Tuesday, December 28, 2004

Stealth start for Tele2's UMTS in Latvia

Tele2, the Swedish-owned mobile telecommunications operator, has quietly launched UMTS or 3G services in Latvia, limited to one base station in its offices in the Pardaugava district of Riga. The fact that the base station was operational was confirmed by Tele2's PR representative, Evita Matisone.
She confirmed that Tele2 had started the service in compliance with the licence it bought for LVL 5.8 million in 2002, but had made no public announcement. "Next year, when we are required to have coverage of 30 % of the population by the end of the year, we will announce something," Matisone said. The PR consultant explained that there appeared to be a very limited market for 3G services in Latvia due to the small number of available UMTS/GSM phones and their relatively high price.
Latvian Mobile Telephone (LMT), the leading operator owned by TeliaSonera announced the start of its 3G services aty a press event on December 13. LMT has installed a base station in its own office building and the new 26 story offices of Hansabanka. At the same time, LMT announced it would be launching EDGE, a higher-speed data service that runs on the current GSM network. A number of mid-range business class handsets now come with EDGE capability and LMT apparently used the press event to announce it was starting EDGE in January as to start up its limited UMTS service.
Your blogger was in the US at the time of the press event and cannot relay any first-hand information. However, the activities of both operators show that they are being very cautious with expanding their UMTS services, something that those vying for the new "third" licence should take into consideration.

Thursday, December 23, 2004

Holiday Greetings

So as we all booze it up a little here at the offices of my day job (the editors are having some kind of seminar away from the offie, so the mice...er reporters are playing, no paper tommorrow), I will take this chance to extend warmest holiday greetings to the small but apparently loyal readership of this blog. A Merry Christmas, Happy New Year, Joyous Kwanzaa (assuming there is at least one reader of African descent) and belated Hannukah greetings! Oh, yes, and belated happy Solstice (Saulgrieži) to any Latvian Dievturi (adherents of the old Latvian Diety, who was not very much into the fire, brimstone and commandments scene, but prefered to ride his pony so gently that not even a blossom was disturbed). Plus any Russian Orthodox readers who will have barely recovered from the Latvian Christmas partying to do Orthodox Christmas and Staray Novi God and all that stuff all over again. So Happy Whatever to all!!

A homeboy unwires Daugavpils

This one flew under this blogger's radar about a month ago. It seems that Belam Latvia, a subsidiary of Belam Inc in the US, used Trade Development Agency funds to set up a pilot/demonstration largely wireless network linking municipal agencies, small town governments, libraries, etc, with private network, internet and voice-over-IP services in and around the eastern Latvian city of Daugavpils. Around USD 400 000 was spent on the project, USD 300 000 from the TDA and USD 100 o00 from Belam Inc. Belam is an agent for the telecoms equipment maker Nortel, which is headquartered in Canada, but does most of its development and manufacturing in the US.
Mark Katz, the president of Belam Latvia, is especially proud of this project, since he was born and raised in Daugavpils and has opened his home town and surrounding villages to the information age. Whether other, perhaps wealthier (Latgale, Eastern Latvia, is seen as an underdeveloped and poor region) municipalities follow suit remains to be seen. Certainly the idea of publically financed, wireless or fiber municipal area networks is once which is competing against commercial service providers in the US and Western Europe.
Christmas approaches and here at the editorial offices of my day job, we have all been sipping gluehwein (hot spiced wine), so I can be excused for makings some wacko observations. Katz of Belam was an avid fencer in high school and bears a more than slight resemblance to the American 1950s actor Guy Williams who played the swashbuckling mysterious Zorro on TV. So perhaps this homeboy from Daugavpils is a kind of Cyber-Zorro bringing the internet to the poor with the money of the rich US?

Tuesday, December 21, 2004

India's TCIL may bid for a Latvian licence

India's Telecommunications Consulting of India Ltd (TCIL) may be a contender for Latvia's third UMTS/GSM licence, this blogger learned. The head of the auction commission, deputy state secretary in the Ministry of Transport Guntis Macs, told a parliamentary anti-corruption commission that an Indian company was a serious contender.
Macs misspoke the company as a Delhi Telecommunications & Consulting, but it is in fact TCIL, according to Manoj Dairola, a helpful colleague who covers telecoms for the Economic Times in Delhi.
Macs said representatives of the Indian company would come to Latvia in early January to acquaint themselves with the auction terms and the Latvian market. TCIL has participated in a number of mobile projects in India, neighboring countries and Africa.
I also chased down a rumor that Huawei, the Shenzen, China based builder of mobile infrastructure, was associated with the still mysterious potential bidder International Telecommunications and Technologies (IT&T). Huawei officials denied any association with IT&T.

IT&T goes after rival, claims murky Tele2 ties

In what could be a case of the hitherto invisible pot calling the kettle black, International Telecommunications and Technologies (IT&T), one of two announced potential bidders for in Latvia's third (now extended) mobile operator licence auction, has accused the other bidder, cable-tv and telecoms enterepreneur Peteris Smidre's Alina, of having murky ties to the Swedish Tele2 group.
IT&T's representative in Latvia, Edgars Zakrizevkis told local media he would challenge any bid by Alina based on alleged ties to Tele2 as well as a lack of international experience and insufficient financing to meet the minimal requirements of the auction (guarantees that the company can put up at least EUR 25 million). Smidre, who started and built up Baltcom GSM (later sold and its name changed to Tele2), dismissed the allegations as nonsense. He said that his only direct ties to Tele2 – non-competition agreements signed when Baltcom GSM was sold - had lapsed. As for international experience, this blogger has pointed out that IT&T has never been heard of by a number of international telecoms analysts. The IT&T representative claims that Alina will be bidding as a straw man for Tele2 with the purpose of blocking competition. Interestingly, Minister of Transport Ainars Slesers also mentioned the possibility that existing operators Latvian Mobile Telephone (LMT) and Tele2 could launch a straw man operation to buy the licence (and then spend EUR 150 million on what – or lose it?)
Zakrizevskis says that the reason for IT&T being unknown ist that it is not really in the telecoms business directly, but actually a financing consortium. He says details of exactly who is behind IT&T will be disclosed when the pre-selection applications are file on February 25 (under the extended deadline). He did hint, however, that private equity funds were behind IT&T.
Smidre, regarded as an independently wealthy man in Latvia after selling his holdings in Baltcom GSM to Tele2 (he got a slice of the more than USD 200 million deal), told this blogger that he gets many offers from private equity outfits, but would never put his money in a deal that involved spending EUR 150 million to capture, at best, some 200 - 300 000 new customers (plus some churn from existing operators) in Latvia.
This blogger has suggested that the next step in the ongoing "fix the engines while flying" approach to the Latvian auction may be to change the minimum investment requirement. Good news for the Financial Times, which is now running ads changing the deadlines for the auction announced in earlier ads.

Monday, December 20, 2004

The trial and error auction moves along

Latvia's trial and error auction of its third GSM and UMTS mobile licence went through another iteration when the government accepted on December 20 the Ministry of Transport's proposal to extend the auction's pre-selection application deadline by two months to February 25.
The government (Cabinet of Ministers) didn't, however, change the requirement– considered excessive if not bizarre by some analysts – that the third operator spend at least EUR 150 million to build an new independent network. It merely added the requirement - proposed by the Ministry of Transport, that applicants file a detailed investment plan for how the EUR 150 million will be spent.
However, there are signs that this mininam requirement may change. Minister of Economics Krisjanis Karins (New Era) has wondered aloud why the new operator simply couldn't use the existing networks (at least to start with) on a domestic roaming basis. Infrastructure sharing is also common among competitors when building UMTS networks (Telia and rival Tele2 in Sweden, for example).
The companies, which have expressed a renewed interest in the auction, also are extremely skeptical about the need for such a high investment "floor". Jesper Eriksen, managing director of Danish TDC's Lithuanian subsidiary Bite GSM, thinks the sum could be acceptable as a spending guideline over "the life of the licence" which would probably be quite a few years. Peteris Smidre, who has declared over the weekend that his private company Alina will apply for a licence also privately says the EUR 150 million requirement is "crazy". The Latvian Telecommunications Association, where Smidre has considerable influence, also asked that the investment quota be modified.
It seems now that the next step in Latvia's trial and error process, probably before the February 25 deadline, will be steps to modify the investment requirement. That will not, of course, undo the damage to the reputation of the whole process, which started off with at least the appearance of a desperately rushed procedure aimed at having only one bidder win.
What made the deadline almost impossible to meet was not the timeframe, but the huge investment requirement plus the timeframe. If it were a question of spending LVL 1.3 to, say, 3 million, some international operators could have made a decision on short notice. But spending EUR 150 million when there are, perhaps, only 300 000 new customers to be had, is another story...
Advice to those interested – wait until the New Year. The Minister of Transport may, yet again, reconsider the terms of the auction. At the same time, don't rule out another fiasco. Until the pre-selection applications are in, there are no guarantees. Before the 2002 flop, there were also rumors that Lithuania's Bite or Radiolinja of Finland/Estonia were coming. In fact, both confirmned their interest. But on the big day in 2002 nobody came.
One more thing about the 2002 flop – the starting price was a bit high at LVL 7.6 million and all of the big operators were spooked by the huge sums spend in the big European markets that later brought some companies close to ruin. So perhaps it was mostly external factors beyond Latvia's control. In the present auction, the main factor of uncertainty seems to be precisely the unpredictable trial and error approach of the Latvian government in trying to auction off the licence.

