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Due to Unpredictable Political Situation, TeliaSonera May Exit Georgia

According to TeliaSonera End of the Year Report, service revenues in Georgia declined 8.9 percent in local currency, excluding acquisitions and disposals, mainly due to lower interconnect revenues. Billed revenues continued to grow, supported by strong data growth.

The EBITDA margin, excluding non-recurring items, rose to 41.0 percent (37.8), mainly due lower interconnect costs and cost savings. The number of subscriptions grew by 42 000 in the quarter and by 285 000 during the year.

Teliasonera’s report says that changes in the global financial market and the world economy are difficult to predict. TeliaSonera has a strong balance sheet and operates in a relatively non-cyclical or late cyclical industry. However, a severe or long-term recession in the countries in which TeliaSonera operates would have an impact on its customers and may have a negative impact on its growth and results of operations through reduced telecom spending. The maturity schedule of TeliaSonera’s loan portfolio is aimed to be evenly distributed over several years, and refinancing is expected to be made by using uncommitted open-market debt financing programs and bank loans, alongside the company’s free cash flow. In addition, TeliaSonera has committed lines of credit with banks that are deemed to be sufficient and may be utilized if the open-market refinancing conditions are poor.

However, TeliaSonera’s cost of funding might be higher, should there be changes in the global financial markets or the world economy. International political developments.

TeliaSonera has material investments and receivables in the Russian Federation related to its associated company ‘OAO MegaFon’ and the international carrier operations. Following the conflict between the Russian Federation and Ukraine, the European Union and the United States have implemented sanctions directed towards individuals and corporates. The Russian Federation faces consequence due to certain counter actions. The sanctions and counter actions are expected to negatively affect the Russian ruble. These developments, as well as other international political conflicts and developments affecting countries in which TeliaSonera is operating, may adversely impact TeliaSonera’s cash flows, financial position and results of operations.

TeliaSonera has made significant investments in telecom operators in Kazakhstan, Azerbaijan,Uzbekistan, Tajikistan, Georgia, Moldova, Nepal, Russia and Turkey. Historically, the political, economic, legal and regulatory systems in these countries have been less predictable than in countries with more mature institutional structures. The future political situation in each of the emerging market countries may remain unpredictable, and markets in which TeliaSonera operates may become unstable, even to the extent that TeliaSonera may have to exit a country or a specific operation within a country.

Geocell  commercial director Vano Machavariani refutes TeliaSonera’s withdrawal from the  market and notes that journalists   interpreted Teliasonera’s reports incorrectly on the basis of accounting done in Georgia, Tajikistan and Moldova.

Accordingly, Machavariani notes  that Geocell  is not reducing investments, but in his words, will carry out  more aggressive investment policy.