The investment in Unitech Telenor’s current CEO Sigve Brekke was pushing for that Asia-chief in 2008, has cost Telenor’s shareholders around 30 billion. More serious is that Unitech is deeply involved in the biggest corruption case in recent Indian history – and that all warning lights indicated that the investment should be shelved. But Brekke defied experts’ advice. It can now cost him his job.
– Sigve Brekke knew – or should have known – when Telenor partnered with Unitech that the Indian company had acquired 2G licenses its unlawful or irregular manner .
it says corruption fighter and one of India’s most powerful men, Subramanian Swamy, in an exclusive interview with capital.
Swamy is the man who helped roll up the giant corruption case that has circulated in the Indian media since 2008 – and almost as long in Indian courts. He has a bachelor’s degree in mathematics, master in statistics and a (real) PhD in economics from Harvard. He is a founding member of the Indian Janata Party, which he led from 1990 until 2013, and as he merged into the Bharatiya Janata Party – today one of the two largest parties in Indian politics. He has been Indian Trade and Minister of Justice and been elected to Parliament five times. In recent years he has distinguished himself as a champion of anti-corruption movement in India and has been widely known to initiate legal proceedings against the high and mighty. In other words, no small authority in India that now confronts Telenor chief way of doing business.
Swamy justification for why he thinks Brekke knew – or should have known – that Telenor acquired the Indian telecommunications licenses in an irregular or illegal manner, was that they were sold by the government to Unitech for far below market for a period which was not complied with.
– the condition for receiving licenses to ten percent of the market, was that they could not be resold until it had been two years. Unitech ignored, however, the provision right after they got the license, to sell majority shares to Telenor. It happened at a price which was many times that of the Unitech had paid the government for the license. It is obvious that they saw that it was illegal for what they could not do directly, they did indirectly, said Swamy.
He is incidentally also the man who can be said to have suffered Telenor it largest and most ignominious loss in company history.
When Indian Supreme Court on 2 February 2012, decided that the 122 advertised 2G licenses which former telecom minister A. Raja will be sold at a discount on a unlawfully should be canceled, it was after a petition from just Swamy.
22 of the canceled licenses, Telenor had secured by buying in Unitech to huge sums, but by a stroke of the pen, they were suddenly canceled and virtually zero worth.
the Sigve Brekke prestige investment in India has thus become one of the most unsuccessful Norwegian business investments ever.
Mini-CV – Sigve Brekke
He is born the sole heir of Uvdal but said of his heir court and went into politics instead. In the 1980s he was political secretary of the AUF, a position that gave him access to the job as political adviser to the defense minister from 1993 and as state secretary in the Defense Ministry later that year.
He was vigorously rejected when he was a state secretary tried to get into the Center for International Affairs at Harvard. “He does not have sufficient practical or academic experience in the realm of international affairs two allow him two succeed in this environment”, it sounded crass message from Harvard. Elite University gave simultaneously clear message that Secretary Lindstrøm, who recommended him, in the future to consider the intellectual capacity of the applicants bit better.
Brekke gave careful not up Harvard dream for this reason, and he managed later to get onto the far less demanding John F. School of Government at Harvard University.
Then he was tapping into Telenor of Labor mate Tormod Hermansen, who even made sure that the phone company pays Harvard master his – before Brekke at all had started working for Telenor.
Hermansen sent Brekke to Asia, where he quickly made success and have got a lot of good, but also some that are not good. These included capital last year reveal that substantial sums have gone from treasury to Telenor’s Thai subsidiary, DTAC, where Brekke had various leading roles, for various projects run by his sons. Among other things, dtac donated 1.4 million to Brekke sons charitable involvement Kids Action for Kids, 210.000 million has gone to swim their club, at least 40,000 have gone to a cookbook project on shoe theirs. In addition, unknown amount gone to both basketball and tennis club their food competition at school etc.
Despite Brekke constantly stresses that he as a leader is committed to openness, he has not wished to provide further details for DTAC’s sponsorship of family activities.
Brekke has been skilled at getting people with it, especially in its Asian employees, he easily managed to create excitement. But he is also a master at getting people from themselves. “An unscrupulous politician and svenskdødare,” called Telecoms News Erna’s editor in chief him. The reason for the statement is the many tough and controversial dismissals he has stood for as a leader. Among other things, employees have been dismissed both via SMS and email. The special is that several of those who have been dismissed by Brekke later made greater career elsewhere, such as Swedish Johan Dennelind, who is now CEO of TeliaSonera.
In recent years, Brekke was one of the best of salaried Telenor. When he last year was appointed as the new CEO, he bought fast new apartment to 20 million at Tjuvholmen, while the family retains the fashionable villa they have stayed in in one of Bangkok’s best stroke.