Sunday, December 19, 2004

Third licence auction deadline extended

Minister of Transport Ainars Slesers has asked the government to extend by two months the deadlines for the third GSM and UMTS licence auctions. The government (Cabinet of Ministers) will meet Monday, December 20, just one day ahead of the old deadline for application to be pre-selected for the auction. Slesers has asked that a decision on the extension be placed at the top of the agenda of the extraordinary Cabinet meeting, originally called to discuss budget matters.
The Minister of Transport is apparently responding to harsh criticism of the short deadlines and other terms of the auction. Delna, Latvia's branch of the anti-corruption organization Transparency International, has said the auction should be investigated by the anti-corruption authorities because it looks like blatant state capture on behalf of one company (the elusive, Middle East based International Telecommunications and Technologies, or IT&T). Also, a parliamentary anti-corruption commission will discuss the matter at a meeting on December 21.
IT&T is the only potential applicant and bidder, although Slesers and Ministry of Transport Deputy State Secretary Guntis Macs said there were at least four contenders. It was not clear whether these four contenders would have applied for the Dec 21 deadline, or whether (more likely) they would consider applying under the extended deadline. International analysts, such as EMC's Kester Mann, have been unable to find any traces of IT&T's activities in their extensive data bases.
Both Denmark's TDC (through its Lithuanian Bite GSM subsidiary) and Latvia's Baltcom have indicated the short deadline and other terms of the auction meant they would not apply by Dec 21.
Slesers said he would not remove the mandatory minimum investment of 150 million euros, but demand, instead, that applicants supply a detailed investment plan that could be scrutinized by auditors to make sure it was not spending for the sake of spending. Analysts have said that the requirement goes completely against the grain of trends in Europe, where operators building 3G networks try to share resources even while competing on end-user pricing and services.
Slesers insists that the high level of investment will ensure that the third operator makes a long-term committment and, by cutting tariffs sharply (the minister expects a third operator to cut mobile costs by 50 %), to start recovering one's investment only after several years.
Meanwhile, sources have told this blogger that at least ten contenders have expressed interest in setting up virtual mobile operations in Latvia. Currently there is only one mobile virtual network operator (MVNO? do I have that right?), Zetcom, which sells Amigo cards and runs on Latvian Mobile Telephone's (LMT's) network. Amigo has been growing rapidly in its niche of youth-oriented pre-paid cards, a signal that it is possible to compete on the existing network. LMT has apparently decided that it is more rational to lease capacity for running several tens of thousands of lines and take a wholesale revenue stream rather than carry the cost of marketing and administering the same number of post-paid lines.
The 150 million euro investment floor is privately regarded as a crackpot scheme with little rational basis even by Latvian telecommunications officials. One wonders where the 150 million euro investment scheme will fit in with the Ministry of Transport's other scheme to build yet another independent network by merging the infrastructure assets of Latvenergo, Latvian Railways and other state companies and agencies - the Alliance described earlier in this blog? Such a small country, so many networks, so many schemes...

Thursday, December 16, 2004

Regulator cuts interconnect charges by 80 %

The Public Utilities Regulatory Board has cut the interconnect charges Lattelekom can charge other operators for using its network by up to 80 %. The agency ordered Lattelekom to slash its local interconnect (Riga and environs) to a uniform 0.8 santims per minute from 1.656 santims and also reduced the national interconnect from 3.88 santims to 0.8 santims.
Lattelekom is expected to contest the ruling in the Administrative Court. The regulator says its interconnect ceiling is based on actual Lattelekom costs. Lattelekom has said throughout the process (there were hearings on the proposed sharp cut) that no operator has passed on any interconnect savings to its customers (Lattelekom cut inteconnect charges by 20 % at the start of 2004.
Meanwhile, the hasty auction of Latvia's third UMTS/GSM licence going ahead despite there being only one potential bidder, for whom the auction appears to have been tailor-made. The somewhat mysterious Middle Eastern company, International Telecommunications & Technologies (IT&T) has, at last, put up a rather jargon-filled home page describing its services. You can see it at www.it-t.net, where just before my departure for the US (I am now back in Latvia), there was nothing. So they are making an effort.
Unfortunately, whatever the intentions were on all sides, this has the appearance of an auction with a pre-arranged winner. Whether this is true or not -- the IT&T people vehemently deny it– appearances will keep the company under some kind of cloud even if it seems to win "fair and square." Politically, it is hard to see why Prime Minister Aigars Kalvitis didn't at least extend the deadline for the pre-selection. Normally, Minister of Transport Ainars Slesers should have been called on the carpet for the whole matter, for its appearance of scandal, if nothing else. But that wasn't done, nor were pleas to change the auction terms heard. All of which fuels the impression that some kind of state capture may be behind the whole business.

Thursday, December 09, 2004

Back to timesharing a la wireless?

Back around 1965, when I was a young teenager and my father worked for Honeywell, I asked what it was exactly that he did. He said he sat at a thing like an electric typewriter connected to a computer the size of four big refrigerators. There were several other typewriters attached to the computer and this was called timesharing. The users ( a systems test team) asked the computer to do things (test routines) and checked what it printed against standards.The electric telexes, alone, could only type, but the computer gave them the full power of a mainframe of the time (about what you have in a mid-priced mobile phone of 2004, and the Honeywell mainframe cost USD 2 million then).
Now, according to Scott McNealty of Sun Microsystems, speaking at Oracle OpenWorld, the future belongs to "thin clients" connected wirelessly to servers and clusters. If the connection breaks, you can't even type on the equipment, it is almost brainless. In fact, what will put "your work" on the thin client desktop is a small chip, a kind of super SIM card, and when you take it out, someone else can snap in his and have a completely different desktop workspace. So we have come full circle in 40 years to timesharing of a new kind.
When I think of the young guys in the Latvian IT business, I always imagine that they will not even work like people did in the mid-90s, nevermind the 80s -- with clunky systems, green on black screens, the like. Legacy is not a problem, compared to the US and Western Europe, where legacy going back to the 1960s is one reaon Oracle and its competitors have to come up with elaborate solutions to make this zoo look simple again For instance, the Data Hub idea. But now it looks like we are coming around to timesharing again, when everyone feeds off the power of the once great central virtual computer.
Just some scribblings from Oracle. A great speech by Larry Ellisson, as usual, summing up the Oracle vision more clearly than some of the technobabbling and buzzword dropping heard earlier. He was only tripped up a bit and perhaps said the wrong things by washing his hands of what Oracle may be used for by the Chinese government. Ellisson correctly said that the company didn't make government policy, but the person questioning him gave him an opening by not asking a) whether there are some customers, whose oppressive uses for information are so obvious that Oracle should question selling to them b) whether the company has some ethical standards about how it allows its software to be used.

Tuesday, December 07, 2004

Hello from Mars (Oracle, SF)

Somehow that Latvian Eurovision (?) song seems appropriate. When you look at the statistics of use of IT among Latvian priavte business (officially, 13 percent according to the Latvian Information Technology and Telecommunications Association/LITTA, probably about twice that), then all the talk here about information driven enterprise and the grid-enabled adaptive enterprise seems that either we here in San Francisco, or Latvia are on Mars. All of this presumes a profound degree of IT penetration of entire enterprises in all of their functions (I saw how, on a business intelligence dashboard, you could drill down from a divisional level summary expense report to a record of a single expense approval made just a few days ago). This is not the case in Latvia except for some big companies. At the same time, I found myself telling people at some journalist cocktail party how advanced Latvian IT skills and services were in companies such as Dati, Exigen, IT Alise, Lattelekom, how stuff like GREID (the secret, in part, of Exigen's success). It's kind of a paradox. Gotta run now...

