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TeliaSonera’s Uzbekistan scandal is a warning to telecom CEOs everywhere

The chickens are coming home to roost. Lars Nyberg resigned yesterday as CEO of TeliaSonera, the Sweden-based global telecommunications company, in the wake of an investigation into a 3G licensing deal in Uzbekistan.

It’s the first time a big telecom CEO has quit over a scandal in emerging markets. For a decade, telcos have relied on foreign subsidiaries and far-flung partner groups with questionable records on corruption and human rights. They’re now starting to pay the price.

Though TeliaSonera was cleared of bribery and money-laundering charges, an independent audit faulted the company for failing to do due diligence when paying 2.3 billion kronor ($350 million) for the license in 2007 from a shell firm, Takilant, which allegedly has ties to to Gulnara Karimova, daughter of dictatorial Uzbek President Islam Karimov. Last fall, Nyberg gave his word that if the corruption charges proved true, he would resign. To his credit, he stepped down, even when cleared of explicit wrongdoing.

But it’s about more than just one company.

Nyberg’s resignation comes exactly two years since telecoms shocked the world by disconnecting Egypt from the internet during the uprising against Hosni Mubarak, at Mubarak’s request. (My organization, Access, has a Telco Hall of Shame that documents this and other inglorious moments in recent telecoms history.) It is clear that a pattern has emerged: In chasing profits in emerging markets, telecoms are facing difficult choices and overlooking laws, whether domestic, international, or simply moral.

Telecoms claim they have little power to resist or alter strict operating licenses when they sign with foreign governments. To some extent they’re right. TeliaSonera experienced this firsthand in Belarus when President Alexander Lukashenko demanded that operators install SORM, a surveillance system allowing state security to access company networks. TeliaSonera complied, one in a pattern of decisions that opened the company to criticism that it helped state security locate political dissidents. In Egypt, Vodafone likewise blamed its licensing agreement, saying its contract required the provider to comply with the request to shut down the network.

But while the pressure for telecommunications companies to comply with a government’s demands in order to get licenses can be intense, the pressure in the other direction is growing too. As markets get riskier, companies that do nothing in the face of corruption charges and human-rights violations face greater consequences. And it’s not just a matter of managing risk. In 2011 the UN Human Rights Council adopted the UN Guiding Principles on Business and Human Rights, which made corporate respect for human rights a matter of international law.

The telcos’ hands are not tied

So what can these companies do? If they band together, and demand respect for human rights and proper due diligence in their operating agreements, they can turn the licenses they are seeking into an opportunity not just to get new business but also to stand up for their customers, uphold international rule of law against corruption—and even preserve their own boardrooms.

Eleven of the world’s largest telcos, from Vodafone to AT&T, have come together to address these issues under the banner of the Industry Dialogue on Freedom of Expression and Privacy. Access’s Telco Action Plan contains principles and practical advice for them on how to work in ways that respect human rights. As an international NGO, we don’t just agitate on behalf of victims of human-rights abuse, but work with investors, users, shareholders and lawmakers, all of whom are eager to see the telcos innovate as much in policy and the rights of their users as they do in their technology and business development.

TeliaSonera was a key player in the Industry Dialogue. It is unclear what Nyberg’s resignation will mean, both for the company and for the initiative. The Industry Dialogue urgently needs new leaders to step up. Despite their self imposed 2102 deadline, we have not seen a final statement of principles from them or an announcement of where the Industry Dialogue will house itself for the long term.

And it’s Nyberg’s very departure that should convince telecom CEOs that they need to be those new leaders. Global telecommunications have transformed the way people interact, participate in society, connect with the world, and, in the words of none other than Nyberg himself, “It is an undeniable fact that modern telecommunications speed up a country’s long journey towards democracy.” Telecom CEOs everywhere should take note, and push for better compliance on corruption and respect for human rights, before they, too, become the fall guys for their industry’s failings.

We welcome your comments at ideas@qz.com.

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