Financial risks

Financial risks

Risk

Description

Mitigating activities

Associated companies and joint operations

Telia Company conducts some of its activities through associated companies, the major one being Turkcell in Turkey, in which Telia Company does not have full ownership or controlling interest and are due to that not in full control but still have significant influence over the conduct of these businesses. Telia Company also has holdings in LMT and Lattelecom, the leading Latvian mobile and fixed operators. In turn, these associated companies own holdings in numerous other companies. Under the governing documents for certain of these associated companies, Telia Company’s partners have control over or share control of key matters such as the approval of business plans and budgets, and decisions as to the timing and amount of cash, as well as protective rights in matters such as approval of dividends, changes in the ownership structure and other shareholder related matters. The risk of actions outside Telia Company’s or its associated companies’ control and adverse to their interests is inherent in associated companies and jointly controlled entities.

Potential impact

The financial performance of these associated companies may have a significant impact on Telia Company’s short- and long-term results.

  • Monitoring of the associated companies performance
  • Active board work in our associated companies, driving issues of key importance to Telia Company
  • Continuous work to solve the deadlock between the main shareholders of Turkcell
  • During 2017 Telia Company disposed its ownership in MegaFon and reduced its shareholding in Turkcell

Impairment losses and restructuring charges

Factors generally affecting the telecom markets as well as changes in the economic, regulatory, business or political environment may negatively change management’s expectation of future cash flows attributable to certain assets. Telia Company may then be required to recognize asset impairment losses, including but not limited to goodwill and fair value adjustments recorded in connection with historical or future acquisitions.

Potential impact

Significant adverse changes in the economic, regulatory, business or political environment, as well as in Telia Company’s business plans, may affect Telia Company’s financial position, and results of operations, impairment losses, restructuring charges, which may adversely affect Telia Company’s ability to pay dividends.

  • Management constantly reviews and refines the business plans, and may make exit decisions or take other actions in order to effectively execute on business strategy
  • Restructuring and streamlining initiatives, which have resulted in substantial restructuring and streamlining charges. Similar initiatives may be undertaken in the future

Competition and price pressure

Telia Company is subject to substantial and historically increasing competition and price pressure. Transition to new business models in the ICT industry may lead to structural changes and different competitive dynamics.

Potential impact

Failure to anticipate and respond to industry dynamics, and to drive a change agenda to meet mature and developing demands in the marketplace, may affect Telia Company’s customer relationships, service offerings and position in the value chain. Competition from a variety of sources, including current market participants, new entrants and new products and services, may also adversely affect Telia Company’s results.

  • Actively monitor changes in customer and market behavior to create and execute mitigation plans
  • Business transformation programs and new business initiatives in line with our business strategy
  • Continuously exploring opportunities close to our core services to create new revenues

For information on management of capital and credit, liquidity, currency, interest rate and refinancing risks as well as insurable risks, see Note C26 “Financial risk management”. Pension obligation risks are described in Note C21 “Provisions for pensions and employment contracts”.