Sunday, December 05, 2004

New PM to review third licence auction terms

To catch up with some Latvian developments even as I write here on a sunny San Francisco morning, the new Prime Minister Aigars Kalvitis has said he wants to "review" the terms of the auction for Latvia's third GSM and UMTS mobile operator licence.
That auction was announced on November 23, the applications to be short-listed must be filed by December 21, and the auction itself will be held January 7. Applicants should be ready to bid starting at LVL 1.3 million and to invest at least EUR 150 million in a new, independent network.
All of which, as I wrote earlier, sounds suspiciously like the offer from International Telecommunications and Technology (IT&T), which appeared out of nowhere in early November. IT&T, contrary to my earlier remarks, appears to be a real company, some kind of international consortium. They have been planning to come into the Latvian market for about a year, aided by a local entrepreneur who, in the past, had done some deals in the real estate business with the current minister of transport, Ainars Slesers.
The Latvian Telecommunications Association has also demanded that the auction application deadline be extended by at least a month and that the requirement to invest a rather enormous minimal amount be striken.
All of this makes the new Prime Minister's willingness to review and perhaps modify the auction terms a reasonable gesture. The political nuance here is that even if Slesers and IT&T's local consultant had never done any business at all, the "review" amounts to questioning the judgement of the new/old minister of transport even before the ink on the new coalition government's policy declaration has dried.
That, of course, is a political, not a IT/telecoms issue, but it does not bode well for the stability of the coalition. The PM, by changing the terms of the auction would, in effect, be expressing diminished confidence in his minister of transport for something Slesers was working on in both the old and new governments. Indeed, those who actually drafted and signed the auction terms (Vilis Zvidrins of the Ministry of Transport Communications Department) seem to say the main reason the terms are as they are is that Slesers asked them to do it that way.
According to this blogger's sources, Communication Department head Raimonds Bergmanis was more than glad to be on vacation when the decision to call the auction was approved.
On the other hand, one can admire Slesers' "can do" approach to moving ahead quickly in developing a more competitive telecommunications market, just as he is understood to be behind the entry of Ryanair and Easyjet into Latvia's aviation market. But the downside of haste in getting a third (fourth, really, if you follow this blog) mobile operator up and running is that you may scare off the understandably cautious, internationally known majors such as Vodaphone or Bell Mobility (Canada) and even Latvia's Baltcom, where owner Peteris Smidre has never been known to shun risk. Then, when a little known company, which in all probablity is legitimate, comes in the way IT&T is doing it, you create a climate of suspicion of impropriety. Although, actually, such a climate is the prevailing weather system in Latvian politics...

Your blogger is in San Francisco

I'm in San Francisco to cover the Oracle OpenWorld event for my day job (Oracle in Latvia sponsored me). If there's anything of interest on the IT side with a Latvian angle or that generates interesting thoughts about IT in Latvia (as for uses of big corporate Oracle systems, count 'em, but don't bother your left hand to help with the count if it's doing something else). Nonetheless, the keynotes by Carly Fiorina (Hewlett Packard), Scott McNealy (of Sun, the nemesis of Microsoft), Micheal Dell, etc. promise to be interesting. Hope to do an interview with Exigen, too.
If I have the time, watch this spot.

Wednesday, December 01, 2004

Third licence contender in Latvia looks for real

One of the pleasures of blogging is that you can correct your own misapprehensions or mistakes. It now seems that International Telecommunications and Technologies (IT-T), which I dismissed as a "Nigerian letter" company in an earlier post, is more real that I thought and quite serious about buying the third Latvian GSM and UMTS licence at a hastily organized auction. I talked to IT-T's chief operating officer Nicolas Abinader in Beirut and his local consultant, the Latvian entrepreneur Edgars Zakrizevskis.
Mr. Abinader says the company is an international consortium of carriers, operators and technology providers that includes participants from Switzerland, Spain, France and the United Arab Emirates (perhaps other countries, as well). There will be complete disclosure of the composition of IT-T once the pre-selection application is filed by December 21. The Ministry of Transport, which announced the licence auction on November 23, set the starting price at LVL 1.3 million and a condition that at least EUR 150 million be invested in building an independent, nationwide network.
This, to some commentators, sounds disturbingly similar to the offer made by IT-T in the letter I wrote about earlier, where they said they would pay LVL 1.3 million for a licence (GSM, UMTS and CDMA-450) and invest between EUR 150 -220 million. Janis Lelis, the managing director of the Latvian Telecommunications Association has been outraged by the auction terms, calling the deadlines impossible to meet by any professional operator, and describing the requirements for a nationwide independent network and a minimum EUR 150 million investment as irrational, if not something worse. Mr. Lelis points out that a cost-conscious operator would try to cut investment costs while still meeting network build-out requirements.
A source speaking to this blogger with the understanding his identity would not be disclosed went even further and called the whole arrangement "corrupt" and clearly aimed at giving the licence to IT-T to the exclusion of other contenders. IT-T has been preparing to enter the Latvian market for about a year, according to Mr. Zakrizevskis, who has been the group's local consultant.
Mr. Zakrizevskis strongly denied any favoritism or that Minister of Transport Ainars Slesers, with whom he has been linked in a number of real-estate transactions some years ago, was lobbying the Lebanon-based company. He also stressed that he had had dealings with a number of persons in Latvia who later entered politics, but this did not mean any special relationships continued when they came into public office. The Latvian enterpreneur, who has mainly worked in real estate development, described his role as a generator of project ideas which he often finances at a very early stage (research, etc.) and agreed that he was something like an "angel investor" in the US.
Still, the fact that IT-T has apparently gotten the jump on everyone else (it is starting a Latvian subsidiary as required by the auction terms -- something that can take several weeks) is likely to raise eyebrows. Before it was known that IT-T was participating in the auction, several analysts this blogger spoke to (for an article in my "day job" at Dienas bizness) said they though the auction of the third would probably fail, as it did in 2002.
Mr.Zakrizevskis also disclosed that the long-term goal of IT-T, as he understood it (he did not pretend to speak for the company) was to create a demonstration project for later moving into the Russian market. He also indicated that IT-T intended to become a pan-Baltic operator, probably in all three technologies --GSM, UMTS, and CDMA-450 (although in Estonia, there already are three operators).
After all is said, the whole business does look a little strange, but I've let the parties speak for themselves, which is what a journalist/blogger must do...

Monday, November 29, 2004

The three-week UMTS wonder auction, apply now

The Latvian government, spurred by the Ministry of Transport, has announced it will auction the third combined GSM/UMTS licence on January 7, with a starting price of LVL 1.3 million. Applicants for short-listing must apply by December 21. The terms of the auction will also require the new entrant to build an entirely independent network and invest at least EUR 150 million.
According to this blogger's sources, the auction was railroaded through over the objections of officials inside the Transport Ministry and the profound skepticism of the Public Utilities Regulatory Commission (see my earlier post). It appears – and some international analysts agree – that this auction, like its predecessor in 2002, will fail. Back then, the government set a starting price of LVL 5.8 million. The Communications Department of the MoT, which advocated a starting price of LVL 500 000, is understood to have abstained from endorsing the fast-track auction.
One reason no one may show up is that even if LVL 1.3 million is not a huge sum for major international operators, it still has to be spent based on a careful and considered study of the Latvian market and a detailed, up-to-date set of documents outlining what it is the operator will be getting. It appears that as far as the terms of the auction, the MoT has simply cut, pasted and switched some key figures in the 2002 tender documents. With a three week deadline, it is hard to see how any company can make a reasoned and prudent decision. The operators listed in the 16-page (appendices included) market study seem to have expressed nothing more than a polite interest in Latvia, IF...etc. It is doubtful that the MoT, which ordered this criticized report, has any detailed, up-to-date documentation to offer potential bidders, answering such questions as easements (to put up base stations on public and private buildings), the possibility of roaming (with incumbents on reasonable commercial terms), etc.
While the MoT's cut and past may be OK as a way to avoid writing a largely standardized document from scratch, it doesn't address the issues of whether there is actually a market for a third UMTS/GSM operator in Latvia and whether UMTS is a viable solution for a small, saturated and relatively poor market such as Latvia.
There are now probably around 1.4 million mobile phone users in the country, out of a population of around 2.3 million. Any new users are unlikely to be the kind of high ARPU generating business users that a UMTS operator needs to cover its costs, never mind make any money. If one talks about 3G rather than UMTS, then there already is a "third" operator, Triatel, actually the first to offer 3G services via CDMA-450. Meanwhile, one would expect incumbents LMT and Tele2, who must start their UMTS services by year end, to be making a major Christmas marketing effort. But we see nothing, yet, not a peep about how they will each at least make their first commercial lat on UMTS by December 31. There must be some reason for this hesitation with LVL 5.8 million sitting as a piece of paper in the corporate files of each company.
In addition, there have been strides in technology that seriously threaten UMTS in the mobile urban business environment. While browsing at a Nokia boutique at the Stockmann department store in downtown Riga, I was told that the latest Nokia Communicator (the 9500 0r 9300) would be Wi-Fi enabled. This means that users will be able to log on to data links as fast or faster than UMTS at its best (around 2 Mbps) and to use their devices to make internet phone calls rather than using any of the mobile networks. Internet telephony over WiFi is a "GSM killer" app if there ever was one, especially if your device makes or at least suggests your choices for you. A multistandard mobile phone of the near future could, for example, default to the user's Skype account when in range of a WiFi hotspot and automatically log on to it and make the call. Who will be the first to buy these devices? The high ARPU business user every operator is after.
I believe that once a significant number of hotspots are set up at business venues (restaurants, hotels, the airport and train station), and especially if Lattelekom launches WiMax, the use even of GSM for voice in the "electronically dense" urban environment (Riga, some other city centers) will decline in favor of "free" internet voice (well, flat-rate, at least).
So who is ready to spend at least LVL 1.3 million, topped by EUR 150 million to build a (superflous) autonomous network nationwide? Probably nobody. So look for another flop. Or at best, some really weird, never-heard-of company coming in and taking the licence on its firts and only bid.

