hands of a “local partner” with numerous links to the ruling Aliyev family. In addition, TeliaSonera and its partners down played and obscured what was really going on in its documents and its public statements at the time were often misleading.

“It smells of corruption and bribery”, said Lars Hammar, a retired police officer and one of Sweden's most experienced financial crime investigators who reviewed the findings. “No one could have dreamed that figures like this would have been paid or transferred.”

Einar Hackner, an experienced auditor and professor emeritus in business administration at Mid Sweden Universitywho reviewed the reporters’ findings, believes the government assets have likely been stolen.

“I think there are very strong reasons for the conclusion that this is not only grossly unethical, but also that it should be left to the police so that the prosecutor can initiate an investigation … for corruption, theft, embezzlement, breach of trust and a series of other crimes like that, and / or complicity in crimes like that.”

TeliaSonera’s business practices have come under withering fire in recent years after SVT working with OCCRP and later TT revealed bribes allegedly paid to a member of the ruling family of Uzbekistan. The company’s new CEO, Johan Dennelind, was hired after the scandals and has vowed to clean up its business practices.

Dennelind said that the transactions raise a number of questions, including who TeliaSonera’s local partner in Azerbaijan was. He said the company has made available all materials to prosecutors to review.

“We have some countries, including Azerbaijan, where we have a situation where we do not know the identity of our partner,” Dennelind said. He said the company has tried for more than 18 months to determine who their local partners are but without success although he admitted it was likely someone close to power.

Dennelind, called the situation "troublsome".

When asked directly whether TeliaSonera bribed the Aliyev regime, Dennelind, said “We cannot prove it. But we cannot rule it out.”

Lars Nyberg, TeliaSonera’s CEO from 2007 to 2013 when he resigned after the Uzbekistan affair became public, refused an interview with SVT but in email exchanges called the conclusions "wrong".

Oil, Phones and Money

Azerbaijan, an oil-rich country of nearly 10 million people on the Caspian Sea, has one of the highest mobile penetration rates among the former Soviet republics. After oil, the telecommunication industry is the largest industrial sector in Azerbaijan, and a major contributor to its economy. It is hugely profitable, paying hundreds of millions of dollars in dividends to its shareholders.

Azercell was established in January 1996 as a joint venture between the Azerbaijani government and Turkcell, a leading mobile phone operator of Turkey. The Azerbaijani government owned 51 percent of the new mobile carrier.

Faced with the difficulties of operating in a country considered among the most corrupt in the world, Turkcell, later that year brought in a new partner that was viewed favorably by the government: the Istanbul-based Cenay Insaat (Cenay Construction), which is part of a group of related companies known as the Cenay Group.

The Cenay Group, which would play an important role in the deals that favored the companies close to the Aliyevs, is owned by the Guldamla family. At the time, the family had already established a good relationship with Azerbaijan’s first president Heydar Aliyev, the father of the current president Ilham Aliyev. The relationship continued after Heydar Aliyev’s death in 2003, and Cenay officials would sometimes appear at special occasions with the new president.

Their financial success is largely due to their various businesses in Azerbaijan, which include fiber optics, oil and natural gas. They are heavily involved in the strategically important Trans-Anatolian gas pipeline project promoted by Azerbaijan.

Together they formed an Istanbul-based holding company called Azertel and Turkcell moved its ownership share of Azercell into this new company. Azertel, through a recapitalization, later increased its stake in Azercell to 64.3 percent while the government’s stake decreased to 35.7 percent.

In 2000, Turkcell merged most of its international holdings, including Azertel, with assets from the Finnish telecom operator Sonera into a Dutch-based company called Fintur Holdings. Turkcell received a minority stake in the new company. Sonera merged two years later with the Swedish operator Telia to become TeliaSonera. Through its majority in Fintur, TeliaSonera gained management control over Azercell.

From the beginning Azercell profits and taxes were a major contributor to Azerbaijan’s state budget and by 2004 were also helping TeliaSonera’s bottom line. But in 2008, when the company started to really earn big profits, the state’s share was quietly shifted to companies linked to the family of the President Aliyev.

Building a Majority

At the end of 2003, things were looking promising for Azercell. After seven years on the market it had just reached the 1 million subscriber mark and was selected as the "Best Company of the Year" by the Consulting & Business magazine and "Charity Benefactor of the Year" by the Azerbaijani non-governmental organization Alliance For Children’s Rights. Shareholders were pleased. The company was the second biggest taxpayer after SOCAR, the state oil company, and had just distributed profits of US$ 31.5 million – at the time the highest dividend ever paid in Azerbaijan.

The future looked even brighter in early 2004 when Erdal Durukan, the CEO of TeliaSonera’s Dutch holding company, met with Farhad Aliyev, then the Minister of Economic Development of Azerbaijan. The minister told Durukan of a plan to privatize the government shares in Azercell by June 2004, and asked for a proposal from them. According to a shareholders agreement, if the government wanted to privatize its share in Azercell, it was required to first offer its shares to TeliaSonera before offering them to anyone else.

Durukan presented a privatization plan to his board of directors in April of 2004. TeliaSonera planned to increase its indirect ownership in Azercell from 51 to 75 percent, giving it full management control of the company. While the government of Azerbaijan valued the company at between US$ 400 and 550 million, TeliaSonera’s valuation was higher -- between US$ 600 and 700 million.

The board gave a go ahead to start negotiations with the government and its partner the Cenay Insaat. The maximum cost TeliaSonera was willing to pay was US$ 200 million, which was the government’s estimate of the value of the company but lower than TeliaSonera’s estimate. If it succeeded, TeliaSonera would no longer need to ask the government for approval on decisions and major investment projects.

The board wanted to move quickly to privatize because the longer they waited, the more expensive Azercell was likely to be. Business was booming and handset sales growth was steep. The value of the company was increasing just as steeply.

TeliaSonera put a full team of legal, financial and tax advisors to work on negotiating the privatization. They hoped to close the deal by the end of 2004.

A Change in Plans

But six months later, in September 2004, a new player entered the game.

With no explanation, the government of Azerbaijan informed TeliaSonera that the Swedish-Finnish telecom could not privatize Azercell by itself. Instead, Cenay Insaat and a new government-approved local partner would privatize the share.

TeliaSonera would have to waive its right to buy the government shares and agree to finance Cenay Insaat and the new local partner with a US$ 100 million loan. Cenay Insaat and the local partner would repay their debt through the dividend stream the new partners would earn through its increased ownership of the lucrative Azercell. At no point did the executives explain the sudden shift of strategy or even reveal the true identity of the local partner.

In exchange, the mysterious local partner agreed to certain conditions that were documented in a confidential agreement dated Dec. 14, 2004. In that agreement, TeliaSonera that the new partner must guarantee it would get all necessary licenses and regulatory approvals and that the government would pass laws liberalizing the telecom industry. Such a sweeping commitment could only be delivered by the government itself or a highly placed government official. The agreement mirrors one signed by TeliaSonera in the Uzbekistan bribery scandal.

TeliaSonera wanted to maintain corporate control over Azercell’s holding company, and appoint all board members. The local partner would have the right to nominate one board observer.

But the local partner wanted more management control, something TeliaSonera was unwilling to concede. TeliaSonera fought the deal and tried to negotiate better terms.

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