Lattelecom CEO's fate in the balance

The owners of Lattelecom, TeliaSonera (49%) and the Latvian government (51%) were discussing on November 30 the fate of CEO Nils Melngailis and two other executives whose mandates expire December 10. A decision, based on the recommendations of the owners, will come next week (after December 3) at the earliest.
According to my sources, the Swedes, by not objecting to Melngailis plans for a management and staff buy-out of Lattelecom have indirectly declared that they want to keep Melngailis as CEO and not upset the status quo. TeliaSonera can only gain by getting out of its nearly-stranded investment in the fixed-line operator and getting a full 100% of Latvian Mobile Telephone (LMT) The government, however, seems to be considering dumping Melngailis, possibly as a way to back out of the MBO for reasons, so to speak, that lie beyond conventional reasoning.
The deal has already been shaky since the Latvian government's present crisis (prime minister Aigars Kalvitis has set an on-again, maybe off-again resignation date of December 5), which arose for reasons unrelated to the Lattelecom deal. If it goes down (rather than goes down :) ), Melngailis would resign anyway.
As to what happens next - I would say -- Nils gets an international position somewhere, with the usual hassles of moving residence and family, while Lattelecom faces the consequences of what can only be described as a typical, but in this case, very large-scale Latvian clusterfuck. TeliaSonera continues to sing the role of the half-mother Agonistes in this increasingly bizarre telco opera.

Alcatel-Lucent presents its WiMax solution

I just spent a day (as in get up at 5 AM, fly to Paris, watch a couple of hours of presentations, get back home just before midnight) at an Alcatel-Lucent WiMax event. It was on short notice and felt a bit improvised, but apparently the Alcatel-Lucent people wanted to make that everything was running as it should. The only thing they forgot was the "Don't try this at home" signs for the young man and woman who took turns riding around on a Segway while using a mobile WiMax terminal (a subcompact laptop with a camera).
On the way down, I went through Copenhagen Airport, which is rapidly developing the status of a monster airport, soon to challenge Frankfurt (as I remember it, last transit there was to Australia in 2003). Try kilometer walks between connecting flights. The airport has grown from being comfortable to a monstrosity that it takes, perhaps, 30 minutes to cross on foot in a rush, ignoring all the shops, restaurants, etc. etc.

I only have one thing to say about Paris Charles De Gaulle: the use of bad hallucinogenic drugs by French architects in the 1970s (or whenever the wacko thing was built). Also, the brilliant idea of separating the public toilets from the waiting area with the security checkpoint in Satellite 7 (WTF is a satellite, some mushroom munching froggie's cool idea while the other guy at the architect's office has left his drawing board and is giggling and shaving the office cat?)

OK, here is a video of my chat with Hyam Bolande, the American marketing director for Alcatel-Lucent's marketing director for its wireless business group. It will also be posted on my Latvian-language blog:

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Cisco's Kaan Terzioglu visits Latvia

Cisco honcho Kaan Terzioglu (vice president Central & Eastern Europe) visited Latvia and sat down for a talk with this blogger (also for my Latvian-language blog). We discussed Cisco's new program to invest in high-tech companies in the region as well as e-government solutions and the future of the internet. Here is the video:



Yes, I know he has the kid's arms coming out of his head :). Videoblogging is a learning process.

TeliaSonera's broadband honcho speaks

While in Stockholm on Friday, November 16, I had an opportunity to interview Erik Hallberg, TeliaSonera's head of Broadband services. He has a few interesting things to say about HDTV, the rising demand for bandwidth, fiber to the home, and whether telecoms operators will become media companies. And, oh yes, some remarks about the relationship between content providers and operators increasingly selling flat-rate commodity services.

Here is the video:

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TeliaSonera Mobility honcho speaks

Lars Klasson, CTO and Vice-President of TeliaSonera Mobility Services talked to this blogger in Stockholm recently about mobile broadband and other issues. Here is the video:

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Fuckwit packaging designers at Phillips

The reason the US troops in Iraq don't have enough armor is simple-- some kind of transparent Kevlar is now being used for packaging most small computer or electronic accessories. To open any of these things requires serious, heavy duty shears and practically cutting the stiff plastic package to ribbons. What fuckwit designed these packages? I understand we want to protect, say, that flash drive that will be obsolete in three months (when 16 GB cost what 4 GB do now) or to encase some other gadget worth under USD 100. But we are not, for fuck's sake, going to submit any of these products to re-entry from orbit or a shotgun blast. 

 I am surprised that consumer electronics stores are not selling some kind of superscissors for cutting open these packages, where it can take 20 minutes just to get at your headphones or USD 20 flash drive.

