Telia Company has warned for a negative impact on second-quarter profits, due mainly to a further writedown of the value of its Uzbekistan subsidiary Ucell, which it has been trying to sell. Cash flow meanwhile will show a positive benefit from a number of divestments in the period.
The company expects a negative effect of SEK 1.2 billion on operating income in continuing operations, and a dent of SEK 2.0 billion to net income in discontinued operations in the second quarter of 2017. The cash flow effect is a positive SEK 6.3 billion for continuing operations.
The main negative impact is an impairment charge of SEK 1.5 billion on Ucell, due to increased regulatory and currency risks in Uzbekistan as well as an updated view of the valuation ranges. Telia said management’s best estimate of the risk-adjusted, debt-free value of Ucell has been reduced from SEK 3.3 billion to SEK 1.3 billion as of 30 June 2017.
Telia has been trying to sell Ucell but said nothing on whether it has made any progress on the divestment. In addition to the difficult operating conditions in Uzbekistan, the company still faces corruption investigations in the US, Sweden and Netherlands. Provisions for a possible settlement of the case already led to a sharp reduction in Telia's profit and dividends last year.
Looking at continuing operations, Telia said the sale of Sergel Group is complete and results in a capital gain of SEK 1.2 billion, which will be included in Q2 operating income from continuing operations. The sale had a positive cash flow effect of SEK 1.9 billion, and reduced net debt by SEK 1.9 billion.
Following the divestment of 7 percent of Turkcell shares, a capital loss of SEK 1.8 billion has been recognised, where the impact on equity was positive to the tune of SEK 1.3 billion. The divestment had a positive cash flow effect of SEK 4.4 billion.
As a result of an assessment of IT and network assets, a write-down of SEK 600 million has been recognised within 'other operations', mainly related to plant and machinery, and to capitalised development expenses. This write-down has no cash flow effect.
Telia Company has made a write-down of SEK 300 million of its holding in the associated company TOO Rodnik in Kazakhstan, of which Telia consolidates 50 percent. Rodnik owns the listed company AO KazTransCom. The asset is no longer deemed to have a recoverable value. The write-down does not impact cash flow.
The divestment of Tcell in Tajikistan resulted in a capital loss of SEK 200 million, which is related to cumulative exchange losses reclassified to net income.
