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.