I just bought a LVL 7.99 set of headphones made by Philips, which, while it hadn't sealed them for eternity behind transparent Kevlar armor, had looped the wires around the inner cardboard packaging forcing me to rip the whole thing to shreds. Dutch ingenuity? Fuck yeah! Try to open the box and get your item out in a rational way!

Best English Bookstore in the Nordic region?

This may seem like an offtopic, but it isn't.  While reading the most recent edition of WIRED magazine, I found myself eyeing the latest Sony reading gadget. A bit expensive at USD 299, plus there is the Amazon Kindle, just announced (even more expensive at USD 399), but that probably doesn't work for downloading reading material outside the US. 

I experimented with an early electronic book some years ago, the Nuevomedia RocketBook, I think, which was a flop with little to download. Anyway, I the technofreak find that I still prefer (or have to settle for) the physical book. Or to be more precise, I buy the physical book through Amazon.com and, living in Latvia, rarely see a good English-language bookstore. Certainly none in Riga.

Thus I was pleasantly surprised to have a few hours to kill in downtown Stockholm, where I rediscovered Hedengren's Bookstore on Stureplan in the Sturegallerian shopping center. This is less a Swedish than a remarkable multi-lingual bookstore with a vast and often fascinatingly obscure collection of English-language books. Lots of weird popular science titles on physics and cosmology, history and military history, walls of literature and science fiction. A great way to browse, tons of books stuffing shelves, remind me of Foyle's in London, the shelves a bit crowded. Unfortunately, Swedish prices for foreign language books are a bit steep, but it is a good place to examine a title before ordering it from Amazon in the US (even with delivery in Latvia (usually via a warehouse inside the EU).

So if in Sweden and pining for a good browse of English books (yes, there are even comfortable chairs here and there, you can sit and leaf through a volume, no one says anything, there are nice books of art and photography), do try Hedengren's . 

Any yes, by the way, I do believe that electronic books, using thin electronic paper and an open universal method of accessing downloads (WiFi or wireless internet) have a future. I look forward to them, but for now, I am, alas, sticking to the paper kind. 

Mika Sarhimaa on HP's challenges in the Baltics

Mika Sarhimaa, the new managing director of Hewlett-Packard Oy, which also covers the three Baltic States, talks about the challenges and opportunities of working in these markets. The interview was conducted during an HP event in Riga at the Radisson SAS Daugava hotel on November 13. Here is the video:

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Alex Sozonoff of HP discusses Web 2.0

Alex Sozonoff, a retired Hewlett-Packard executive and chairman of HP Finland & Baltics, sat down with this blogger to talk about Web. 2.0 and its impact on business and business IT. Here is the video:

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No chance of a Lattelecom deal in 2007

Latvia's acting minister of Economics and Justice Minister Gaidis Berzins (Fatherland &Freedom) has said there is no chance the present (disintegrating--JK) government will approve the Lattelecom management and employee buyout (MEBO).
The government is expected to resign on December 5, the same day that beleaguered Prime Minister Aigars Kalvitis has said he will step down. Kalvitis was under pressure to resign because of a number of political scandals and controversies unrelated to telecommunications privatization.
Lattelecom management led by CEO Nils Melngailis had hoped to seal the LVL 300 million deal involving The Blackstone Group as a equity partner by year's end. It now looks like Latvia could be under a caretaker government or facing political turmoil, perhaps including dismissal of the national legislature, the 100-member Saeima, well into 2008.
The political situation along with increasing uncertainly on financial markets around the world increases the liklihood that the Lattelecom MEBO will simply be muddled to death. See my earlier posts.

Tele2 open to Lattelecom on its network

Tele2 in Latvia is open to the idea of Lattelecom starting a virtual mobile operator on its network, Tele2 Latvia CEO Petras Kirdeika told this blogger.

Kirdeika said Tele2 would consider a commercially viable proposal from Lattelecom or any other operator wishing to lease part of Tele2's mobile network.

He said that the company would also be ready to negotiate a co-financing agreement if Lattelecom's (or another operator's) needs required the building of additional network capacity.

In reporting its third-quarter results, Tele2 said it had built a record 50 base stations across the country during the period.

Lattelecom CEO Nils Melngailis has said that if the company succeeds with its MBO, it will have to move quickly to offer mobile services in addition to fixed line telephony and internet. Bite Latvija, which has hitherto been open to virtual operators, effectively declared a moratorium on new actors on its network after being purchased by  Mid Europa Partners, a private equity company. Kenneth Campbell, CEO of the Bite Group, told this blogger (as reported in the magazine Kapitāls), that Bite's priority was to strengthen its own brand. 

