Telia's CEO Johan Dennelind Plans to Step Down in 2020

(Bloomberg) -- Telia Co. Chief Executive Officer Johan Dennelind has told the board of the Swedish telecom company that he plans to leave after six years at the helm.

Dennelind submitted his resignation letter in accordance with the 12-month notice period in his contract. The search for his successor will start immediately, the company said in a statement.

During his tenure since 2013, Dennelind has steered Stockholm-based Telia away from the complex holdings it had in Central Asia, some of which were dogged by corruption concerns. Instead, he favored a Nordic expansion for the company, whose largest shareholder is Sweden's government.

Stefan Gauffin, an analyst at DNB said the broker believes that Dennelind's mandate was primarily to turn Telia "into a more sustainable company" and that, with the exits from Eurasia and investments in the Nordic Region, it could argue that "this mission has been accomplished."

Keen on adding media and content to Telia's broadband, cable and mobile businesses, Dennelind oversaw a 9.2 billion-krona ($960 million) bid for Bonnier AB's television operations. The deal faces a European Union investigation with a Sept. 19 deadline on whether it would reduce choice and increase prices for consumers. Bonnier operates TV channels and video-streaming services including Sweden's TV4, MTV in Finland and C More.

Shareholders haven't benefited greatly under the outgoing CEO. The stock has fallen about 9% in the period, while Norway's Telenor has gained 44%.

A "poor development" in the Swedish operations, Telia's largest business area, means the shares have underperformed Nordic peers and the decision to acquire Bonnier Broadcasting was also heavily criticized by both institutional investors and the Swedish government, according to Gauffin at DNB.

Telia shares fell as much as 2.4% on Monday, the most since April and underperforming the Stoxx Europe 600 Telecommunications index, which declined as much as 1%.

Of the 28 analysts that cover Telia, three quarters have hold or sell ratings while only 25% advise clients buy the stock. The average analyst price target indicates a return potential of just 1% in the coming 12 months.

But Stefan Ward, an analyst at Pareto Securities, said that after a “significant re-position process” under Dennelind, Telia is now in a “new phase.”

“There is clear potential to further improve the return profile of the business,” the analyst, who recommends clients buy Telia shares, said in a note.

Central-Asian Exit

Under Dennelind, Telia started to exit markets such as Azerbaijan, Georgia and Kazakhstan. That marked a u-turn by the former Swedish phone monopoly, which under Dennelind's predecessors Lars Nyberg and Anders Igel had pushed into the former Soviet Union, back when western companies were attracted to its political opening in the 1990s.

Late last year, Dennelind announced the sale of Telia's stake in Uzbekistan's Ucell, which marked the final exit from a venture that led to penalties of almost $1 billion to U.S. and international authorities to settle a graft probe.

Read more: Telia Sells Uzbek Unit That Cost It Almost $1 Billion in Fines

According to Gauffin at DNB, Telia "could need a new leader with a clear cost focus to continue to digitalize and streamline the company." Potential candidates include Telia Finland head Stein-Erik Vellan, former Telenor Norway head Berit Svendsen, former Tele2 AB CEO Mats Granryd, and SAS AB CEO Rickard Gustafson, he said.

--With assistance from Hailey Waller and Niklas Magnusson.

To contact the reporters on this story: Shaji Mathew in Dubai at shajimathew@bloomberg.net;Niclas Rolander in Stockholm at nrolander@bloomberg.net

To contact the editors responsible for this story: James Ludden at jludden@bloomberg.net, ;Rebecca Penty at rpenty@bloomberg.net, Kevin Miller, Tasneem Hanfi Brögger