Fornebu, March 2016
Norway’s second largest company, and with the state as the largest owner, is the all-time crisis of confidence. Among Telenor’s more than 36,000 employees around the world prevails much testy mood. Not only has the price of Telenor shares fell by about 25 percent – or well over 40 billion – in time after Brekke took over as CEO. The international mobile operator VimpelCom, in which Telenor owns 33 percent of shares in and has 43 percent of the voting rights, has recently admitted to having paid large sums in bribes to the dictator’s daughter Gulnara Karimov to enter the mobile market in Uzbekistan.
VimpelCom is listed on the United States but is headquartered in Amsterdam and has long been investigated by both US and Dutch authorities. The company’s former CEO, Norwegian Jo Lunder, has long been a key person in the Telenor system, and was among others repeatedly mentioned as Sigve Brekke contender in the battle for the job as the new CEO of Telenor after Jon Fredrik Baksaas.
That was until November 2015 when Norwegian authorities charged Lunder and arrested him in connection with the ongoing corruption investigation in VimpelCom.
Turbulence in Telenor
Internally, Telenor has Sigve Brekke suspended or released four key leaders while VimpelCom matter investigated. It is Telenor’s CFO Richard Aa, who has worked closely with Brekke and perhaps Brekke’s strongest competitor in the race to become the new CEO and it is Telenor’s legal director Pål Wien Espen, both of which have enjoyed high standing internally, but which has been accused for not having alerted by textbook when corruption alarm went off in VimpelCom, they both contests.
in addition, Brekke unattached Telenor’s former directors of VimpelCom, former CFO of Telenor’s Thai subsidiary DTAC, Fridtjof Rusten and former Russia -sjef for Telenor, Ole Bjorn Sjulstad, now head of corporate affairs at Telenor Hungary.
On top of this we had known Brekke’s predecessor, Jon Fredrik Baksaas last year quit his consulting contract as a strategic advisor to the Board of Telenor immediate effect, also in connection with VimpelCom case. As if this were not enough, also had notoriously former chairman Svein Aaser – the man who trump through the controversial appointment of Brekke – go on the day as a result of its information management in connection with VimpelCom scandal.
– world-corruption work
It is in this turbulent environment that Sigve Brekke (see mini-CV page 64) has emerged as the new CEO, busboy and rescuer. l Last summer he went out and announced that all VimpelCom record is for sale, and since last autumn – when capital could reveal that he for years has cheated and listed academic degrees on his CV that he has not – he has marketed itself increasingly in various Norwegian media with their strong attitudes against corruption.
– I feel sad that it be questioned trust of Telenor, and especially on things like corruption. These are things that we try to work with every single day, and I actually would say that we are absolutely world class at. This is what gives us a competitive advantage in the big world. This is precisely why I think openness is the only answer to that, said Brekke in an interview with DB television last fall.
The interview took place not long after it became known that the Telenor Board has engaged the law firm Deloitte for a review of how the Norwegian mobile giant has handled its minority ownership in corruption accused VimpelCom through ten years.
Brekke promised full transparency in the investigation and warned that the main conclusions will be made public.
– why we – the board – decided that we should have an investigation where all cards should be on the table. We have hired Deloitte to help us to do the survey here as objective as possible. The only way we are able to re-build confidence and put this behind us is full disclosure. And then we’ll then deal with it as it is and then we’ll move on, said Brekke.
When it den18. February this year became known that VimpelCom acknowledges corruption in Uzbekistan, and adopts a fine of $ 795 million – the equivalent of almost seven billion – to American and Dutch authorities, stated Brekke day after NTB:
– I feel am confident that none of Telenor is involved in corruption, but we want to see how Telenor has handled the case. It is important for us to get all the cards on the table, said the CEO.
For DN told him the next day again, on February 20, that he was upset that VimpelCom has committed corruption in Uzbekistan.
– It is disappointing and very serious that company Telenor is part owner of admits corruption.
Secret investigation
But while Brekke has stood forward in Norwegian media and marketed itself as an advocate for full disclosure of the Deloitte investigation, there existed another – and no less important – investigation work of corruption-related matters that he has not been as open about.
it relates his own work as a former Asia head of Telenor.
– had the outside world learned about the investigation work around Brekke India investment, he had long since been completed in Telenor, and then he had at least not become CEO, claims a centrally located source of good reasons wishes to remain anonymous.
