Monday, October 22, 2007

Lattelecom future in a muddle

First, sorry for the silence on this blog, I was in the US (Boston and Las Vegas, the IBM Information on Demand conference in the latter) and had little time to attend to this. With the uproar surrounding the Latvian government, it now looks like all options for the future ownership of Lattelecom will simply be put off and muddled away (how do you translate the wonderful Latvian expression nomuļļāts?).
As I wrote in my Latvian language blog, the current proposal for the MBO is threatened by ignorance, muddle(by the government, been at it since 2003 or so on these issues) and hounding (as close a translation of noriešana -- literally, to bark to death). At the moment, it looks like muddle will trump all other cards. However, the hounding has already started (several articles expressing suspicion, questioning the motives of the Blackstone Group, etc.).
One of the strongest critics has been Latvian MEP (member of the European Parliament)Inese Vaidere, allegedly representing right of center nationalist party, but proposing, instead of the MBO, a dirigist arrangement where Lattelecom remains majority owned by the state and is governed by a special law. Vaidere points out that the value of future dividends to the state is, in her opinion, higher than the LVL 300 million that will be paid for the company through the MBO. By this argument, some enterprises should be nationalized to provide revenues for the state instead of paying taxes. Classic socialism.
In a worst case scenario (though not "worst"for those who think a government that finds excuses for firing the head of the anti-corruption agency for minor violations should be dismissed along with the parliament backing it), the Saeima (Latvia's parliament) could be dissolved and new elections called following a referendum on the dissolution. This could drag well into 2008. At present, the government is in disarray, there is no Minister of Economics and even without the president dissolving parliament, the government may yet fall. Deciding the future of Lattelecom is the least of the government's worries.

So what will happen? The muddle will drag on to where the terms of the deal may have to be changed because of unstable financial markets globally and in Latvia (the inevitable crash of the real estate market must come soon). Then the possibly weakened or reshuffled (or caretaker) government will have to decide again. The clamor for a public auction of Lattelecom will increase, but such an event, I believe, will simply lead to it being purchased by TeliaSonera on the open market.

The MBO is not a bad idea, it has been tested with mixed, generally positive results in Europe and the USA, but don't hold your breath that it will go through in Latvia for Lattelecom.


Matiss said...

Nomuļļāts - Dawdled?

The Ubiquitous Mr. Lovegroove said...

Amen Brother!
In My Not So Humble opinion, unless LTK can find some greasy MP assistant to push some legislation through the voting, it will take quite a while before somebody looks at it again.
Due to the big mess that the political scene is now, expect back room deals to be pushed through - socialistic or not.