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...

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