Sunday, February 19, 2006

The inexhaustible patience of the Swedish half-mother

Despite all the adventures in Barcelona with pickpockets, a 3GSM World Congress press room like a refugee reception center and a Third-World commuter train experience, I did come away with some insights on the state of play between TeliaSonera, the half-mother of Lattelekom, and the Latvian government, the other, slightly-more-than-half mother.
First, there is an ongoing discussion, most of it apparently by written communication, on models for the privatization of the remaining 51 % of Lattelekom. Since price is a sticking point, and since the Latvian side imagines that Lattelekom (which they want to sell as a bare-bones fixed network operator) is worth more than some of the figures suggested by TeliaSonera, one possible model is to list Lattelekom on the Riga Stock Exchange and get some kind of market driven benchmark.
The price, of course, would be partly held up by the fact that there was one major buyer (TeliaSonera) always in the background, but also depressed by the fact that, in the long run, who needs a fixed line operator with 1/3 as many users (600 000) as Latvia's mobile operators put together (around 1.8 million)?
Both of the other companies in the Baltic in which TeliaSonera has acquired a majority holding (Lietuvos Telekomas and Eesti Telekom or was it Elion/?/) are traded on stock exchanges. In Estonia, TeliaSonera had a hard time prying a few percent shareholdings loose from the state, so Latvia has not been the only hard nut to crack in the region (never mind the mess the Swedish company faces with its attempts to buy Turkcell, etc.).
Still, it appears that nothing will happen until 2007 at the earliest, after Latvia has had its parliamentary elections in October 2006 and a government is formed. If the present coalition retains power, there can perhaps be some movement along the "share-listing" path.
One possible worst-case scenario is that Aivars Lembergs, the controversial mayor of Ventspils (who has great support in the polls) may end up forming a populist/strong-man led government. Lembergs has been hostile to foreign investment and Sweden in particular. This could lead to a scenario of a) continued stalemate or b) the pull-out of TeliaSonera from Lattelekom in exchange for 100 % of Latvian Mobile Telephone (LMT).
To me, it seems that TeliaSonera probably has a "plan B" for making LMT into a modern, mobile-centric wireless voice and data services enterprise that could develop any necessary fixed line (or fixed wireless) assets so as to offer a complete integrated services platform.
In that case, the biggest problem will be in getting LMT's management to be less conservative and, as some say, a bit arrogant with its own success hitherto (in terms of relentless record earnings, etc.).
For Lattelekom, the sale-to-anyone-else scenario will involve a longer period of state ownership while the company is prepared for this offering. As I have written before, this means an almost certain loss of many of its present top-management assets, who will not work in a 100 % state-owned telco (probably the only one in the EU in 2007 or 2008, when this scenario could come to pass). The effect on the quality of service and, above all, on the creativity of new services, flexibility, etc., that will result from political ownership will drive even more customers to smaller, more flexible and customer-oriented alternative operators and to all-pervasive wireless (voice, data, even entertainment such as TV ) service providers.
At the end of "the day" (lasting, say, half a decade) we may see someone finally taking the Lattelekom fixed network off the state's hands for a low price in order to use it for data, IPTV, and wholesale capacity provision to the private operators that will have taken over much of the dwindling fixed network customer base (mainly broadband to the home, some business services, and IP TV).

No comments: