Management/staff offers LVL 290 million for Lattelecom

One of the pitfalls of speedblogging is errors. They stand corrected, including the headline.

Lattelecom's management and staff are offering TeliaSonera (the half-mother) and the government a total of LVL 290 million (around USD 580 million) for all of the fixed line operator, my one-time rival Baiba Rulle reports in Diena, the national daily.
The sum is around LVL 40 million above valuations for the company and apparently doesn't include the 23 % of Latvian Mobile Telephone (LMT) held by Lattelecom. A new legal entity will be formed to hold the Lattelecom participation on behalf of the management and staff with the whole deal financed by "international banks". Including the LMT holding, the amount paid for Lattelecom would be around LVL 450 million or USD 900 million, with around LVL 160 million to be recovered by selling 23 % of LMT to TeliaSonera.
To firm up the tentative committment to the buy-out by financial institutions, Lattelecom needs the government's go-ahead for the management/staff buyout. This would allow the financiers of the deal to do a complete due diligence on the company, Lattelecom CEO Nils Melngailis told this blogger recently.
The news comes shortly after Lattelecom top executives apparently got the go-ahead for the buy-out from TeliaSonera, who sees this as a way out of its endless halfmotherhood. A proposal to swap the 49 % Lattelecom holding plus cash for the remaining part of LMT has been on the table for nearly a year with no clear response by the Latvian government.
For Lattelecom, some deal, any deal is necessary to set a medium and long-term direction for the company. While Lattelecom has chafed somewhat having to deal with the half-mother, falling 100 % into state ownership is seen as the worst possible outcome.

Baltic (and other) Skypies can breath easy

Skype users in Latvia (where there are said to be very many) and the other Baltic countries can breath easy, because Skype doesn't see any intellectual property issues with its voice over IP (VOIP) technology. Skype spokesman Villu Arak (at Skype's Tallinn, Estonia skunkworks)said this in a very brief statement when asked about the implications of Verizon's legal actions against Vonage. He declined to comment on the specific case.
The Verizon- Vonage dispute has centered on a set of VOIP patents that allow internet connected users to call ordinary phone numbers. Some analysts have said that applied as broadly as in the court decision affecting Vonage, the patents claimed by Verizon could be violated by almost all VOIP services.
The decision by a US court to defer an injunction preventing Vonage from signing on new customers has probably saved Vonage from a quick demise, although the company has other issues (large churn).
With Skype apparently safe and a good chance that the lower court decision on the scope of the patents will be narrowed, the only people with anything to worry about are Balts living abroad who might have taken a Vonage number from Cleveland or New York while spending the summer at a second residence in Riga, Tallinn or Vilnius.

Draugiem.lv founder speaks in Stockholm

Lauris Liberts, the founder of draugiem.lv, the Latvian social networking site with more than 900 000 users (in a country of 2.2 million), spoke about his use of outsourcing at the Global Forum in Stockholm on April 20.

Rumors & Whispers at Global Forum

I have been in Stockholm at the Global Forum, a big business conference sponsored, among others, by Lattelecom. Naturally, there was opportunity to catch some rumors about what may be happening next.

1) It appears the half-mother (TeliaSonera) would be ready to go along with Lattelecom's staff and management buy-out proposal. This is rather logical, because it would bail the half-mother out of what is beginning to look like a stranded investment. So far, the Latvian government has made only one decision-- that it will not sell both Lattelecom and Latvian Moble Telephone (LMT) to TeliaSonera. It is willing to sell just LMT, but the government has made no decision in nearly a year about whether it will finalize a deal swapping its remaining holdings in LMT for TeliaSonera's 49 % stake in Lattelecom plus a cash payment. Independent appraisals have been made of both companies, it should be a matter of quick negotiation to seal the deal, but the Latvian government continues to waffle and waver.
The management buy-out proposal is a means of pressuring the government to do something, to make a decision soon, but at the same time, it is not a bluff. Lattelecom has its ducks...sorry, banks lined up and if the deal were to go through, TeliaSonera could cash out of an investment in which it would be bought out anyway by the Latvian government, only God only knows when.
As things look, Lattelecom top execs got the nod on their idea from the half-mother while here in Sweden.

2) Look for Lattelecom and the Latvian social networking website draugiem.lv to strike a businessm-to-business networking deal, something along the line of people in the same company or "fans"(customers) of a certain product forming subgroups in draugiem and companies setting up shops and internet sales points on draugiem. Lauris Liberts, the founder of draugiem.lv and Lattelecom officials talked openly of this idea. Liberts also said he expects draugiem.lv to pass 1 million users in the foreseeable future.

3) Finally, look for Lattelecom to launch an alternative, private sector e-signature that can be used on a mobile phone. Details are sketchy, but if the software gadget is cheaper to obtain and easier to use than the state and Latvian Postal Service sponsored official e-signature, then it could take off. Rumor has it that the number of e-signatures actually bought by private sector businesses and private citizens is perhaps a couple of thousand.