Friday, November 26, 2004

IT integrators cozying up to Triatel?

Triatel, the CDMA-450 operator that started operations on November 15, has several IT integrators and ASPs waiting to talk about some deals, sources told this blogger. The idea is to package the mobile, fixed mobile and wireless internet solutions with the IT companies applications on demand, VPN service and the like. It seems that some of the companies want to offer a kind of "corporate-network-in-a-box" incorporating Triatel fixed and mobile phones, a VPN, servers and networked PCs, applications such as CRM or ERP, whatever.
This is apparently a sign that Triatel is seen as being the right magnet for business users of what are, in fact, 3G services. Triatel subscriptions are not going to be used to watch videocasts (using free video minutes) of lunch at the high school cafeteria, as this blogger's 17-year-old (from my first marriage, lives in Sweden) says some of his classmates do with their 3 phones. The target of some 40 000 users set by Triatel seems realistic in the number of total lines that could be used for business purposes (some companies going entirely wireless, whether with mobile, desktop phones or laptop cards) and by some high-end private users. We may also see Triatel drop the other shoe and announce a pure DSL-type wireless internet subscription, either with high speed or a competitive flat rate price.
It is interesting what Lattelekom will do - it is seeking some CDMA 450 spectrum, supposedly for reaching out into the remote countryside. But will it stand aside and watch Triatel take high revenue business customers (alone or through IT integrators), or will it act? In that case, how? Could Verdi, the brand Lattelekom uses for its IT solution provider, be one of those waiting to talk to Triatel? Certainly, the more natural partner, Latvian Mobile Telephone (LMT) isn't rushing to get its UMTS service up and running by year end as its licence stipulates. And the idea of a mobile office-in-a-box that can be up and running almost in a plug and play mode for its simpler functions (voice, fax, internet, video conferencing) is pretty attractive. If Lattelekom doesn't offer it, someone else will.

Thursday, November 25, 2004

A short note

I've been away from Latvia for several days at a film market in Germany (my wife is a filmmaker). I am now back and hope to provide the latest rumors, gossip and facts from the Latvian telecoms and IT scene. On December 4, I will be heading for Oracle World in San Francisco and hope to do some blogging from there.

Thursday, November 18, 2004

Lattelekom takes bids for TV-capable network

Just as SBC Communications and Microsoft have signed a deal in the US enabling the telecoms operator to send TV signals (presumably TV over IP) to the home, Lattelekom is winding up a bidding procedure to complete its high speed MPLS network in Riga. One of the specs for this network is that it will be able to handle TV over IP, so-called internet television. This, then, will be the basis of Lattelekom's television strategy, announced earlier this year after Nils Melngailis took over as managing director.
According to this blogger's sources, Lattelekom has already completed a high speed MPLS network in the rest of Latvia and Riga was left unfinished because of some technical problems, causing a new tender to be announced. Cisco, the global provider of internet routing equipment (and IP telephony) is among the bidders.
Once the Riga network is completed, Lattelekom will have laid the groundwork for eventually switching to an all-IP network and for reducing voice communications to a limitless, nearly free service for those customers having flat-rate broadband connections.
The old circuit switched network, which cost Lattelekom (and its various private sector shareholders) nearly LVL 500 million, is not about to be shut down, In fact, the former monopoly is installing and expanding interface solutions between what are essentially two networks. However, my guess is that once broadband useage moves into six figures (close to the 200 000 target Lattelekom has set), you will see IP phones being offered together with new broadband links. Also look for connection speeds to jump radically higher from the present 128 kbps (for City Internet) and 256 kbps (HomeDSL) to the megabit and multimegabit level (at least as a premium service).
All in all, Lattelekom is gearing up to use the reach and power of its nationwide network to meet challenges such as the triple-play offered by cable TV, internet and fixed network operator Baltcom, as well as the slightly crackpot plans to launch yet another carrier network by merging several state owned networks into The Alliance (see earlier posts).
I may add to this later. It's Latvian Independence Day and snowing in Riga.

Tuesday, November 16, 2004

Latvia's regulator dodges "mission impossible"

Latvia's Public Utilities Regulatory Commission (SPRK in Latvian) has issued a statement calling a recent survey of the potential market for its "third" GSM/UMTS mobile operator licence vague and unprofessional. Essentially, the SPRK said it cannot undertake organizing a licence auction based on the survey done by Ticon, which found that there was general, conditional interest in the auction by a number of foreign and Latvian companies. The regulator said it could not design an auction based on this data, which the agency said gave no specific recommendations for the pre-conditions for such a sale.
The statement is a signal of an ongoing, underlying conflict between the cautious regulator and the Ministry of Transport, which seems determined to hold an auction by the end of the year. Sources at the Ministry's Communications Department told this blogger that the regulator was foot dragging and dodging its responsibility to conduct the auction with due speed.
The regulator, however, seems determined not to repeat the disastrous attempt at a third-licence auction in 2002, when both incumbents, LMT and Tele2, bought UMTS licences for a fixed price of LVL 5.8 million, but no one showed up for the "real" auction of the third licence. However, the starting price for the current licence has been indicated at around LVL 500 000.
The controversial statement by the SPRK came on the same day as CDMA-450 operator Triatel was scheduled to start operations as Latvia's de-facto third mobile operator, offering 3G services. The incumbents, whose expensive licences required that they start UMTS operations by year end, have yet to announce the start of this service.

Friday, November 12, 2004

The wild card hit

Well, it was a previously unknown Finnish company, AffectoGenimap, that merged with Mebius of Latvia's Lithuanian parent, Informacines Technologijos. So one of the wild guesses in the previous post was sorta correct.
The Finnish company believes it will sell its GIS solutions in the Baltics. Good luck to them, because as someone in the GIS business in Latvia said (a couple of years ago) -- there will be no widespread adoption of GIS as long as digging is cheap. This was said in reference to the use of geographical information systems (GIS) for planning street maintenance and the like.
The Lithuanians apparently see an opportunity to offer their rather extensive and low-cost Oracle implementation experience in Finland.
That's my short comment, sitting here at Riga Airport on a fast WiFi link.

Wednesday, November 10, 2004

Finnish-Baltic IT merger rumors fly

A major merger of a Finnish and "Pan Baltic" IT company is to be announced in Helsinki on Friday. On the Baltic side, there is a short list of "the usual suspects", so here are the hottest rumors:

1) It's Latvian IT Alise (with 10 employees in Estonia, I guess it is Pan-Baltic) and TietoEnator, the Finnish-Swedish IT company. With IT Alise, TietoEnator would broaden its potential customer base in Latvia from it's narrow-focus, bank-card system oriented ("Chipcards in Borneo 'R Us) Latvian subsidiary and pick up a company that has "done" Lattelekom, LMT, and is installing a big m-f of an Oracle eBusiness Suite system at the biggest corporate m-f of them all in Latvia, Latvenergo, the national energy utility. The word is out that the companies have "dated" regularly in the past, but not gone home with each other. One never knows...

