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, (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.

Tuesday, October 12, 2004

More on The Alliance

It has now emerged that the Latvian government's plans to create a second telecommunications infrastructure entity (it already owns 51 % of the incumbent fixed network operator Lattelekom) from four existing state companies and agencies has shifted into somewhat higher gear.
The Latvian office of the international audit and consulting group Deloitte & Touche has been asked by the State Information Network Agency (VITA in Latvian) to prepare a legal and economic study of various alternatives for merging the network resources of VITA, Latvenergo, Latvian Railways and the Latvian State Radio and Television Center into an entity with the working name Alianse (The Alliance).
In a study leaked to this blogger's day job newspaper Dienas bizness in September, VITA wrote that the new entity could have up to 350 000 users and turnover of LVL 23 million in its fifth year of operations.
According to sources, D&T will be looking at a range of possibilities for forming The Alliance, including a scheme where the network assets of all involved would be transferred to a new entity and, for example, Latvian Railways would buy back its necessary network services (dispatching, data transmission, switch monitoring, etc) from the new entity.
Other alternatives are creating a looser affiliation where The Alliance would trade in excess bandwidth (some say there is more of that than air...) as a kind of virtual wholesaler and provide some domestic carrier services to smaller voice and data operators outside of Riga. However, with the Public Utilities Regulation Commission proposing that Lattelekom's interconnect fees be cut by 50 % or more, this may prove unnecessary. In addition, Lattelekom can have surprises up its sleeve, such as divesting its network (as with Scanova in Sweden) and selling capacity to all comers, with service-provider Lattelekom (like Telia in Sweden) simply one of the biggest customers.
D&T is planning to report back with its findings in early November. These will then be put before the Ministry of Transport and, eventually, the Cabinet of Ministers (the Latvian government) for action. According to VITA, creating The Alliance would involve new investments of at least LVL 15 million, with more funds to be raised in some kind of public-private partnership.
An interesting signal that this government (or at least Minister of Transport and Deputy Prime Minister Ainars Šlesers) is taking the project (described in other circles as tending to crackpot... why compete with your own Lattelekom?) seriously is the apparent reassignment of Latvian Investment and Development Agency (LIDA) head Juris Kanels to be chairman of the board of VITA. According to some rumors, VITA director-general Rihards Balodis may also be changing jobs.
Kanels is seen as Šlesers' man who was brought in to do a job at the LIDA and will now oversee the building of The Alliance. It also confirms the rumor, made as a snide remark, that writing up The Alliance project gave some purpose to VITA, an otherwise strange agency in a small country where high grade secure communications can be bought on the market (as they are, for instance, by Latvia's mainly Swedish-owned commercial banks).
It remains to be seen if The Alliance actually gets off the ground, overcoming many possible hinderances (not the least the unwillingness of at least two of its members, Latvian Railways and Latvenergo-which is indivisible by law– to give up their fledgling commercial telecoms and data businesses). Alternatively, it could be a great boondoggle.

Digital TV boom and Sony Ericsson's return?

When a cable TV company apologizes to its customers for delays converting analog to digital cable connections and then places an ad hiring more technicians, it is probably a story. My paper sort of half skipped it (may run later this week), so here it is:

Baltkom TV, Latvia's largest cable network with more than 125 000 subscribers, is now revising upward its forecasts for uptake of its digital cable service on its optical network. Marketing direktor Juris Kezberis says that switchers by year-end will exceed the 5 000 households earlier forecast and probably pass 25 000 instead of 15 000 during 2005.

Baltkom made the initial forecasts when it recently announced it was starting to switch broadcasts on its MMDS network from analog to digital, claiming it was the first to start digital terrestrial broadcasting in Latvia. The state-sponsored project to start digital TV on "standard" frequencies (MMDS reception requires special equipment) has ground to a halt since last year, with everybody involved suing everybody else (to sum it up without a long digression).

So it appears that digital cable TV is generating major demand in Latvia. The initial offering is 49 channels, many of them uncoded Russian, German and English language programs. Latvia's Latvian Independent Television is planning to launch at least two digital channels exclusively on Baltkom and a deal is apparently being negotiated to carry LTV 1 and LTV 7, the public service channels on digital cable as well.

