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...