2) It's MicroLink and God-knows-who in Finland (some company with more k-s and ä-s than you want to see in your life). MicroLink is truly pan-Baltic, it is a mid-sized m-f in its own right in the market (Exigen now has a bigger one ....turnover, watch'cha think, since it attached Dati over the summer). For MicroLink this would fulfill the prophecy of one of its founders, Alan Martinsson, that Baltic IT companies cannot stand alone for long. Alan has, unless I am hallucinating this, gone off to some kind of venture capital/investment banking outfit, and might be involved in doing the deal. Don't know, haven't called the man. But it would make sense. Also, the Estonians, who started MicroLink, would probably feel better selling it to their Finnish cousins, who, BTW, are pretty much at the top of the world IT list in terms of smarts, useage, etc.

3)It's one of the Lithuanian upstarts. Varos Group with its retail and access control solutions sounds a little to narrow, unless we are talking a peer-to-peer type of deal, meeting their obscure Finnish clone, Kurrattperkelääkeskustakoskenkorvakatu Oy ...oy...oy... or whatever. Sonex, which I don't follow, is still tiptoeing out of the hardware business. Mebiuss, just recently came into Latvia, had its obligatory scandals (who doesn't, IT is the # 2 customer for this state outfit) with the Procurement Supervision Board (IUB in Latvian) but has yet to build up a really solid reputation.

So I don't really know, but I'll put my five santims on the IT Alise deal.

Then there are the loonie rumors (although not entirely). The one I heard today from some top folks in the Latvian IT business is that Lattelekom is buying MicroLink. Sorta fits with the Estos mid-range vision of their baby growing up to marry a mid-sized IT & T company. It also fits with the idea that Lattelekom may split into a) a network operator (getting some pan-Baltic assets in the data networks area from MicroLink), b) a service provider (consumer, broadband, cable TV, all that sh**t) and c) a business service provider (heavy into outsourcing your entire IT&T needs, putting in all from the network to the PCs to the rent-an-applications services, just sign here on the SLA...). The latter is going to take a lot of IT competance and weigh. MicroLink has some of it. Rumor also has it that Verdi, the unborn fetus of an IT subsidiary that Lattelekom has been carrying for years is losing folks to international biggies like Accenture. Buying MicroLink might make Lattelekom a more exciting place to work (well, with other excitements like "who's getting reorganized this month?")
One also mustn't forget that, sooner or later, even people like Indulis Emsis and Ainars Slesers will figure out that you can either sell Lattelekom to TeliaSonera, or wait to sell it to DeutscheT-Sonera in 2008 or whatever, but there ain't gonna be too many choices beyond that, and certainly no mad bidding war even for this prize. And don't call out the riot squad to stop the people stampeding off Air Lebanon to bid for that fourth third mobile licence the second time around, while you are at it...

Friday will tell all. Can't make it myself, gotta go to Stockholm with my youngest son that evening on family matters. Otherwise, if it were just a question of spending the day in Helsinki, I would dog-leg it with Finnair to Tukholma as they call it.

Tuesday, November 09, 2004

The lethal 13 % solution -from SME to BRK?

Sorry for getting around to this after the fact, but there were amusing telecoms stories to tell. The Latvian Information Technology and Telecommunications Association (LITTA) reported on October 26 that Latvian software companies recorded only 13 % of their sales as being to small and medium-sized enterprises (SMEs). The average for Eastern Europe is 42 %. Even accounting for a high rate of "unofficially obtained" software, this means that the use of IT at SMEs is at best well below the average for the region (i.e. assuming about 50 % use IT, but don't have licences, bringing the uptake rate to 26 %).
To my mind, IT plays the role of electricity say, 110 years ago. Companies in the 1890s are said to have had vice-presidents for electricity, some had their own generators and power plants. Now, asking whether a company runs on electricity will qualify you as an idiot in Latvia and anywhere else. Yet information processed by IT systems is the electricity of business since the 1980s at least. It certainly is in the 2000s, and the pace of change is much faster than when businesses electrified more than a century ago.
Some years ago I met some Swedish businessmen from the wood processing sector. One said that he had one and only one initial question for any potential Latvian partner: can you work with numerically driven machine tool files? In other words, FORGET IT if you do not have an IT driven, networked production line where I can stick in a diskette in Stockholm and have tabletops machined Latvia and delivered, say, a week later.
No amount of craftsmanship, no hard working best practice Latvian handicraft will get you past that. Unfortunately, the figures show that Latvian SMEs are at best, good mid-1950s small businesses by global and EU standards. Do we see any 50s-style businesses around anymore? No!
These indicators of SME IT use in Latvia are a signal that in the EU/global market, a very large number of Latvian SMEs are going to be business road kill (BRK) very soon. For readers who don't know American slang, road kill are the flat squashed remains of animals who, if there is any expression left, look like they don't know what hit them.

Thursday, November 04, 2004

Mobile operator in a "Nigerian Letter" reaches Latvia

Everyone gets them, the letters from Nigeria, other African countries and even from Russia (claiming to be from Yukos owner Khordokovsky). They offer fabulous "business opportunities" arising from the fact that the Minister for Crocodile Breeding on The White Nile died and left USD 78.6 million in his safe. His faithful servant Kwame, is now offering to share this with you.
Not interested?
The Latvian Ministry of Transport went out with a press release announcing that it, too, had received what is, to my mind, the equivalent of a Nigerian letter offering a fabulous deal in mobile telecommunications. The MOT, of course, was serious.
A company called International Telecommunications and Technology Inc, or IT&T Company is offering to buy licences for GSM, UMTS, and CDMA-450, as well as to build its own independent nationwide network in 12 months, spending between EUR 150 and 220 million. It says it will pay LVL 1.3 million for the licences, which are not officially up for bids yet, but whose starting pricc has been pegged at LVL 500 000.
IT&T Company is nowhere and everywhere. Google it and you see the power of Google, everything ever put on the net about IT&T, meaning information technology and telecommunications. I did no better on the Federal Communications Commission (FCC) website, since IT&T Company claimed to be an FCC licenced operator offering some kind of carrier services in the US and 95 other countries.
The latest word is that IT&T Company is based in Lebanon, but I think there are only two mobile operators there - Libancell and Cellis, or something like that. Both were involved in some kind of scandals, Syrian influence, the Assad family, etc.
In any case, there are probably more than 1.3 million mobile users in Latvia, and a very optimistic estimate says there might be 300 000 potential additional users. The high ARPU business user has been taken (some might be skimmed away by Triatel with its CDMA-450 based 3G services), the middle ground is covered rather well by Tele2's strong Golden Fish prepaid card brand, by LMT's youth-oriented O-karte and the virtual operator Amigo hitting the teenybopper market. So that basically leaves the geezers, grannies and toddlers. Even some of them have mobiles, paid for by their children or grandchildren. So how is the EUR 200 million investment going to be returned?
All of which led me to conclude, almost at first glance, that the whole IT&T Company offering was a crackpot deal. Nobody among my telecoms contacts at Pyramid Research, the Latvian Telecommunications Association, or the Public Utilities Regulatory Board had heard of this outfit. Nor had Dana Al Khatib, an analyst at Arab Advisers Group, who I phoned in Amman, Jordan, for my newspaper. The company had done a comprehensive survey of telecoms companies in the Middle East, but apparently missed the mysterious IT&T Company.
What gives a touch of black humor to this, as to many other political events in Latvia, is that the MOT decided to publicize this lunacy as a sign that there was "interest" in the so-called third GSM/UMTS licence. I'm not belittling that, an auction may have a fighting chance, but by that standard, I get "expressions of interest" amounting to billions every week. Let's see, did I toss out that e-mail from Kwame, who is mournfully remembering his most honorable minister, deceased most horrible when he slipped and fell into a crocodile breeding tank...
Those sums are more eye-popping than what this mysterious allegedly Lebanese company has to offers.

Tuesday, November 02, 2004

Triatel: Latvia's first metrosexual operator

To loosely borrow the term "metrosexual", it refers to an attractive, intelligent and aesthetically refined male person who exhibits what many would consider the best attributes of positive stereotype gay and straight men. There is a flair, an intelligence, a touch of arrogance, perhaps, but all in all, an attitude and "je ne sais quois" which leaves you wondering just which side of the fence this guy is on.
So what does this have to do with Latvian telecoms? Triatel, the brand used by two operators, Telekom Baltija and SIA Radiokoms, has launched a kind of metrosexual set of services. They are state of the art, 3G, mobile, fast (5.2 Mbps download is just around the corner) and at the same time fixed, no different from your slightly upscale home phone, except that there is this little antenna, no cord, but a dial tone just as if there was one. They are equally at home in the city (and this is where Lattelekom or at least some of the wireline ISPs should watch out) and in the increasingly prosperous suburbs. They can look "fixed line" and be mobile very quickly. In fact, you can pack that home desktop phone in a bag and take it to the summer house, just like a 1992 vintage Motorola (except you can safely drop the Triatel phone on your foot, the Motorola is not to be tried at home...). The number and phone portability (within Latvia) is very Vonage-y, but there is no flat rate service yet.
So that's how Triatel is going to look -- cool looking odd brand flip phones, desktop phones and faxes with the cord missing on second glance, and the bright little secret that this company is actually, henceforth, doing everything via CDMA 450 and calling some of it "mobile".
This is just a weird way of looking at Triatel after their presentation today. Everyone else thinks it is some big deal that they are planning to get 40 000 cream of the crop subs, or 2 % of the Latvian market. As long as their interconnect and roaming issues are settled (they are in process), who really cares how big a market share they have as long as they generate decent ARPU.
One thing though, as a Lattelekom executive points out (he sees them as competition, and rightly), is that Triatel has to get the customer outcomes right, because it is no longer just abot the technology or the network. The network connection on the fixed wire (no little antenna) is heading for near zero cost in the big markets. So it all boils down to making business processes work seamlessly and flawlessly and, yes, metrosexually, regardless of the identity of the network, fixed or wireless.