Something similar we also hear from other Telenor distance, but since the internal telecommunications company initiated an intense chase on sources – and it’s been utterly lid on the matter internally – they are we talking about the investigation (or evaluation that the somewhat more neatly called Telenor’s inner corridors) extremely cautious statement. They now hope only that the newly appointed chairman Gunn Wærsted will take up the thread where it was released recently.
It is the leading investigating BI Professor and lawyer Wiersholm, Jan Fougner, who was commissioned to verify a the fatale India investment Brekke trump through the midst of the financial crisis in 2008, the experts’ clear advice.
the capital is aware that Fougnerbakken was hired by the administration of Telenor in the aftermath of the controversial India-investment to see if everything had gone right for him.
Fougnerbakken considered the leading fagpersonenen in Norway on compliance, anti-corruption, corporate penalties, conflict and crisis management as well as subsequent remediation processes under both Norwegian and international laws, including the Foreign Corrupt Practices Act – and he shall have competence spot for such a job.
– Do not know scrutiny
Sources told the capital that Fougnerbakken should have found so much “cloudiness” around India investment that Brekke must have put all cloths to add the lawyer’s work is “dead in the drawer”. Since the investment represents a particularly dark chapter in Telenor’s history that few in the company is proud shall Brekke – with good internal help – finally have managed to put all Fougnerbakken work on ice.
– There were discoveries and question of such a compromising character that not only was Brekke who was served by adding the ball is dead. Violations of the Code of Conduct (the company’s internal Code of Ethics, ed.’s Note.) In connection with India-investment is far worse nature than those we saw in VimpelCom, claims a Telenor source.
Fougner previously headed the investigation into Valla case, Hordaland police handling of whistleblower in Monica case and the corruption suspicions in both Hydro, Yara and Unibuss.
Telenor mission he does not want to comment facing capital.
– capital is aware that you were hired by Telenor to scrutinize India investment, but what happened to the investigation report?
– I am not in a position neither to say if I have or have had, client relationship with Telenor, says a pro Fougnerbakken when capital hit him on the phone after message was left. – So I can neither confirm nor deny this.
The capital has also talked with Harald Norvik, who was chairman when Telenor decided to enter the huge Indian market by buying into Unitech.
– I have not seen any investigation report or final evaluation. The investment was a long process that was under consideration by the Board many times. I experienced nothing mysterious about this, apart from partner problems and that we were opposed by competitors as it held, says Norvik.
Svein Aaser, who took over as chairman when Norvik resigned in protest due to the then minister of industry Trond Giske interference in the management of Telenor, said he did not know of any investigation report.
This is in itself not inconceivable, since investigation work – after the capital known – must have been ordered by the administration, and not the Board of Telenor, before it was stowed away.
– Investor Hostile behavior
According to statements as Svein Aaser gave to Norwegian media relating to employment by Sigve Brekke as CEO in spring 2015, it was Brekke’s competence as Asia chief who led him right to the top in one of Norwegian industry’s most powerful positions.
absolutely central job as Asia chief has it Brekke been taking care of the company’s India investment, whoever numedølingen got trump through fall 2008 and who (in cumulative EBITDA minus Capex) soon has cost the company almost 25 billion. We expect interest and other capital costs, we come up quickly in an amount of approximately 30 billion for investment in Unitech, which hardly anyone Telenor shareholders wanted.
In autumn 2008 devastated the financial crisis in many parts of the world, several countries’ economies were on the verge of collapse and exchanges raged. So did the Telenor shareholders when they heard about Brekke’s frantic plans in India. Hardly any of the leading financial analysts who followed the company closely managed to calculate home price of Unitech – even in a best case scenario. The price was too high.
– It was simply investor hostile behavior, says a famous financier.
But even if the alarm went off in the financial markets, and investors immediately reacted by sending Telenor stock down over 20 percent since India investment became known, while credit rating agency Moody’s was considering downgrading its debt, there was even greater warning lights that flashed elsewhere prior to the investment.
– Corruption alarm went off, but Telenor did not listen to it, says a key source.
In class with Watergate
2G Spectrum Scam, called it the biggest corruption case in the history of India, according to the country’s newspapers. Fraud has roots right up at ministerial level in Indian politics, involving the prime minister, telecommunications minister, state secretary, prosecutors, several officials and a number of peaks in the Indian industry. India’s central investigative solution unit CBI (Central Bureau of Investigation) has had 19 prominent names on prosecution decisions their in the case, several of which have already been sitting long in custody but battles in court is by no means finished slow-moving Indian judicial system.
