Monday, December 24, 2007

Merry Christmas and all other seasonal holidays!

 A Merry Christmas to all my readers who celebrate the holiday. I have apparently missed Hannukah (it only sometimes falls on the same dates as Christmas, but I do hope that any Jewish readers celebrated it well).  And yes, a Happy Kwanza, to any African-American readers who follow this tradition (around Christmas time, if I am not mistaken) as well as, I suppose, any Africans. Maybe I should stick to Season's Greetings and stop struggling to do the ethno-politically correct thing for everyone? :)  
Oh yes, and a Happy Solstice (Saulgrieži) to any and all Latvian Keepers of the Diety (Dievturi).
Did I miss anyone?

Saturday, December 22, 2007

Blackstone honcho outlines what could be

I had an opportunity to do a phone interview on December 20 with Walid Kamhavi, a Blackstone managing director (they have many) connected with the foundering management buy-out of Lattelecom
The odd part is that I published a complete translated transcript of the interview on my Latvian-language blog(can be found through  almost immediately --I simultaneously translated and transcribed. But I am not really up for listening to the whole thing again (unfortunately, I leapfrogged to videoblogging, skipping podcasting along the way).
So here are the main points:
--Blackstone can offer many synergies to Lattelecom, since it hold stakes in several telecoms companies (Deutsche Telekom, TDC) and telecoms related companies (some wireless and cable outfits listed on their home page). It can also offer economies of scale in certain kinds of purchasing and sophisticated financial advice and contacts should Lattelecom or any of its subsidiaries want to tap the capital markets. 
--Blackstone is partnering with the present management of Lattelecom (Nils Melngailis) and any change would mean a review of their commitment.
--at some point, the passage of time will erode the anticipated benefits to all parties to the proposed deal (a nice way of saying -- delay long enough, and the thing will fall apart, which I believe is exactly what the Latvian government wants to happen).
--should the deal go through, Blackstone does have an exit strategy, but this is a long-term project that would involve growing the value of Lattelecom with the engagement described above. The eventual divestment could be within the telco industry, as a merger or consolidation (again, presumably in telecoms), or to new financial investors (another Blackstone-type outfit).
All in all, it was a fair view and shows that contrary to the hallucinations of some Latvian commentators, Walid and his team are not George Soros' handpuppets nor mere speculators tossing their telecom roulette chips on the table and standing back to wait for a win. 
Alas, I view Hell as a place where journalists spend eternity transcribing interview recordings, so I probably won't do the English-original version unless the Christmas spirit and long Christmas holidays take their toll. 
The reason I rushed to do the Latvian-translated version was that I saw the Dienas bizness (my former workplace) journalist come in after me (at the Lattelecom office) to do her phone interview and presumed they would put something on their website immediately. They did, but it was a rehash of my Latvian blog. The article with some different nuances, was published the next day.

Wednesday, December 19, 2007

Another death knell rings for the Lattelecom MBO

Sorry, folks, for being a bit behind on this, but the outgoing Latvian government on December 18 decided not to extent the memorandum of understanding with Lattelecom, The Blackstone Group and the bank consortium and TeliaSonera regarding the management and staff buy-out proposed by Lattelecom CEO Nils Melngailis.
The issue will be decided by "the next government", in effect, the present government 2.0 (shaken and stirred a bit), where attitudes and opinions are unlikely to change.
My call -- the whole thing will be muddled around until 1) Blackstone backs off and the consortium falls apart 2) Melngailis resigns. At the end of a day lasting 2-3 years, we may see TeliaSonera at last collecting what it has been waiting for -- both Latvian Mobile Telephone (LMT) and whatever is left of Lattelecom.
An outside chance is that the new government will organize (after a decent interval) some kind of MBO or sell-off 2.0 that will have the "right" bidders, including local interests. Though it is strange to bleed something half to death just to get your claws into it...

Monday, December 17, 2007

PM nominee hopes for decision on Lattelecom

Ivars Godmanis, nominated by Latvia's president Valdis Zatlers to form a new government, has said he hopes to settled the issue of Lattelecom privatization, either by going through with the management and staff buy-out proposed by partly-deposed Lattelecom honcho Nils Melngailis, or by selling the company (along with the remaining state holdings in Latvian Mobile Telephone/LMT) to TeliaSonera.
Unfortunately, Godmanis (of the Latvian First Party/Latvian Way merged entity) has to deal with his future coalition partners, where the nationalist Fatherland & Freedom has opposed the MBO, with the positions of the others unclear (even though the same political salad backed the MBO deal in principle during the summer). My prediction -- more muddle well into the next year and Melngailis and Blackstone leaving the scene still very likely.
This presents both an opportunity and a problem for TeliaSonera, the only realistic potential buyer of Lattelecom (regardless of whether it is sold by open auction or as an item hanging inside the coat of a shady street peddlar). If the government abandons the MBO but nationalizes Lattelecom (and lets the Swedes buy LMT), TeliaSonera ends up holding two contradictory means of payment. One is the shares in Lattelecom, whose relative value will plunge(simply on uncertainty) once the MBO crashes , and the other is cash, which will have to be paid for LMT anyway above and beyond the share swap. In other words, the whole thing will cost more cash.
If TeliaSonera buys both companies, then, of course, the total cost will be less because of the diminished value of a leaderless Lattelecom (after the deal, of course, it will be run by a CEO sent by Stockholm to run the company as a division of TeliaSonera responsible for the Latvian market)

Thursday, December 13, 2007

Two, three, many MBOs spooked TeliaSonera?

