Thursday, December 14, 2006

Latvian government wavers on telecom deal?

Now that the valuation figures for Latvian Mobile Telephone (LMT) and Lattelecom have leaked to the press, some rather strange statements and discussions have started about what seemed like a done deal in principle -- half-mother TeliaSonera gets 100 % of LMT for its share in Lattelecom and some cash, and the Latvian state gets 100 ) of Lattelecom and the cash (quite a bit of it).
Dienas bizness (my former workplace) reports (citing the news agency BNS) that the government has "several alternatives for what to do with the state stakeholdings in Lattelecom and LMT". Whoa! Earlier this year, then Minister of Economics Aigars Stokenbergs made it clear that the Swedes could have LMT but would never get Lattelecom. So what new plans are there? Maybe do nothing and keep the seemingly valuable 51 % hunks of each enterprise, leaving TeliaSonera with what amounts to a stranded investment?
Meanwhile, Minister of Finance Oskars Spurdzins says that the issue of privatizing Lattelecom (once it has been nationalized through the deal with the Swedes) has yet to be discussed. So we seem to be on the verge of two semi-crackpot strategies at once -- look for some unpredictable plan C (plan A was the Swedes take the lot, plan B was the Swedes gat LMT) and/or declare that Lattelecom shall be one of the few wholly state-owned telcos in the European Union. It will also be a wireline telco, therefore, in a sunset market.
Strange talk has also emerged of the alleged disinterest of TeliaSonera in Lattelecom and of the declining value of the company. Sure, without a clear mobile strategy and alternative, a wireline alone operator is going to lose value and when in comes to market, no one may want to but it. To my mind, Lattelecom's financials have improved (surprisingly) and the company has moved into new areas such as business process outsourcing, IT services and international data transmission. That is about the best it can do, given that it has written off the fixed voice market and currently has no mobile assets (which is where the voice revenues are).
As for Swedish interest 1) there is a huge amount of foreign/Swedish capital in Lattelecom, more than LVL 500 million invested in the network 2) once the government said no to selling a majority of Lattelecom to TeliaSonera, why should it be interested, except to sustain the value of its means of payment for LMT (a very good incentive not to screw around with Lattelecom or to diss it, one would think)?
In short, the wackaloonies are back (they never left :) ), something underlined by the fact that Egils Baldzens, who headed a crackpot parliamentary commission on Lattelecom in the early 00s (that commission concluded that Lattelecom's presence in Latvia had had the negative effect of a medium intensity war, based on all kinds of gonzo statistical assumptions and thinking) has been quoted in the press, though not saying much.
There could be more to say about this, especially the bizarre reappearance of the issue of the 1994 umbrella agreement in the discussion, but I gotta get to work...


tedijs said...

It is surprising how few of even industry insiders realize that Lattelecom has much bigger potential than LMT and that probably quite soon Lattelecom will cost more than LMT.
Wireless craze rules minds of those who don’t understand what really goes on in telecommunications/data transfer nowadays. Learn physics!

Bleveland said...

"Learn physics!"

If you are aiming at the limitations of wireless systems in terms of data capacity and speed than I agree. When it comes to data rates and capacity, fixed networks are and will be unbeatable for a long time ahead. The question is "who needs it?". I believe people are dismissing the fixed providers a little to guick and early. Earning loads of money on voice might be a sunset market for fixed providers, but the need for data (DSL etc) is covering that up fairly well (see the surprising results of not only Lattelecom).
Also do not underestimate the need for back bone capacity to wireless / mobile systems (today mostly done fixed). Without -paying money for- that no one wireless network can survive.

As far as for the LMT / Lattelecoms soap story, I think one line in the post beneath about internet shopping is actually very applicable here as well.

"the sleazy post-Soviet fucker habits have not faded away and are very much alive"