Exactly how much money was withheld from the Indian treasury in connection with the government’s allocation of second generation mobile licenses (2G Spectrum) in 2008 is difficult to determine, but the Indian SAI has estimated that the loss could amount to 26 billion dollars, based on auction prices for comparable 3G and BWA spectrum. It gave the Indian 2G scam a dubious second place in the top-ten list of Time Magazine over the worst abuses scandals, right after Watergate.
One of korrupsjonsskandalens most key players are the former telecom minister in the country, Andimithu Raja and former Unitech director and -boss Sanjay Chandra. The latter is the wealthy businessman who Brekke selected as business partner for Telenor’s joint venture with Unitech in India in 2008, what would later be named Uninor. Chandras dealings with this company have already led him behind bars, and he risks further years of imprisonment when the cases against him are completed in the legal system.
First come first served
But we have to rewind back to 2007 for the right to understand the background of the Indian corruption case and Telenor’s connections to this. When would the Indian cellular upgraded, and the authorities decided to announce the 2G license.
The prime minister Manmohan Singh was quick on the court and advised telecom minister Andimuthu Raja to hold a transparent allocation process with updated prices on the attractive 2G licenses authorities wanted to sell, but Raja would obviously different.
instead of auction off licenses to the highest bidder, which would have ensured higher revenues, selected telecoms minister to hand out licenses to the at best can be described as a dubious first come first served principle, where several of the lucky winners – who did buy them a total of 122 licenses at discounted 2001 prices – should have received inside information about the process.
– Offences and bribery
According to a recent indictment of the central Indian investigation unit CBI (Central Bureau of investigation) was committed several offenses and paid bribes that some companies should be favored in the allocation process . Among other claims the Indian SAI that were given licenses to ineligible companies, those with no telecom experience (such as Unitech who shall have received special treatment by telecom minister Raja) and those who had received inside information in secret.
despite the fact that the licenses were intended for sale to telecom companies, got ia companies Nahan Properties and Adonis Projects six licenses each, Volga Properties and Aska Projects got three licenses each, while Azure Properties, Hudson Properties, Unitech Builders & amp; Estates and Unitech Infrastructures got all their own license. Since all companies were acquired by Unitech set Unitech, who was India’s second most valuable property, with 22 precious telecom licenses in the country.
It was these Telenor wanted to get hold of.
$ 440 million in bribes?
After the Indian telecoms ministry on 10 January 2008 stated that the first come first served principle should apply to license allocation, which meant that those who had inside information about the process and had applied for licenses at the earliest in the autumn before, were awarded licenses, hail criticism of the process.
It prevented still not Telenor’s then newly appointed Asia CEO Sigve Brekke to go further talks with Unitech autumn 2008.
on 30 October 2008 could Telenor send out a press release stating that the company has entered the Indian market. So did the Norwegian mobile giant by acquiring 60 percent of the equity in Unitech-owned Unitech Wireless for approximately 1.07 billion dollars. In the deal accepted Telenor also a debt of $ 400 million. This meant about the price of Unitech Wireless – where licenses were collected – was several times higher in a short period of time. For comparison, cost licenses that the Indian company did purchase under the controversial allocation “only” $ 240 million.
Unitech was not alone in selling its own shares at a high price only shortly after license award. Swan Telecom and Tata Teleservices, which was also favored with 2G license from Minister Raja, sold respectively Etisalat and DoCoMo.
In a joint investigative claim The central investigation unit CBI and the Indian Income Tax Department (Income Tax Department) that telecom minister Raja may have received as much as $ 440 million in bribes to have accelerated deadline for 2G licenses so that the first applicants were awarded licenses. The accelerated deadline may have eliminated many applicants and made Raja able to favor a few. The agencies accuses Raja to have used bank accounts in his wife’s name on Mauritius and Seychelles to receive kickbacks.
According to CBI shall Raja conspiring with defendants in the case of a first come first served allocation to ensure that Swan and Unitech got 2G licenses to far below market prices.
got the help of party friend
After Subramanian Swamy petition to the Indian Supreme Court that they disputed licenses should be canceled, was upheld in 2012, begins the criticism of Telenor’s research and partner selection in India to increase in strength, also in Norwegian media. Not only have tens of billions lost in the Norwegian telecommunications group. There is also an enormous amount of personal prestige in the case.
In this difficult situation get the former State Secretary for Labour, Mr. Brekke, a helping hand from important quarters. Already in early May put then-Industry Minister Trond Giske (Ap) on a flight to India.
Telenor has then already come with a warning that the company will leave India if the government accepts the Telecom recommendation about a sharp increase of base prices in the new auctions of licenses to be advertised. It writes the Economic Times.
– It will be impossible for us to continue operating here, said Sigve Brekke.
