Tuesday, July 24, 2007

Government waffles again on telecom privatization

LJust when it seemed that agreement had been reached in principle to sell the remaining state holdings in Latvian Mobile Telephone (LMT) to TeliaSonera and to let Lattelecom be privatized by a management/staff buyout, the Latvian government decided July 24 to extend the deadline for preparation of privatization rules for LMT to October 1.
The real shocker is in an explanatory document appended to the decision:
"As, for the time being, no agreement has been reached by the parties involved concerning the future disposition of the state holdings in ...Lattelecom and ...Latvian Mobile Telephone, the draft protocol decision foresees extending the deadline for completing the task to October 1 of this year." (Emphasis mine).
What this seems to say is that all deals are off, or at least it could be understood that way. In fact, both the government and the half-mother TeliaSonera had indicated agreement in principle to a scheme that has been discussed for more than a year, namely, that the Swedes get LMT, and someone else gets Lattelecom (in the latest alternative, the management and staff). The half mother has also given a nod to the management buyout, though it may have hinted at a last minute higher offer for the whole package (TeliaSonera has always wanted to buy 100 % of both Lattelecom and LMT, but given an unavoidable choice, it would take LMT alone).
The whole bizarrely ambiguous statement comes two days before TeliaSonera honcho Kenneth Karlberg is due in Riga for talks with the government. Presumably these would have been about choreographing the deal -- waiving first refusals, detaching the state and half-mother's indirect shares of LMT held by Lattelecom, finalizing the price of everything. In this sense, there was no formal, written agreement -- work should be starting toward this, but certainly there was agreement in the common-sense understanding of the concept.
Certainly, the half-mother has reason to worry -- the half-mother's , as it turned out, half-blood press honcho called me and asked for a copy of the Latvian language documents so he could show them to his mother. This seemed very strange for a man called Niklas Henricson, until it turned out that Niklas' mother is Latvian. That is just a curious aside and a warning -- we are everywhere :). Niklas, alas, has not grown up in Sweden learning Latvian.
Anyway, one way or another, the latest and strangest from the Latvian government should be on Kenneth Karlberg's laptop at his vacation residence pretty soon.
And--one more thing... The Latvian government has ordered a tender for another appraisal of Lattelecom and LMT, even though Minister of Economics Jurijs Strods says he is sure the value of Lattelecom has not diminished. Since both companies are not traded, appraisals, such as were made last year by two different firms, Ernst & Young and Carnegie, are expensive educated guesses at best. Well, it has been a good year for the appraisal business in Latvia, that's for sure.
Whatever is really going on, the whole privatization process has, yet again, been destabilized and dragged on, probably well into 2008, even as Nils Melngailis, Lattelecom's CEO, looks to put together a consortium to finance the MBO (assisted by Lazard). That leaves Lattelecom adrift with, as Bob Dylan said, "no direction home" for at least a year, nor even any idea who home" is or will be.


Anonymous said...

Privatization is the best way to bring the efficiencies of markets to state owned companies. Why will governments not realize the quicker privatization occurs the sooner consumers benefit? No where is this more true than in telecommunications where technology changes rapidly. To delay privatization is to delay new telecommunications technology from coming to the consumers of Latvia. Around the world telecommunications companies have been privatized for almost 20 years now. Latvia should no longer delay. - Jacob Steelman, International Ventures Group

Bleveland said...

Why will governments not realize the quicker privatization occurs the sooner consumers benefit?

The government does not have the benefit of the consumers particularly high on its agenda. Nor do any other political movements have. In fact the interests of citizens do not seem to be on any political agenda at all in this country.

Latvian politicians are in principle without exceptions all crooks and liars. Any exception would simply confirm that rule.

Maybe the “Lemberg stipendiums”, paid out for frustrating the privatization process for Lattelecom and indirect LMT, were after all a bit higher than assumed so far or, of course, there was paid out a little "reminder" recently.
I heard the poor Lembergs was ill and had to be released from jail. Perfectly healthy top criminals tend to suffer from severe illnesses as soon as they are behind bars. Well, true, none of us feels well when we are kept from doing what we like to do for a living ;-)