Monday, November 01, 2004

Are the Germans coming?

Three or four years from now, don't be surprised if Lattelekom and Latvian Mobile Telephone (LMT) are subsidiaries of TeliaSonera which, in turn is a subsidiary of Deutsche Telekom. Or worse, Lattelekom is a 49 % stranded investment of TeliaSonera, though that is less likely now that the government of "no privatization on my watch" Indulis Emsis has fallen.
According to my source, speaking in my ear at a crowded wine-drinking event ahead of my newspaper, Dienas bizness annual awards event, the word is out to "start learning German".
This information is to be taken as seriously as any cocktail party rumor, but against the background of rumors that France Telecom was interested in TeliaSonera, it does sort of make sense. It also meshes with my own view, which I tell anyone who says "TeliaSonera taking over LMT and Lattelekom will be a supermonopoly", that TeliaSonera is a midsized fish in the European and global telecoms shark tank. It just looks big to us. To the really big, TeliaSonera looks like lunch. Not ready to be served yet, not, maybe, for quite a while, but still, lunch...

Friday, October 29, 2004

I'm in the phone booth, thinkin' 'bout the government

That bad misquote of an ancient Bob Dylan song (the line, I believe, orginally was "Johnny's in the basement, mixin' up some medicine, I'm on the pavement, thinkin' bout the government") brings me to record some preliminary thoughts about the fall of the minority coalition under Indulis Emsis and its possible impact on the telecoms sector.
It isn't exactly the first thing that comes to mind, but here are a few speculations.

1) The realignment of political forces, especially if New Era (Jaunais laiks) returns to government, could break the deadlock on the privatization of Lattelekom, which would mean that TeliaSonera would get a better chance to increase its stake in the company significantly above the present 49 %. Emsis has been opposed to privatization and has said it would not happen as long as he was in government. Indeed, he has suggested what would amount to an operational renationalization of both Lattelekom and its sister company, Latvian Mobile Telephone (LMT) by "taking charge" in the government's interest in both companies.

2) The government crisis will postpone the auction of a third GSM/UMTS licence, which Emsis insisted had to be held even before Ticon Latvia had made its feasibilty report. Now, after closer study, that report appears to have been done rather superficially, finding not so much genuinely interested operators as companies who talked to the interviewers out of politeness and made essentially polite statements of "we might be interested" rather than analyzing the market in depth and discussing options based on that.
In fact, this blogger has learned that Ticon even got the name of one company, listed as J Tong Telecom Inc, wrong. The company is actually called J-Tone and is part of larger Taiwanese telecoms group. According to my sources, J-Tone (which means quick call or something like that in Chinese), was and remains essentially clueless about the Latvian telecoms market, but more or less said something like "why not"?

3) The fall of the Emsis government may also derail plans to start a second government owned telecoms wholesaler (or whatever it is supposed to be) called The Alliance (see earlier posts). It seems that Ainars Slesers, the Deputy PM and Minister of Transport rolled into one, favored this plan, as did the Ministry's Communications Department. Indeed, the idea came up in a sectoral policy concept published earlier this year, before the Repse government fell (this stuff happens often here, we're no worse than the Italians), so it may be picked up again even if whatever right-of-center government that reconstitutes (like the "policeman" in Terminator II) keeps Slesers out in the cold.

4) If New Era gets a strong position in a new government, it may heat up the pursuit of "the guilty" in the digital TV scandal, which had essentially faded from sight during the Emsis interlude. So far, they got found one culprit, a Mr. Bean look-alike financial planner associated with Andris Skele, founder of the People's Party, the folks who just sank the Emsis government. Unlikely that they will resume the hunt for the elusive digital fraudsters, as there is one theory that links the little-known Kempmayer Media Ltd, blamed for the digital TV scandal (although it delivered on all of its contracts) to Skele through some byzantine network of offshore companies. Meanwhile, digital TV, mostly by cable and MMDS, is moving ahead under private sector steam.

This, indeed, may be the best thing about a governmental interlude yet once again, one more time, whatever...
I don't mean that some digital schemers should go unpunished, but that while the scattered hogs are finding their way back to the trough, it is unlikely they will interfere in any way with private activities to develop telecoms and other, converged digital services that the market demands.

Thursday, October 28, 2004

Lattelekom appeals price comparison decision

Lattelekom has appealed to the Administrative Court a decision of the Competition Council condemning advertisments published earlier this year comparing the price of calls on Tele2's mobile network with calls on its own fixed network.
The Competition Council ruled that voice calls on different networks were not a proper basis for price-comparitive advertising. Lattelekom maintains that most telecommunications users have access to both fixed and mobile phones and may be legitimately informed that making fixed-network calls, when available, is cheaper.
Lattelekom has yet to decide on whether it will appeal a similar Competition Council decision with regard to its ads comparing using a mobile phone when a fixed line is available to riding a cow or eating with a shovel. Once again, the complaint was filed by Tele2, which seems to be making litigation one of its core businesses (don't worry, at Lattelekom, it's reorganization :) ).
Sorry, no key-words boldfaced in this post, left my Powerbook with its Firefox browser home with the 9 year old.

Wednesday, October 27, 2004

Vodafone, Elisa, others show mild interest in Latvia's third 3G licence

Vodafone, French Bouygues, Canada's Bell Mobility, Finland's Elisa, Russia's MTS and Taiwan's J-TONG Telecom Inc all have shown mild interest in participating in a planned auction of Latvia's third GSM/UMTS mobile operator licence.
Among local companies, the cable TV and fixed-network telecoms operator Baltcom, which started and built up Baltcom GSM between 1997 and 2000 (when it was sold to Tele 2) may be ready to return to the mobile market, said director general Peteris Smidre. He confirmed that he had been interviewed by Ticon Latvia, a consultant hired by the Ministry of Transport to do a quick feasibility study.
A copy of the 17 page document was obtained by this blogger.
Smidre said that the LVL 500 000 starting price for a licence auction officially suggested by the Communications Department was acceptable, and that if the right conditions were offered to a third operator, including some protection from the market-dominant incumbents, low interconnect rates and incentives to cooperate on infrastructure (shared towers, initial domestic roaming, etc), Baltcom would make a try to return to the mobile market.
According to the report, the main risks seen by the foreign companies that agreed to be interviewed were in the smallness of the Latvian market (where there are already more than 1.2 million mobile users of a population of 2.4 million) and doubts about whether a combined operator (especially on the UMTS side) could make an adequate profit.
Also named among local companies was Canadian-affliated CSC Telecom, a so-called alternative service provider currently offering low-cost overseas calls, internet and other services to business and residential customers, and Latvenergo.
The Latvian national energy utility said, however, that it had apparently been misunderstood by the Ticon interviewers. The company has no plans to bid for the third licence but is interested, instead, in offering infrastructure and transmission capacity on its internal network.
One source told this blogger that the interest of local companies was mainly to partner with international operators on any bid. Only Baltcom has any experience of building a mobile network from scratch, and it was initially aided by its American shareholders (Western Wireless among others) and the fact that Smidre is a telecommunications engineer by training.
The Communications Department is urging the Public Utilities Regulatory Commission to arrange an auction by year-end. The regulator says it has to finish evaluating the Ticon report before it can say whether this is possible. Sources close to the regulator suggest privately that they don't want to rush any auction, especially in view of the fiasco with the last attempt in 2002. The Communication Department, however, insists that one needs merely to update the previous documentation in order to sell the licence by New Year's Eve.

Monday, October 25, 2004

Latvia's mobile numbers to run out?