Also ran into some dumb-ass behavior characteristic of broomstick-up-the-ass stereotype robot Germans when a Swedish immigrant taxi driver refused to detour on a fixed price trip from Arlanda airport to some hotel downtown and let me off where I was staying in Kista, just off the main highway from the airport. Had to pay the fucker an extra SEK 50. Unbelievable. Just a few years ago, I was in the same situation, sharing a cab after missing the airport bus, and it was absolutely no problemo, the guy let me off along the way, I paid the other passangers my share and that was it.

Cisco's Piotr Pluta speaks about "The Human Network"

Cisco Baltics manager Piotr Pluta, recently at Cisco Expo 2007 in Riga, spoke to this blogger about Cisco's Human Network strategy, mobility and other issues.

Mark Emanuelson of Cisco talks about SMEs

Mark Emanuelson, who manages marketing strategy for Cisco Systems in Central and Eastern Europe, talks, among other things, about Cisco's strategy for small and medium-sized businesses in his area of responsibility,

Lattelecom launches IPTV

Lattelecom held a press conference on April 17 to announce its IPTV service. I got Gints Kiršteins, head of the Content Business Division of Lattelecom to talk about the new service.

Lattelecom looks to HD movies on demand

Lattelecom has yet to commercially launch the IPTV service about which I wrote a recent rant, but it is already looking beyond the first package of over-the-DSL link services to IP telephony, high-definition video on demand and surfing the internet on high-definition screens.
The real "killer app", although to a rather limited audience in Latvia at present, is the equivalent of an HD DVD player (for special programming and rental films). The company is already testing a second-generation decoder that can be connected to an HD capable TV.
By offering a "virtual" HD DVD player, Lattelecom offers a service where users do not have to choose sides in the ongoing HD DVD format wars. Regardless of whether the film is on HD DVD or Blu Ray, IPTV subscribers will be able to watch it.
The present new generation DSL modems to be installed with IPTV subscriptions have a port for IP phones. This means that Lattelecom may follow in the footsteps of Elion, the Estonian fixed-line operator, which has an IP telephony service with a globally portable number (in reality, an IP address for the phone) making it possible to call a user of the Elion service for local rates wherever in the world the phone is connected to the internet. A similar service by Lattelecom would make free or nearly free global voice possible.
The price of HD capable flat screens is falling in Latvia (as elsewhere), so as these are sold in increasing numbers, they can be used to surf the internet (both the current and the second-generation decoders can have keyboards attached). Presently, ordinary TV screen definition is considered inadequate for displaying many internet pages.

Political depravity and telco privatization in Latvia

Normally I would not write on this non-political blog about the outrageous, depraved state-capture corruption in Latvia suggested by a written agreement between a powerful oligarch and one (probably several) Latvian political parties. However, the alleged (?) contract published on delfi.lv and widely discussed in the media (it was first disclosed by TV talk show host and investigative journalist Jānis Domburs) contains a direct reference to Lattelecom. Under the contract, the political party agrees not to promote the privatization of Lattelecom. The contract was signed between the now jailed Ventspils mayor and oligarch Aivars Lembergs and his circle and, apparently, the Latvian Social Democratic Workers Party (!) in 1999, but it may well have been renegotiated with other parties with the same terms. By some accounts, the Social Democrats were paid LVL 70 000 for their cooperation, a fair sum eight years ago, but chump change today. Anyway, the existence of these kinds of secret contracts and back-door financial support could be one reason why the privatization of Lattelecom and Latvian Mobile Telephone has been running in place for all these years...
P.J. O'Rourke has already written a book called Parliament of Whores, and, anyway, I don't write about Latvia's parliament, the Saeima.

Mauku Saeima, anyone?

And from a market anarchist blog:

It's terribly unfair to compare government officials to whores. It slanders whores. What have whores ever done to deserve being compared with government officials?

IPTV -- so far, 90 % f**ked

When you beta test something, obviously there us a curve of testers ranging from those whose experience is excellent to those whose experience is a catastrophe. At this stage of the game, perhaps those who uncover a clusterfuck may well be of more value than those, for whom all goes as expected. In my case I believe whatever is wrong, in the sense of bizarrely fucked up is individual to my connection.

I have Lattelecom's test mode IPTV hooked up on their new DSL modem connected to a Ruckus wireless IPTV setup (too much trouble dragging Ethernet cables through my kitchen and across the hall, so Lattelecom lent me their test equipment). After trial and error and some help from Lattelecom, I got the Ruckus connection to work and the IPTV menus actually showed up on my screen. But then

so here is the GOOD FUCKING NEWS...

the only thing that worked was video on demand. I actually started watching one of the test films and it looked great, 16:9 image, just like playing a DVD and I could wind it back and forth, stop it just like a DVD or video. If this works and looks this good for everyone, it will be a killer app for Lattelecom's IPTV. You can forget buying even a cheapo LVL 25 DVD player made by yaks on some Chinese steppe. Excellent -- at least the one time I tried it and didn't watch the whole movie because it was late -- I only disconnect the normal WiFi and do these experiments when everyone else has gone to bed and no one wants to watch "regular" TV.