Shortly before the Indian authorities to decide how they confiscated the licenses to be auctioned off again meets economics minister Giske, according to NRK, the Indian Minister Montek Sing Ahluwalia in new Delhi. The purpose of the meeting is to present Norwegian government views the matter.
Ahluwalia is Deputy Head of the Indian Planning Commission and sits in the Cabinet subcommittee in telecommunications matters, the committee that ultimately determines how the licenses were canceled because of corruption, auctioned off again.
– We have said that it is necessary to make quite significant changes in the proposed auction telecommunications Authority of India has suggested, if Telenor should have a chance to continue their activities in India , Giske said, adding:
– This involves many billion in investments, and that Norway is dependent on maintaining predictable conditions when the company has invested big money.
Baksaas said in this regard to NRK that he believes it is important that Giske also have come to India to put pressure on the Indian authorities.
however, not everyone is as excited Norwegian political interference in an Indian judicial process where corruption has been the topic.
– Supreme Court’s decision is part of anti-corruption work, but Giske has argued that it creates unpredictable for Telenor and future investments. When will you therefore that India should remain småkorrupt, because we know how to relate to. It gives a nasty aftertaste, the South Asian Knows and lecturer at the University of Oslo, Geir Mr Heierstad, previously stated to Our Country.
Lobby efforts seemed
autumn 2012 shows that Giskes and the Norwegian lobbying in India has borne fruit. In November gets the Norwegian telecom giant Indian regulatory approval to pay 4.1 billion for buying back licenses in six of the total 22 regions.
Nevertheless, much is amiss in the matter. It is claimed in several quarters that Telenor knew – or should have known – that not everything was in perfect order with Unitech’s 2G license.
Then comes Wiersholm lawyer and investigates Jan Fougner into play. After the capital has reason to believe, should Fougnerbakken have concluded that Telenor management ignored several warning signs when they decided to enter into joint venture with Unitech, the company later named Uninor.
– the other went from process
Subramanian Swamy is not the only one who believes that Telenor’s management knew – or should have known – that Telenor acquired licenses in an illegal or irregular manner.
Shalini Singh, assistant editor and telecommunications expert in the Indian big newspaper the Hindu, has previously stated Aftenposten that she finds it difficult to believe that Telenor did not know anything about the risk of corruption – in that India’s leading newspaper, the Times of India reported on this almost every day over a year in advance. Singh previously worked for The Times, and posed the following rhetorical question in Aftenposten:
– Unitech was also in discussions with several other international companies in addition to Telenor. The other went from the process, but Telenor did not. Why?
For the Indian NDTV has Brekke himself admitted that it was he who initially was responsible for advise Telenor to enter India.
– Do you regret? asked television journalist.
– No, not a second, said Brekke.
2G spectrum scandal
May 2007: Andimuthu Raja takes over as telecom Minister.
August 2007: telecom Ministry starts the process of allocation of 2G licenses.
25. September 2007: Telecom Ministry issues press release in which they set the deadline for 2G licenses to 1 October 2007.
1. October 2007: Department of Telecom receives 575 applications from 46 companies.
2. November 2007: Prime Minister Manmohan Singh sends a letter to telecom minister A. Raja to ensure fair license allocation, “right” prices and transparency in the process. Raja responds and rejects many of the requests. He insists on awarding licenses for first come, first served basis.
22. November 2007: Finance Ministry writes a letter to the Telecom Ministry in which it expressed concern over the process.
10. January 2008: Telecom Ministry states that 2G licenses should be allocated under the first come, first served principle, which means that the application deadline (cut-off date), in reality, is accelerated from 1 October 2007 to 25 September of the same year. It turns out that Telecom Ministry on 25 September 2007 wrote on his website that those seeking between kl. 15.30 and 16.30 the same day will be awarded licenses. This information should only be a few players who knew about in advance.
122 new 2G licenses sold under the first come, first served basis at heavily discounted 2001 prices. Despite the fact that the licenses were intended for sale to telecom companies, the companies Nahan Properties and Adonis Projects six licenses each, Volga Properties and Aska Projects get three licenses each, while Azure Properties, Hudson Properties, Unitech Builders & amp; Estates and Unitech Infrastructures each person takes their license. Since all companies were acquired by Unitech set Unitech, who was India’s second most valuable property, with 22 valuable telecom licenses.
Spring 2008: The criticism of the Indian government license allocation smoldering, and there is much writings in the media on the matter. The criteria for the license to be awarded should be telecom experience and the companies that got the license itself had to invest and build out its mobile network. Unitech is considered not to fulfill some criteria.
4. July 2008: Sigve Brekke appointed Head of Telenor in Asia and Deputy CEO of Telenor.
30.