The numbers allocated for mobile phone operators in Latvia may run out by next spring, according to Inna Steinbuka, chairman of the Public Utilities Regulatory Board, which is currently charged with distributing numbering resource.
Steinbuka and Gundega Rutka, an expert with the regulator, say that in the next two weeks, the last 200 000 available numbers will be allocated – 100 000 apiece – to Latvian Mobile Telephone (LMT) and Tele2. Rutka estimates that at present rates of consumption – LMT recently reported a monthly increase of around 30 000 customers – the numbers should be fully used up in March or April. That effectively means that both operators will have to stop ordering new SIM cards, as there will be no authorized numbers left to use with them.
The regulator advocates a rapid switch to eight-digit numbering, something which the agency has been reminding the government (more precisely, the Ministry of Transport's Communications Department) of since the summer. In fact, Steinbuka and Rutka suggest that it may already be too late to do this in an orderly fashion.
Another unexpected side effect of the number shortage is that any new so-called third operator will have no resources whatsoever. In fact, announcing an auction for the third GSM/UMTS licence will, in effect, be a misrepresentation, since whoever buys it will have no number resources whatsoever.
There may, however, be more to this whole oncoming mess than meets the eye. For one thing, the regulator under the final draft of Latvia's new Law on Electronic Communications will lose the power to allocate numbers. Steinbuka's attitude is "good riddance" as the regulator has enough to do already.
But at the Communications Department, sources told this blogger that the alarmist statements from the regulator are seen as part of a bureaucratic battle – the regulator doesn't want to lose some of its authority to the Ministry of Transport. Whatever the case may be, Steinbuka describes the handling of the numbering issue as "a football" that has been kicked between the regulator and the Communications Department for several months with no useful result.
Raimonds Bergmanis, the director of the Communications Department says that a government decree is being drafted concerning the adopting of eight-digit numbering. It will be adopted by the Cabinet of Ministers and issued in the next few weeks. He personally is skeptical about any imminent crisis for the mobile operators and says that for the immediate future, it would suffice to better manage existing resource by finally charging for their use or reservation.
Bergmanis points to a database on the regulator's website www.sprk.gov.lv, (follow the links in Latvian) that he says adds up to around a million numbers set aside for each existing operator (I have not played around with them in their downloadable Excel format). That means that even if each of the operators has around 700 000 users (LMT says it does, Tele2 doesn't report these figures), there are still around 600 000 mobile numbers left. Also, says Bergmanis, if all of these numbers were, indeed, to be allocated, it would mean that every living inhabitant, including infants and subsistence-level pensioners, could get a mobile phone.
A list of number resouce allocations since fall, 2002 shows that 770 000 numbers have or soon will be allocated, covering, roughly, the time the regulator has been in existence. The figures don't show how many numbers were already apportioned to both operators at the time.
Yet another interesting issue is how many numbers are actually in some kind of churn-lag, for lack of a better term. These would mainly be Tele2 prepaid cards whose lifetime (six months for some) has not expired, but which are effectively not being used (they were bought by short term visitors and then discarded). Only once these numbers are "legally dead" can they be reissued. The same problem faces Amigo, the virtual operator as well as LMT's O-Card program.
In a statement showing, to my mind, the underlying tensions between the Communications Department and the regulator, Bergmanis said that it was possible the existing operators had effectively staged a kind of number resource "land grab" so that there would be nothing left for the third GSM/UMTS operator. With number portability, anyone switching to "Newbie3GCom" (my hypothetical name) would face a stiff fee, which the incumbent operators, theoretically, could charge. By pointing this out, the
Communications Department director is effectively saying that the regulator allowed the "land grab" and may have been profligate in meeting the operators' demands for more and more numbers.
Meanwhile the regulator is documenting that it was, in fact, conservative if not miserly with the numbers by pointing out that it took several tries for each operator to get a new allocation and by showing this blogger correspondence with LMT telling the operator to use up what it already has in stock before coming to them for more.
So what we have is a multifaceted process going on, with bureaucrats fighting for turf or to say (as the regulator may well want to), "I told you so", with the operators sharing the belief that they are heading at high speed for the end of their number allocation rope, and with not a few people in the business asking – will there be SIM cards available around Easter?

Friday, October 22, 2004

Lawyers. pick up your phones...

...some strange and not so strange cases will be coming your way. I, for one, would like to sue Apple Computer. I paid around USD 2000 for my 867 Mhz Powerbook G4 in the summer of 2003. Now they are selling the same machines for a lot less, with 1.33 Ghz, never mind that the iBook, a G3 when I bought it in 2001, jumped to G4 last year. Boy do I feel discriminated with respect to anyone else who started blogging last week with a brand new Powerbook!
Tele2 in Latvia feels the same, but it paid LVL 5.8 million for a UMTS licence in 2002, as did LMT. Triatel, the CDMA-450 operator paid LVL 200 (100 for each alliance partner) to start operations and now it looks like the government expects to get at least LVL 500 000 for the combined "third" GSM/UMTS licence it still hopes to sell by auction sometime in the first half of 2005.
More details of the intended auction have emerged, and it now looks like the Ministry of Transport will urged the Public Utilities Regulation Commission to hold a combined beauty contest (selected a few best looking business models) and auction (letting the beauties with the most services for the least price try for the highest bid). The starting bid will be LVL 500 000, something that was omitted from a document submitted to the government, leaving the impression that this was all the money the government expects to get from the sale. In 2002, the bids were to star at LVL 7.6 million and no one came.
Tele2 strongly suggested it will sue to prevent the a sale for any amount less than LVL 5.8 million it paid, asserting any lower price is discriminatory. The Swedish-owned company is probably emboldened by its "victory" in the Competition Council against evil Lattelekom for accusing it of encouraging people to ride cows and eat with shovels (see my earlier post). Could the Latvian courts be equally wacko? You never know...
Alas for Tele2, the possible auction result is only one lower cost of entry for a "third" rival. Equipment prices have probably fallen since 2002. UMTS was just coming out of prototype then, now you have several networks up and burning cash..I mean running, for a number of operators, like 3, who has people chase you around Swedish shopping malls.
In addition, both Latvian mobile incumbents have had a moratorium on new entrants (even Triatel is coming in after the two year deadline) since the last failed auction. As one government official said: "Tele2 has been living twirling its hat and wallowing in fat:" Trust me, it sounds better in Latvian :). Even LMT, which has wallowed in around LVL 42 million of fat last year, has decide to shrug off the auction terms. In retrospect, LVL 5.8 million was a few days revenue or about a month and a half of profit for Juris Binde.
One should also remember that Tele2 had a choice (not withstanding stories that the government, in 2002, strongly suggested that both incumbents buy their fixed price UMTS licences). Like with GPRS until earlier this year, it could have stood on the sidelines until it saw that there was a market and some reason to turn on this feature (Tele2's former CEO in Latvia, Bill Butler, always used to say that the company was just one circuit board insertion short – at all of its base stations – of turning on GPRS. Bill went on to new challenges in Tele2 without snapping the gadgets into the slots even though LMT was already going nationwide with GPRS).
The other upcoming work for lawyers may be if and when Lattelekom decides to challenge a final (not yet decided) decision by the regulator to slash its interconnect rates to 0.8 santims per minute. Lattelekom officials suggest such a decision, if finalized, would violate European Union mandated procedures. Lattelekom maintains that such a step is not based on a throrough examination of costs, and that it would not benefit consumers, but merely drive down the incumbent's revenues (large proportions of interconnect fees come from alternative operators who terminate foreign calls in Latvia via Lattelekom, rather than from domestic interconnects for local and national calls). Also, there have already been cuts of between 20 - 40 % in various interconnect fees, based on Lattelekom's own cost-based calculations by methodology set by the regulator, which the incumbent says have not been passed on to consumers by such heavy interconnect users as the mobile operators. Had these cuts been passed on, they would have amounted, at most, to around 0.5 santim off of rates between LVL 0.12 and LVL 0.20 per minute, domestic.
Lattelekom would probably first try to apply EU law in the Latvian courts, but if the interconnect issue is pushed too far, you could see Lattelekom appealing directly to the European Commission in Brussels, perhaps aided by 49 % owner TeliaSonera and other European operator interested in avoiding what they consider a bad precedent in EU member Latvia.
Again, you saw this first on this blog.

Thursday, October 21, 2004

More Triatel surprises, some problems...