AND THE F**KED UP PART...

Check this video.



I shot this on my Nokia N-80, ghastly quality. The problem is most likely with my particular DSL connection. The multicast simply doesn't work. Kind Kristine of Lattelecom said to wait and the picture might pop up. It hasn't over the past 30 minutes, so it never will.

Nice try. Maybe it will get fixed, maybe not...
I certainly hope it works for most customers when this is commercially launched at the end of the month or whenever.
What upsets me most is that my DSL internet works only via a direct ethernet to my desktop computer. I plug the same m-f**king cable into a DLink DI-524 and even though I get onto thw WiFi network, I got no internet connection. The IP-non-TV runs nicely over the Ruckus gadgets. This is as f**ked up as it gets...

Siemens opens SAP training center in Riga

Siemens in cooperation with SAP has opened an SAP training center in Riga, Latvia covering the Baltic region. The purpose of the center is to provide SAP users with training courses in Latvian, English and Russian. Mika Tanner, head of training for SAP Nordics (the Baltic operation comes under Nordics) talked to this blogger about the new training center:

James Enck shuts it down and other matters

A blogger that I often read, James Enck in his EuroTelcoBlog, has announced that he is closing it down because of a major job change. James is leaving his post at Daiwa in London apparently to join a high powered Wall Street team (he doesn't say who). For one reason or another, blogging is not part of the game where he is going, though he doesn't exclude that he could reappear in the blogosphere. I enjoyed reading James from time to time and took note of his interest in FTTx solutions, probably the only way that fixed-line operators can stay significantly ahead in the bandwidth and speed categories. Best of luck to James at his new position.
I also shuffled through some statistics from the Latvian Telecommunications Association on market shares on the total voice (fixed and mobile) market. Tele2 is the biggest by a slight margin (in terms of users) with 32.4 % in 2006, followed by Latvian Mobile Telephone (LMT) at 31.8 % . Lattelecom had 21.1 %. The total market grew, however, by 14.6 % and the share of "other" voice providers grew to 14.7 % of the market from 4.7 % in 2005. Most of this growth is due to the appearance of Bite as a serious competitor during the year. In early 2007, they chalked up user 200 000, a person in the town of Jelgava who got 200 000 free minutes on the Bite network as a prize.
What is a bit confusing is that there is certainly some duplication of users -- most mobile users are also on the Lattelecom net, if not as voice callers from home, then as DSL subscribers (there are more than 100 000 of them). Also, fixed voice is folding into internet. Many of the 100 000 + DSL subscribers and those using other internet services are surely using Skype a lot. Skype says Latvia is one of the densest user locations relative to population.
In essence, except for charge by the minute mobile calling, the voice market is relatively meaningless as voice becomes a feature of flat-rate internet. In a few years, as reasonably priced flat-rate mobile internet spreads, voice (mobile Skype and the like) will also become a feature of this service. So soon, there will be little reason to talk about voice :).

Management/staff buyout proposed for Lattelecom

Lattelecom's management has proposed a management/staff buyout of the company as an alternative to the long, drawn out negotiations with the half-mother TeliaSonera on a resolution of the privatization of Latvian Mobile Telephone (LMT).
The plan was reported by Baiba Rulle, a most capable reporter at Diena, and confirmed by Lattelecom CEO Nils Melngailis, who declined to disclose any details, citing confidentiality until the government (which has not exactly been falling over itself to talk to TeliaSonera) examines and decides on the proposal.
With Lattelecom (minus the 23 % of LMT it holds) valued at at least 260 million lats, this is probably a bit more than the company's executives and staff can afford out of pocket. So in all likelihood, the proposal has lined up some kind of deal with either a bank, a banking consortium or private equity investor.
My guess is that some people in the government may see this as a "back door" for evil foreign (Western) financial interests trying to prevent them from running Lattelecom as a 100 % state-owned company that can be politically influenced to make commercially dubious investments or to simply operate as a Ministry of Telecommunications rather than an enterprise.
This is exactly what management is trying to head off -- the (as the Germans would say) Bock zum Gaertner (Billygoat as a gardner :) ? ) scenario of state ownership. At the same time, Lattelecom' s management sees the half-mother as a little slow on some important decisions and would, perhaps, not mind having TeliaSonera out of the picture.

Nozare.lv blog temporarily f**ked (update)

Since I have many readers of this blog in Latvia, I just want to note that my Latvian language blog on nozare.lv has been offline for a couple of hours due to some server crash or whatever. I hope it will be restored soon. Several other nozare.lv blogs are also affected in addition to my rants on telecommunications and IT.

UPDATE: After a rather long outage -- many hours. nozare.lv appears to be back online.