Tuesday, March 07, 2006

The half-mother wants an IPO?

TeliaSonera honcho Kenneth Karlberg is reportedly meeting with Minister of Economics Krisjanis Karins March 8 and one issue they may discuss is the possibility of listing Lattelekom on the Riga Stock Exchange as a step that would facilitate a number of solutions to the seemingly endless effort by the Swedish half-mother to get majority control of both the fixed line operator and Latvian Mobile Telephone (LMT). All else failing, TeliaSonera will settle for LMT alone and that, as far as the otherwise intractable Latvian government goes, should be not problem.
There are several things to be gained from doing a Lattelekom IPO:

1) Both sides would get a market price/valuation for the company instead of spending money finding investment bankers who a) would value the company cheap for the buyer and b) dispute that valuation for the seller. At the end of the day, each would use some kind of analogy to a company that is already on the market, so why not go to the market directly?

2) The IPO could be done by diminishing, perhaps proportionally, the holdings of the existing stakeholders to create a pool of shares (Lattelekom would be converted from a Latvian limited company or SIA to a joint stock corporation or a/s) for the IPO. It could be in the range of 20 % or something. This would mean no one would have a clear majority, making one of the options below more attractive.

3) As in Estonia, where it now has just over 53 % of Eesti Telekom, the full mother of fixed line operator Elion and Estonian Mobile Telephone (EMT), TeliaSonera would buy shares on the market to get just over 50 % of Lattelekom. It would do so without the embarrassing attempt to woo minority shareholders that flopped with Eesti Telekom, although there is one version that I have heard that it was intended to show that TeliaSonera would not pay just any price for Eesti Telecom.

4) If TeliaSonera decided not to press ahead with a purchase of Lattelekom for whatever reason, a fair portion of the shares could be sold to a third party financial investor, such as a mutual fund or private equity fund interested in holding Lattelekom shares in its portfolio for their possible dividend flow or capital gains. This would provide an exit strategy for Lattelekom and also make an exit easier for the financial investor (who would not be getting 49 % of Lattelekom as the bedmate of the other slightly more than half -mother). Quite frankly, anyone who has been watching the situation can fairly conclude that, as far as what to do with Lattelekom, the Latvian government is basically totally batshit wacko... Deprived of 51 %, it could not make things worse either for the new investor or itself.

5) Finally, this arrangement would allow any of the shareholders to sell to a White Knight (anyone but TeliaSonera!!!) telco that would come in and buy most or all of Lattelekom, fulfilling the dreams of the Latvian government that someone reputable could be found to take a majority holding and usher in a new era of cut-throat competition in fixed network services. (Like what about the fact that more than twice as many people use mobile for voice, that there is a range of regional internet choices, some pretty good speeds for under LVL 10 per month, that there is practically free VOIP, like there is a competition problem? What planet has the government been visiting? See the batshit wacko remark above..)

Anyway, all this would be possible after an IPO. The idea is nothing new, by the way, the Riga Stock Exchange, when it was under different management, proposed as much in 2003, before
and the government had settled their arbitration dispute. The idea of giving Lattelekom to anyone but TeliaSonera can also be found in government position papers that fluttered into the hands of this blogger as the government of Einars Repse fell in the spring of 2004.

This was written while listening to the following tracks (not in this particular order):
Rage Against The Machine, Maggie's Farm (Dylan cover), U2 Vertigo, Grateful Dead, Sunshine (live), Jimi Hendrix, Sunshine of Your Love (Cream cover, live at Winterland). Eddie Grant, Electric Avenue, Green Day, American Idiot.
BTW there is something seriously fcuked with blogger.com, keeps disconnecting.

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