In mobile phone news, Sony-Ericsson is upgrading its sales activities in the Baltic by advertising in the Swedish for a regional manager to be based in Lithuania (according to my sources). This means that the handset dealer will have to make a steep uphill comeback from when it, as still Ericsson, essentially abandoned the Latvian market a few years ago. (Sony) Ericsson's market share in Latvia then plummeted to the low single digits (no exact figures, sorry), and it was quickly overtaken by Siemens and Samsung. Nokia, of course, remains at the top, a looming presence like a large bear in the wods.

Plans forge ahead for merging state networks

Sources tell us that plans are forging ahead for making an alternative backbone network to Lattelekom by merging the networks of four state owned companies and agencies. The idea was originally proposed in a paper drafted by the State Information Network Agency (Latvian acronym VITA), which proposed pooling the network resources of the energy utility Latvenergo, the Latvian Railways, and the Latvian State Radio and Television Center as well as VITA to create a competitor to fixed operator Lattelekom (owned 51 % by the state and 49 % by Sweden's TeliaSonera). The plan for creating something called The Alliance (Alianse) said it would have 350 000 users by the fifth year of operations and cost around LVL 15 million to set up. By the fifth year, The Alliance would have revenues of over LVL 20 million (by comparison, Lattelekom now has revenues in the LVL 135 million range).
The new state owned entity would be formed by each of the above mentioned companies and agencies divesting its network assets to a new company and then repurchasing services from The Alliance. In other words, Latvian Railways would divest its internal nationwide (along the rail lines) digital network and purchase back dispatcher, data transmission and other services from the Alliance. Latvenergo would do the same with its fiber optic network.
It is harder to see what would become of the State Radio and Television Center, since it now sells its TV transmission and domestic backbone network services to TV and radio broadcasters and mobile phone operators. If it divested these assets to The Alliance it would become a reseller of these services over the Alliance's network? Finally, VITA itself is more or less a purchasing entity for secure state voice and data services, it's network consists of leased commercial capacity for the most part. It would have few physical assets to bring to the new entity. Also, none of Latvenergo's assets can be separated or privatized. Without changing the Energy Law, it is impossible to divest Latvenergo's telecoms unit, especially not to a new company which could well have private owners and investors. The original report on the Alliance proposes partly funding it through an unspecified public-private partnership.
The practical plans for forging The Alliance are being made by a working group in the government. We hope to obtain the minutes of the meeting where this was discussed.

Monday, October 11, 2004

Small fry, bigger fish, grandes poissons?

Well, good morning, axe handle, as the Swedes would say. I just read about the spate of rumors last week that France Telecom was courting TeliaSonera. It pushed up the shares of both companies for a while, then came the denials.
TeliaSonera is one of the parents of Lattelekom (49 %) and consolidates a majority, by its reckoning, of Latvian Mobile Telephone (LMT). TeliaSonera's repeated appeals to buy the rest of both of these companies to form an integrated (at the network and services platform level, at least) regional operator have fallen on deaf government ears. In the public discussions of this idea, the spectre of "a supermonopoly" headquartered in Stockholm has been raised.
I always smiled at this. If Lattelekom and LMT (despite its hefty profits) are small fry, then TeliaSonera is only a mid-sized fish. Possible, and, within the next five or so years, even probable food for something much bigger. I am somewhat pleased by these rumors confirming that yes, there are grandes poissons out there in the Telecoms Ocean, or perhaps Grosse Fische.
I couldn't quite see the logic of France Telecom buying the company that just got cleared to buy its Danish Orange unit. One would think the French would prefer to expand in the direction of the Mediterranean and francophone North Africa. But one never knows.
Deutsche Telekom could be another remotely possible suitor for TeliaSonera, perhaps once it has taken all of the little Baltic fish under its fins. The Germans, I believe, lost in the original tender process to modernize Latvia's telecommunications in the early 1990s, so the interest has been there. After all, it would give a Nordic/Hanseatic regional branch to the German-based operator.
In any event, such rumor and speculation should be food for thought for those in the Latvian government who believe Lattelekom can remain a 51 % state-owned company indefinitely.

Thursday, October 07, 2004

Lattelekom announces WiFi roaming

As reported in this blog on September 22, Latvia's fixed network operator Lattelekom has now officially announced that it is offering international WiFi roaming. The company, owned 49 % by Sweden's TeliaSonera (the rest by the Latvian state) has signed a deal with Deutsche Telecom affiliate T-Systems (as reported here) as well as with operators in Portugal and Finland. Sweden, Great Britain, neighboring Estonia and other countries will come on line later, but before year-end. Initially, some 500 foreign WiFi sites will become accessible (at rates charged by the foreign host). T-Systems roaming charges will be LVL 0.0667 per minute.
Details on how the roaming enabled card will work are still sketchy – it will cost at least LVL 2.95 per month to "subscribe", but with no indication of the denominations of any pre-paid packages.
As I wrote earlier, it remains to be seen whether this deal will be attractive or will Latvian "road warriors" set off looking for freebie hotspots available in many countries (as part of the service at hotels or coffee shops).

Monday, October 04, 2004

Latvia's Triatel maxes out its number stock

Triatel, the Latvian CDMA-450 mobile operator set to launch commercial services in a few weeks, said it has maxed out the range of numbers it is allowed to used under its licence. The company doubled the number of numbers (that feels silly to write, but true) to 60 000 from 30 000. Triatel's marketing director Uldis Stüre said the decision to max out the the company's assigned numbers was an signal of confidence that it rapidly gain customers for its 3G services.
CDMA-450 is still not a commonly used standard in Europe, but proponents said at the recent Baltic Sea Communications Forum that the technology was gaining acceptance in places like the Czech Republic, Romania and Portugal (?).
In the Czech Republic, Eurotel's CDMA -450 was apparently perceived as a threat to parent company Cesky Telekom's wireline DSL business, leading to an acrimonious management reshuffle at the mobile operator.

Friday, October 01, 2004

Some foreign interest in Latvia's 3G/GSM auction?

A marketing research and consulting company, Ticon Latvia, is expected to report by the middle of October on the feasibility of holding an auction for Latvia's third GSM/UMTS licence. Latvia's prime minister Indulis Emsis has already jumped the gun on the report and said an auction will be held in 2005 in the interest of increasing competition in mobile services.
According to information provided to this blogger, the Latvian PM may have acted on preliminary information from the consultants, whose mandate was to interview "somewhat more than 10" Latvian and international companies. The researchers apparently got some favorable response.
It is said that French, German and Russian mobile operators have shown some interest. Orange and T-Mobile and Russia's NTS (so says one of the blogger's background sources) are mentioned as possible candidates.
More interesting speculation: the market survey report, either explicitly or through the data and operator viewpoints it compiles, may recommend splitting the third licence into an immediately effective third GSM licence and some kind of option or right or first refusal on UMTS. In other words, if XYZ Mobile buys Latvia's third licence, it can start GSM immediately, but also gets the exclusive right to activate its UMTS licence during a certain period, say two years, like the moratorium on new licences that came into effect after the abortive 2002 GSM/UMTS auction.
Ahead of what was widely termed a fiasco (the starting bid was set at LVL 7.6 million), Lithuania's Bite and Radiolinja showed some interest in the Latvian licence.
By some interpretations of the 2005 draft budget, Latvia hopes to get LVL 1.136 million in revenues from a UMTS licence. Nobody (not the Finance Ministry, not the Transport Ministry that oversees telecoms, nor the Public Utilities Regulatory Board, which would run the auction) seems to know where this figure came from.
Tele2's chief executive in Latvia Mats Tilly said his company would consider legal action if the terms of the third licence tender differed substantially from those Tele2 accepted when it bought a UMTS licence for LVL 5.8 million in 2002. Tilly was apparently upset by the assumption that the new operator would pay five times less. Latvian Mobile Telephone's (LMT) president Juris Binde is more philosophical, remarking that the price of things changes. Meanwhile, the odd man out, CDMA-450 operator Triatel is poised to launch 3G services in a limited part of the country by the end of October. So the third licence will actually be for a fourth operator.
Janis Lelis, the managing director of the Latvian Telecommunications Association believes that there is a potential untapped customer base of around 300 000 mobile users on top of the 1.2 million already using mobiles (the total population of Latvia is about 2.4 million). Even if three GSM operators split the newcomers evenly, Lelis thinks an operator with 100 000 customers would be viable, especially if the regulatory authorities enforce favorable interconnects and so-called domestic roaming (the newcomer can use incumbent networks until it builds its own).
Perhaps the hybrid GSM licence/UMTS option or first-refusal will prove to be the most viable when Ticon Latvia makes its expected report.