Global Insight Perspective | |
Significance | TeliaSonera's chief executive officer, Anders Igel, has resigned after five years in charge of the largest Nordic telecoms company. |
Implications | Igel's exit paves the way for the company to take fresh leads towards addressing its revenue decline and solving its existing conflicts with fellow shareholders in Russia and Turkey. |
Outlook | Beyond grappling with declining customer numbers and profits, any new chief executive would have to deal with a changing shareholder structure as the government privatises its stakes and the Russian conglomerate, Alfa, eyes an asset swap. |
Nordic telecoms giant TeliaSonera has announced that its chief executive officer (CEO), Anders Igel, will quit the company, following declining profit margins and the failure of the company's leadership to resolve ownership disputes in Turkey and Russia. Igel, who has been chief executive for five years, engineered the merger of Sweden-based Telia, with Finland-based Sonera in 2002. In a thinly veiled attack on the failures of Igel's time in charge, the company said that it would need a new leadership as it enters a new phase. "Thereby, to further improve the spirit and commercial drive in the organisation, TeliaSonera needs a strong and motivating leadership focused on growth, restructuring and value enhancement," the company said in a statement.
Speaking further in a conference call, TeliaSonera's chairman, Tom von Weymarn, said the company would begin the process of finding a new chief executive that can take the company further. "TeliaSonera needs a chief executive who can improve the spirit and commercial drive, make acquisitions and speed up efforts to cut costs and jobs, von Weymarn observed. TeliaSonera's chief financial officer, Kim Ignatius, will take over as acting chief executive until a replacement is found.
Outlook and Implications
Slowing Profit Raises Concern: Igel's departure has been largely caused by the apparent slowdown in the company's profits, mirroring the similar departure of the chief executive of Deutsche Telekom at the end of 2006. In first-quarter 2007, the company posted its smallest increase in profit in more than a year as its Nordic fixed-line operations continued to decline. TeliaSonera lost 104,000 fixed-line customers in Sweden in the first quarter and more than half a million users across all its operations. In April, the outgoing chief executive expressed concerns over the margin development at the fixed-line unit and commented that measures to ease costs would not suffice to halt the customer drain. The company has been carrying out an extensive cost-efficiency programme in both Sweden and Finland in a bid to cut costs in its two home markets.
Uncertainty Over Future: At the moment, TeliaSonera is in a fix and there seems to be little guarantee as to which direction it is headed. On the surface, the company presents its change of chief executive as the fillip to rekindle growth. However, underneath, the company is unsettled and unsure of its next move. An ongoing privatisation in Sweden, conflicts with fellow shareholders in Russia and Turkey, plus speculations of asset-swapping with Russian conglomerate Alfa have all emerged as veritable concerns to the company's board. Despite previous asset-swap talks with Alfa collapsing, renewed negotiations, in the light of the Swedish government's privatisation and the current European Union (EU)-Russia relationship, are a highly charged topic, with significant socio-political dimensions. Similarly, resolving the conflicts in both Russia and Turkey will help TeliaSonera to extract further synergies from its overseas operations (see Europe: 4 June 2007: Reports Indicate Altimo and TeliaSonera Resume Talks on Possible Asset Swap, Sweden: 2 May 2007: Swedish Government Begins TeliaSonera Privatisation and Europe: 2 April 2007: Asset-Swap Talks Between Altimo and TeliaSonera End in Failure).