for sale and discontinued operations and therefore presented as a single amount in the consolidated statements of comprehensive income. Assets and liabilities in region Eurasia are presented separately in two line items in the consolidated statement of financial position. The consolidated cash flow statement is presented including region Eurasia, but with additional information on cash flows from operating, investing and financing activities and free cash flow for region Eurasia. The amounts for continuing and discontinued operations in the consolidated financial statements are presented after elimination of intra group transactions. Comparative periods in the consolidated statements of comprehensive income are restated to reflect the classification of region Eurasia as discontinued operations.

Net income from discontinued operations, SEK in millions

Jan-Dec 2015

Jan-Dec 2014

Net sales



Expenses and other operating income, net



Operating income



Finance costs and other financial items, net



Income after financial items



Income taxes



Impairment loss on remeasurement to fair value less costs to sell 1


Net income from discontinued operations




EBITDA excl. non-recurring items




1 Non-tax deductible

Operating income in 2014 was effected by impairment losses. Finance costs and other financial items, net increased mainly due to exchange rate changes affecting USD cash balances due to devaluation in Azerbaijan and Kazakhstan during 2015.

Assets and liabilities classified as held for sale, SEK in millions

Dec 31, 2015

Goodwill and other intangible assets


Property, plant and equipment


Other non-current assets


Short-term interest-bearing receivables


Other current assets


Cash and cash equivalents


Assets of former segment region Eurasia classified as held for sale


Long-term borrowings


Long-term provisions


Other long-term liabilities


Short-term borrowings


Other current liabilities


Liabilities of former segment region Eurasia associated with assets
classified as held for sale


Net assets of former segment region Eurasia classified as held for sale



In accordance with IFRS 5, the discontinued operations are measured at the lower of carrying value and estimated fair value less costs to sell. The valuation is based on an overall assessment of the input from the sales process and the risks in the different countries. The remeasurement of the net assets in region Eurasia resulted in an impairment charge of SEK 5.3 billion related to goodwill and other fixed assets in Uzbekistan.

Fair value is the price that would be received to sell the discontinued operations in an orderly transaction between market participants at the measurement date under current market conditions. There are no directly observable prices for TeliaSonera’s discontinued operations and fair values have therefore been estimated using other valuation techniques which require the use of judgment.


As of December 31, 2015, the operations in Uzbekistan (Ucell) is measured at estimated fair value less costs to sell and is classified within Level 3 of the fair value hierarchy of IFRS 13. For Ucell, valuations have been prepared based on the current business plan. Input from both internal and external advisors have been considered in the valuations. The following different valuation models have been used:

  • Valuation multiples from comparable companies (peers) on relevant financial metrics such as EBITDA and Operating Free Cash Flow (OpFCF)
  • Discounted cash flow (DCF) calculations, and
  • Brokers’ EBITDA multiple valuations of Ucell

The key assumptions used in the valuation models are presented in the table below.


Multiple range


Terminal growth rate %

Enterprise value/EBITDA

2.75 - 3.75

Enterprise value/OpFCF

4.75 - 5.75

DCF base case

20.78 - 21.78

2.00 - 3.00

DCF conservative

20.78 - 21.78

-2.00 - 0.00

Brokers’ EBITDA multiples

2.5 - 4.0

The combined results of the different valuation models provided an estimated range reflecting a normalized Enterprise value based on normal business risks. Apart from the normal business risks, there are a number of specific risks related to the valuation of Ucell such as cash repatriation issues, the foreign exchange risks, the unstable regulatory environment, the compliance issues associated with Ucell’s minority shareholder and finding the right buyer from a sustainability point of view. Given the lack of precedents and factual evidence, it is difficult to quantify the valuation impact of all such risks. Morover, any potential discount, will be highly subject to the specific views of an interested buyer. The normalized range for the estimated enterprise value was adjusted to reflect management’s best estimate of these specific risks. Management’s best estimate is that the risk adjusted debt free value of Ucell is SEK 3.3 billion. Changes in any of the estimated risk adjustments would have a material impact on the estimated fair value. The most significant impact on fair value will be the buyer’s ability to operate in the country and convert local currency. See also Risks and uncertainties, sections “International political and macroeconomic developments,” “Emerging markets,” and “Review of Eurasian transactions.”


For Ncell in Nepal, the estimated fair value as of December 31, 2015 was based on the sales price in the agreements signed in December 2015. As the estimated fair value for Ncell exceeded the carrying value per the end of 2015, Ncell was not remeasured at December 31, 2015.

