U.S. and Dutch authorities have offered Swedish telecom carrier Telia AB to pay $1.4bn to settle allegations that it paid out hundreds of millions of dollars in bribes to enter Uzbekistan’s mobile market in 2007.

Telia, along with Russian VimpelCom and MTS, is accused of bribing entities connected to Gulnara Karimova, the now disgraced eldest daughter of late Uzbek President Islam Karimov, to win licences to operate 3G and 4G licences in the Uzbek mobile market. The corruption probe has shaken Telia’s management forcing former chief executive and chairman to step down and the Swedish company to announce it is putting up for sale its Eurasian operations. Selling out of Uzbekistan, however, would not be an easy task, Telia chief executive Johan Dennelind said in October 2015.

The proposal did not go into much detail, Telia said in a statement on September 14. The company promised to analyse the offer, while it continues discussions with the authorities. “Our initial reaction to the proposal is that the amount is very high,” Telia’s Chairman Marie Ehrling said. “We will now have to analyse the information and decide on how to proceed with the ongoing discussions with the authorities.”

The suggested fine, which is one of the largest ever levied under the US Foreign Corrupt Practices Act, is credit negative, Moody’s Investors Service said on September 19. The fine is twice as high as the agency’s projected fine of up to $800mn. VimpelCom was fined $795m by the US and Dutch authorities for the bribes it paid in Uzbekistan earlier this year. 

“Despite the size of the fine, we estimate that Telia’s Moody’s-adjusted gross debt to EBITDA would only increase to around 3.3x from 3.1x following this payment,” the ratings agency said. “Telia had around SEK16 billion in cash as of 30 June 2016, so funding the settlement is not a liquidity issue,” Moody's said noting that slight deterioration in the company’s financial ratios and a marginal increase in its financial risk will not affect Telia’s ‘Baa1’ rating and stable outlook.

Telia’s Uzbek subsidiary, Ucell, started operating in the country under the brand of COSCOM in 1996. Currently, the company has over 9mn subscribers in Uzbekistan, providing 2G, 3G and 4G services. The company has recently been granted a 15-year extension of its operating license in Uzbekistan.

Telia owns mobile operators in seven countries across the Central Asian region (Nepal, Kazakhstan, Uzbekistan, Azerbaijan, Georgia, Moldova and Tajikistan), and has over 40mn local subscribers. In September 2015, the group said it will exit Eurasia after its operations in the region came under the scrutiny U.S. authorities. Earlier this month, the company agreed to sell its stake in Tajik mobile network operator Tcell for $39mn.

Moody’s estimates that Eurasia generated around 20% of Telia's consolidated revenues, 30% of its EBITDA for 2015 and was net cash positive. At the same time, the company’s plans to pull out of the region are hindered by significant unsolved legacy issues such as unwanted partner relationships in Uzbekistan and Azerbaijan, and difficulties with cash repatriation mainly in Uzbekistan. The subsidiaries also exposed Telia to the region’s foreign currency volatility, the agency said. By selling these Eurasian assets, the company will avoid these risks, but they will reduce the group’s scale and geographical diversification.

Both Swedish and Finnish governments hold 37.3% and 3.2% stakes in the Telia, respectively. Telia’s bribery case was under investigation by the Swedish Prosecution Authority, the US Department of Justice, the US Securities and Exchange Commission.