I've suggested to my day job newspaper that we interview Triatel's Mihail Zotov as a businessperson of the year for some kind of IT/Telecoms supplement magazine we plan to do (we do lots of magazines and supplements, actually it's no big deal). Mihail hasn't made the most money, Juris Binde of LMT takes that prize. Mihail simply upset everyone's apple cart. Paid 100 lats, set up shop (well, Telekom Baltija has been there for some time, to tell the truth), put up a test CDMA 450 network and there you have it – something ready to go commercial in those parts of Latvia where the money is. This left LMT and Tele2 gnashing their teeth. 5.8 million lats apiece for UMTS licenses up the chimney , as the Latvian saying goes.
But that is not the end of the story . Triatel is more than CDMA 450, that's only been the hot news. The brand actually applies to a range of services, mostly business oriented (but private customers are welcome). Much of that business is fixed line, but the real value in fixed line is in broadband and the services and QoS you can offer over the connection. There are close to 200 people in Latvia, including some businessy sounding names, who use Skype, and that's probably the tip of the iceberg, because not everybody fills in all blanks when they download and configure Niklas Zennstrom's latest toy. So voice, forget it...except mobile voice when you are not in a WiFi zone (saw some stuff on the net about Vonage and Boingo making something together, so there we go...). Plus John Tully (perhaps reader no. 6 of this blog) mails me that there will be WiFi/GSM triband handsets on the market.
So what's Triatel up to? My sources suggest the company may be going head to head with Lattelekom and all comers in using CDMA 450 as a high speed, fixed wireless internet platform. When fully equipped and juiced up, a CDMA-450 network can deliver 4 to 6 Mb downlink, so it is said. That's pretty good by comparison with ordinary DSL (256 kbps to the home via Lattelekom). It's the kind of solution you think of when Lattelekom asks an outrageous sounding price to wire a development of new homes, and the developer says "you should pay me for offering you to connect these people". A bit exaggerated, but a good point. The folks in this wealthy suburb would be spending money over the wire, and it's really Lattelekom's problem to scoop up some of that value. In the city, where everyone is wired or close to some fiber, maybe the fiber should be nearly free, so you expand the network participation as fast as possible and can start pumping premium stuff like digital TV, video on demand, games, whatever down the pipe.
So I see Triatel and Lattelekom competing in one way or another for the growing middle-class suburban customers who are a bit off the net in a 50 km radius around Riga. 6 megs to the home or between a few neighbors is a pretty good deal, especially if it's bundled with Triatel mobile subscription. Lattelekom's wireless RadioDSL has sort of dropped from sight (well, maybe I should ask them :) ), even though it was technically interesting, being genuine SDSL.
And now for the problems. Triatel will announce soon who its phone retailers will be, but according to my sources, it has been an uphill fight. DT Mobile, Latvia's biggest chain of mobile handset retailers (and an agent for LMT) hasn't come to a deal with Triatel. Look, also, for Triatel selling its phones on the net.

Wednesday, October 20, 2004

Wireless internet at Latvian road speeds :)

Siemens and Flarion are developing a high-speed wireless internet technology suited to, well, the high-speed customer:

FLASH-OFDM® systems enable users traveling at speeds of up to 250 kilometers per hour to utilize data services at average downlink speeds of 1 to 1.5 megabits per second, capable of bursting to 3.2 megabits per second in individual cases. The uplink typically offers users an average experience of 300 - 500 kilobits per second, bursting to 900 kilobits per second. With latency of only 50 milliseconds, the system is extremely well suited for enterprise or interactive applications.

So at last we have something for the black-windshield Mercedes and BMW crowd who strive to approach these speeds on Latvia's less than high standard highways and basically gonzo drivers (381 dead so far this year and counting...). As for trains, one of the best known trains (for tourists) is the Little Train (Mazais bānītis) where you can hop off and pick flowers or mushrooms and then catch the train again at a slow jog (so one says, I haven't tried it).

On a more serious note, it will be interesting to check whether Triatel, the CDMA-450 operator starting commercially in November, will be looking into this. Or Lattelekom, for that matter (although they are aiming at rural shacks, which don't move very fast).

Tuesday, October 19, 2004

Baby, you can't ride that (Lattelekom) cow

Ever so often (in Latvia, more often), state agency decisions deserve the colorful label of being totally fuckwit.
While I try to be serious in tone on this blog, this designation comes to mind after the decision by Latvia's Competition Council condemning a series of ads by Lattelekom asserting that it was plain stupid to call people on mobile phones when landlines (preferably Lattelekom's) were available.
Lattelekom compared this to other bizarre and stupid actions, such as riding a cow, combing one's hair with a rake and eating with a shovel. For comparison with landline rates, Lattelekom used numbers that looked suspiciously like Tele2's rates. Tele2 prides itself on being the "price leader" (although its price war with LMT has had a somewhat long truce).
Tele2 went to the Competition Council crying foul and asserting that its image had been damaged (a bunch of Swedish cow-riders, right?).
The Lattelekom ads were, though bizarre, memorable and successful, and for the Competition Council to call them unfair and to say that making a voice call in one medium or the other was unfair comparison is, well, you saw the word above, to put it mildly.
I would also suggest that Tele2 give it a rest. They may have scored a victory in this wacko dispute, but if Lattelekom has to take down its cows (seriously, they gotta retract the ads), then Mats Tilly, Tele2's Managing Director in Latvia, is riding away from his "victory" on a silly donkey, just like Don Quixote after his latest round with the windmills.

Monday, October 18, 2004

Lattelekom plans rural CDMA-450 in 2006

Confirming what has been written earlier in this blog, Lattelekom's network division head Valdis Vancovics confirmed that the incumbent fixed line operator has asked the Public Utilities Regulatory Commission to use some 450 MHz frequencies for rural, fixed-mobile CDMA-450 solutions. He said these would be implemented starting in 2006 as part of Lattelekom's modernization plan, adopted during the summer, to finish modernizing remaining 10 % of Latvia's network that does not have full digital services.
Vancovics says he hopes Lattelekom can cooperate with mobile operators Latvian Mobile Telephone (LMT), Tele2 and newcomer Triatel, as well as the Latvian Radio and Television Center, for base station, tower and other infrastructure deployment.
Services that Lattelekom hopes to offer to remote rural customers include basic voice telephony and internet at speeds initially up to 150 kbps (slightly higher than Lattelekom's basic, wireline CityInternet service).
Lattelekom's application for frequency allocation, filed last week, will be processed in a month.
An intriguing rumor is that the State Information Network Agency (VITA) is also looking into CDMA-450. This may be part of the ongoing plans to start a rival, state-owned operator to Lattelekom by merging the networks of four state-owned entities (see earlier posts).

Saturday, October 16, 2004

More CDMA 450 to come in Latvia?

The Latvian Telecommunication State Inspection (LVEI in Latvian) finally issued the necessary permits for commercial operations to CDMA 450 operator Triatel late Friday. Latvia's de-facto third mobile operator and its first third generation (3G) services provider should start signing up customers, selling phones through dealers, etc. in about two weeks.
The remaining obstacle is getting an interconnect arrangement with incumbent Tele2 and finalizing one with Latvian Mobile Telephone (LMT). Tele2 refused to deal with Triatel until all its papers were in order, but LMT has already conducted some interconnect tests.
An interesting issue is whether the frequency use permits include provisions to leave at least one channel free in the 450Mhz spectrum, so that another operator could use it. This appears to have been the case, although this blogger was unable to get details of the permits before the weekend. I did learn that the LVEI was deciding between two drafts for the permits, one of which would allow the frequency use in a manner consistent with other, new operators entering the 450 Mhz market.
Apparently, there is strong interest. According to my sources, incumbent fixed network operator Lattelekom has made inquires with the Public Utilities Regulatory Board regarding some kind of CDMA-450 project. There have also been inquires from other CDMA-450 operators.
A reasonable assumption for Lattelekom's interest is that CDMA450, set up properly, is a terrific solution for the perpetual rural modernization problem. By using this technology for fixed wireless voice and high speed internet (matching wireline DSL), Lattelekom could connect unmodernized rural areas at relatively low cost. Lattelekom officials joke that it would be cheaper to buy apartments or houses in the closest village for some customers than to lay wirelines to their remote homes and farmsteads.
One also wonders, whether, in the interest of cost-sharing, the preliminary feelers extended by Triatel to Lattelekom (and mentioned in this blog)may be growing into some kind of framework for cooperation. It would make sense for Triatel to extend its coverage nationwide using the same infrastructure (base stations, towers, etc.) that Lattelekom needs for reaching the remote rural customers.
I think there is yet another strategy behind Lattelekom's interest in CDMA 450, and that is the eventual switchover to an all-IP based network, where CDMA 450 customers would form the "wireless" part, and urban dwellers with relatively cheap broadband wireline connetions, the majority. CDMA450 could also offer a way to seamlessly move one's connection device (as computing moves from desktop to portable) away from the home or office.
There is certainly more to the CDMA450 phenomenon than meets the eye.