On December 21, 2015, TeliaSonera announced that it had agreed to sell its 60.4 percent ownership in the Nepalese operator Ncell to Axiata, one of Asia’s largest telecommunication groups, for USD 1,030 million (SEK 8.6 billion) on a cash and debt free basis. At the same time, TeliaSonera should dissolve its economic interests in the 20 percent local ownership and receive approximately USD 48 million (SEK 0.4 billion). The transactions are conditional on each other. Ncell had a net cash position of approximately USD 284 million (SEK 2.4 billion), after purchase price adjustments, as of September 30, 2015, and TeliaSonera will be paid for the cash position at closing in proportion to its economic interest of 80.4 percent. The divestment, all transactions included, results in a positive net cash effect for TeliaSonera, corresponding to approximately SEK 7.5 billion after provisions, primarily related to tax.

Other parts pf discontinued operations

For the other parts of discontinued operations (excluding Uzbekistan and Nepal), the estimated fair values exceeds the carrying value and these parts have therefore not been remeasured at December 31, 2015. The estimated fair values were based on a combination of indicative bids received, valuation discussions with potential buyers and valuation models in the form of multiples from comparable companies (peers) on relevant financial metrics such as EBITDA and discounted cash flow calculations. The specific risks of each country have also been factored in to the fair value estimates. See Risks and uncertainties for more information on the risks.

Subsidiaries in discontinued operations with material non-controlling interests

AO Kcell and Azercell Telekom B.M. are held partly by intermediate holding companies where one is partly held by the associated company Turkcell. The NCI in Kcell is 38.1 percent. Based on a put option granted, the NCI in Azercell is accounting-wise reduced to 30.5 percent.

Ncell Pvt. Ltd. is held by intermediate holding companies with an NCI of 39.6 percent, but based on a put option granted the NCI is reduced to 19.6 percent.

Based on put options granted on 6 percent of the share capital in TeliaSonera Uzbek Telecom Holding B.V. (Uzbek Holding), the subsidiary is accounting-wise treated as a wholly-owned subsidiary of TeliaSonera.

Put options

Azertel Telekomünikasyon A.S. (Azertel), the parent company of the mobile operator Azercell Telekom B.M. (Azercell) in Azerbaijan, has a put option granted in 2008 in conjunction with the privatization of Azercell, now wholly-owned by Azertel. Should a deadlock regarding material decisions at the general assembly arise, the resolution supported by Fintur Holdings B.V. will apply. In such circumstances, the put option gives the largest holder of non-controlling interests the right to sell its 42 percent holding in Azertel to Fintur Holdings B.V. TeliaSonera consolidates 74.3 percent of Fintur. The exercise price is equal to the fair value at the time of exercise and is to be determined by independent appraisal. The provision represents the present value of management’s best estimate of the amount required to settle the liability. The provision may vary as a result of changes in Azertel’s estimated fair value and the timing of the option exercise.

Uzbek Holding, the parent company of the mobile operator OOO Coscom (Ucell) in Uzbekistan, has a put option originally granted in 2007 in conjunction with the acquisition of a 3G license, frequencies and number blocks in Uzbekistan in exchange for cash and a 26 percent interest in Uzbek Holding. The put option gave the existing holder of the non-controlling interest the right to sell its 26 percent interest in Uzbek Holding to TeliaSonera. In 2010, TeliaSonera acquired 20 percent of the shares in Uzbek Holding resulting in a total holding of 94 percent. Following this transaction, the terms of the put option were amended. The put option refers to 6 percent of the shares and is exercisable after February 15, 2013. The exercise price is equal to the higher of either a fixed amount of USD 75 million or the fair value at the time of exercise as determined by independent appraisal.

Put options and financial receivables are offset in the statement of financial position when there is an enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to settle the put option and financial receivable simultaneously (Ncell and Rodnik).

Financial risk management

TeliaSonera’s net investments in the Eurasia region is although classified as discontinued operations, still exposed to fluctuations in foreign exchange rates and managed accordingly.

Transaction risk on proceeds of the divestments will be dealt with as a part of the group’s established foreign exchange risk management procedures following the group policy on financial management. The currency of the future sales proceeds will probably not be the same as the local currency of the disposed operations.

Conversion risk in discontinued operations relates to the net investments in foreign operations. The major currencies contributing to the conversion risk are NPR, AZN, USD, UZS and KZT.

The surplus liquidity and liquidity position for the discontinued operations as of December 31, 2015 were 10,687 million, which relate to cash and cash equivalents. Based on the current liquidity position and the expected disposal of the Eurasian operations within one year, TeliaSonera’s liquidity risk relating to discontinued operations are considered limited.

Credit risk will be dealt with as part of the group’s established credit risk management procedures following the group policy, or where applicable, the subsidiary´s policy on financial management.

Interest rate risk is the risk that a change in interest rates will negatively affect the group net income or cash flows. The interest-bearing borrowings in the discontinued operations refers mainly to fixed rate loans with short maturity and considering the expected divestment of the operations within one year the interest rate risk exposure for TeliaSonera is therefore deemed limited. The interest rate risk relating to cash and cash equivalents and receivables is deemed limited.

© TeliaSonera 2015
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