He let it be understood that Lattelecom was such potentially strong brand that it could not be allowed to cannibalize Bite's potential and existing customers.

Tele2 Latvia's CEO on 3rd quarter results

Petras Kirdeika, CEO of Tele2 in Latvia, talks about third quarter results. Last year (2006), Tele2 was ranked as the most profitable company in Latvia. Here is the video:

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Lattelecom MBO not on the agenda

The proposed management and staff buyout of Lattelecom is not on the agenda of the November 6 meeting of the Latvian Cabinet of Ministers and it looks like this matter will be delayed indefinitely. Despite two valuations made by Ernst & Young and the Swedish-based investment bank Carnegie, the acting Minister of Economics Gaidis Berzins says that no official valuation of Lattelecom and Latvian Mobile Telephone (LMT) has been made (according to lengthy official tender proceedings to find the valuator, etc. etc.).

Berzins' Fatherland & Freedom Party has expressed serious reservations bordering on outright opposition to the MBO, as has the party's Member of the European Parliament Inese Vaidere, writing several opinion pieces in the Latvian media.

The postponement of the decision on the MBO is,  I think, the beginning of the end for this attempt to privatize Lattelecom. The matter will be dragged long into 2008, debated in a fog of bizarre conspiracy theories and wacko economics, and finally muddled to death. 

Lattelecom MBO prospects darken

With the Latvian government falling apart for reasons unrelated to the Lattelecom MBO proposal, and with the remains of the government apparently split on whether to approve the deal on November 6, I see the prospects for the deal going through darkening.
It now looks like the government may disintegrate without deciding, or put off a decision beyond its own rapidly diminishing shelf-life. I was on a very popular TV talk show here with a number of people speaking out on what would be Latvia's largest privatization deal hitherto, including Lattelecom CEO Nils Melngailis and two persons who were actually three government ministers (Ina Gudele as herself, the Special Assignments Minister for E-government and Gaidis Berzins, Minister of Justice and acting Minister of Economics). Ina clearly signaled that she was leaning toward approving the deal, while the two-in one Berzins tilted toward reservations and hesitation. Ina said she had not read the latest government documentation on the MBO and Berzins said it was confidential, but basically dealt with "principles" rather than a yes or no to the current proposal.
Aivars Tabuns, a mildly suborbital sociologist then mocked the confidentiality as if we were addressing a terrorism case, not a business deal and I could largely agree. But then Tabuns insisted that the price of Lattelecom had to be calculated on all the money spent on network investments (more that LVL 500 million) and the market value of all the real estate owned by Lattelecom (as if we were preparing for an asset strip, not a privatization). Peteris Smidre of arch-rival Baltkom, a cable TV and telecommunications group that has clashed with Lattelecom in the past on interconnect and other issues, also said that the only business case he could see at the time is an MBO. Smidre had also indicated his interest in a Lattelecom privatization. In terms of getting a substantial part of the company, were that option open, Baltkom would also have to go to the banks and to private equity, perhaps for a "management buy-in"(if Peteris wanted to exercise some board/managerial control in the deal).
Latvian speakers might be able to watch the show through this link.
A couple of additional considerations have come to my attention:

--The Blackstone Group probably won't wait more than three months, six maximum, for the deal to be approved. Then it will walk away.
--Should the deal fall through, Nils Melngailis will resign as Lattelecom CEO. If it is delayed beyond November 6, Nils will hang on to the bitter end or close to it, but the word is that some of his key staff may be handing in resignations and seeking other work as early as next week if the MBO isn't approved. However, one doesn't know how much job churn there would be anyway.

--according to a valuation of Lattelecom made for the magazine Kapitāls (I write for them as part of my job at LETA) , the company is worth around LVL 300 million as it is now (with a 23 % stake in Latvian Mobile Telephone/LMT), but only around LVL 175 million when the stake is taken out. Although Lattelecom is not traded and all valuations are educated guesses, Nils said on TV that he believed the value of the company had declined somewhat since the MBO proposal was made in the spring.

It looks to me like the muddle scenario is the most likely one. If Nils goes, then I see TeliaSonera getting Lattelecom at the end of a long and rocky road ahead (perhaps a desperately organized public auction in mid-2009) and getting it, probably, on the cheap. This is not the worst case scenario, but neither is it the best. As I think I said on TV, the whole process has been dictated by the government's clear decision not to sell Lattelecom to the Swedes and subsequent refusal (by delay) to do a deal that would have given them 100 % of Lattelecom plus cash for 100 % of LMT ending up in Swedish hands.