The company has attributes that we like: an overlooked or unpopular stock that has lagged major market indexes and become undervalued, a positive change in management or strategy, progressive company policies, and an above-average dividend yield.

Telia replaced its CEO in May 2020. New CEO Allison Kirkby launched a new strategy to streamline the company by cutting costs, better utilizing its substantial assets, and simplifying  its services.

While the company’s markets share multiple borders with Russia, it does not have operations in the country. We consider telecommunication services to be a humanitarian benefit and note that the company has strong policies and disclosure practices to prevent the use of its systems for acts that violate laws or human rights (including the right to privacy and freedom of expression).

In addition to its financial attributes, we also like the company’s strong environmental and social practices. Telia achieved net zero greenhouse gas emissions in 2020 (for its own operations), sources 100% of its electricity from renewable sources, and aims to have zero waste by 2030. The company is committed to protecting privacy and to promoting digital inclusion. There are four women on its 11-member board and three women on the executive management team.  The company was awarded LGBTQI employer of the year in Sweden last year.

While we are excited about the company’s environmental and social agenda, it’s track record does include a significant blemish. In 2013 it was discovered that Telia had paid over $300 million in bribes to obtain and maintain business in Uzbekistan between 2007 and 2010. In 2017, Telia agreed to pay $1 billion in penalties related to the bribery. While the scale of the bribery in Uzbekistan is significant, the company has done the things we would like to see a company do in response – it has turned over its board and management, it has strengthened its internal anti-bribery and ethics systems, cooperated with relevant investigations, and exited the markets where the issues occurred and where corruption risks are higher – refocusing the business on developing 5G in its primary markets. There are no allegations of bribery since 2012, which suggests that the problems may be behind the company. However, any future bribery allegations would be reason to revisit the effectiveness of the company’s response.

The telecom sector is one of our favorites, with four international companies among our largest recent investments. We consider Telia to offer an extraordinarily attractive combination of a high dividend yield (about 6%) and an undervalued stock. As with other international investments, however, there is currency risk. An increase in the value of the U.S. dollar relative to other currencies (in this case the Swedish krona) would decrease the value of foreign investments for U.S.-based investors.