One of my sources tossed out this interesting theory of why TeliaSonera, while it agreed to the Lattelecom MBO, was also disturbed by it.
"They were thinking if Lattelecom can do it, so can other non-wholly-owned subsidiaries,"the source said. The Swedish company was worried that Elion and Estonian Mobile Telephone (EMT) (which it owns 59 % each) and TEO, the Lithuanian fixed-network and broadband operator, owned 60 % by TeliaSonera, could get subversive ideas.
I have never heard any such rumors from Estonia or Lithuania, but it is an interesting thought experiment. All four Elion, EMT, TEO break free and then join up in one pan-Baltic company, putting Humpty-MicroLink back together again in the process and making a small IT/nearshoring and data transmission powerhouse to sell services to eastern and western markets.
Would The Blackstone Group, in the process of being burned by the Latvian government, be interested in financing such a coup? After 6-8 years, a Balttelecom with customers in the Nordic countries, Russia, Ukraine and Belarus might fetch a good price should Blackstone or some other private equity consortium then want to exit.
Sorry, TeliaSonera, I didn't scare you for Halloween, so I'm doing it now :).

Wednesday, December 12, 2007

Lattelecom honcho's next-to-last letter

Nils Melngailis, the deposed board chairman but still managing director of Lattelecom has written a letter to the company's owners (Latvian government 51 %, TeliaSonera 49 %) stating that the present state of affairs presents commercial and legal risks. Lattelecom does not have a fully functional management structure in the absence of a permanent board chairman. The government has not named anyone despite effectively firing Melngailis.
As I see it, this letter is the next to last before Nils resigns and the MBO collapses. The government will then get letters from The Blackstone Group and the bank consortium stating that they have withdrawn as financiers of the deal. That will be the end of it.
What the government does afterwards is hard to predict, except that whoever replaces Nils will face all the same problems exacerbated by almost a year of indecision. Put simply, the mobile operators are capable of starting to eat Lattelecom's lunch by offering flat rate deals and quality of service guaranteed wireless broadband (at least at select locations) that is as fast as Lattelecom's DSL (10 Mbps).
Until a final resolution of Lattelecom's ownership is reached (this may take a few more years, seriously! ) the new CEO will face the same issues as Melngailis -- limited opportunities to expand outside of Latvia and no possibility to go into mobile services.
It may all end in 2010 with TeliaSonera or TeleNordica (TeliaSonera + Telenor) or Telefonica Norte or whatever buying Lattelecom at a firesale and making it the fixed network internet and IP TV division of Latvian Mobile Telephone (LMT).

Kenneth Karlberg (TeliaSonera) talks about data roaming

Kenneth Karlberg, head of Mobility Services at TeliaSonera, speaks about mobile data roaming and the advantages the Baltic countries have over countries with legacy-bound mobile services. This was filmed after a seminar in Stockholm on December 10.

Tuesday, December 11, 2007

A last chance for the half-mother? Or sue the bastards?

Latvia's acting minister of economics and minister of justice in the lame-duck government Gaidis Berzins has said that Sweden's TeliaSonera might still have a chance at acquiring Lattelecom, the fixed line operator, where it is presently a 49 % half-mother. Berzins said this in a radio interview on December 11, according to media reports.
Berzins said the next Latvian government (most likely a mash-up of the present, departing one) would have to decide on whether to go ahead with a management and employee buy-out (MEBO, if you wish) proposed by Lattelecom managing director Nils Melngailis, who has essentially been fired as chairman of the Lattelecom management board.
This can only be seen as yet another bizarre twist in the saga of Lattelecom. A proposal by TeliaSonera to buy both companies -- Lattelecom and the mobile operator Latvian Mobile Telephone (LMT) has been on the table for several years and has been delayed and muddled by the Latvian government ever since.
Last year, the government told TeliaSonera that it would not be allowed to buy Lattelecom, so the Swedish group proposed swapping its shares of Lattelecom for the remaining shares in LMT and setting a final price for the whole deal after independently valuating both companies. This was done last year, but the government muddled away its chance to nationalize Lattelecom and get some cash for LMT as well.
Now Berzins and the Latvian Privatization Agency (which formally holds the state's 51 % share of Lattelecom) have essentially torpedoed the MEBO and pushed Melngailis toward inevitable resignation from Lattelecom.
As things now stand, Lattelecom, at best, is a gefundenes Fressen (a meal discovered lying around for those who don't know German) for TeliaSonera, which had, essentially, written off the idea of owning any fixed-network assets in Latvia and was preparing to concentrate its efforts on LMT as a full-spectrum service wireless company once the MEBO went through.
In my view:

1) TeliaSonera should ask for a new valuation of Lattelecom (minus Melngailis) and then decide whether it wants to buy.

2) Maybe it should press the government to nationalize Lattelecom so as to hasten its acquisition of 100 % of LMT. That is, it should put up its 49 % for sale triggering the state's right of first refusal so the government either puts up or shuts up.

3) It should not, at the end of the day, rely on any promises or representations by the Latvian government and perhaps consider some form of legal action to force a decision. I think nothing else will work for the foreseeable future.

Friday, December 07, 2007

Lattelecom CEO fired, essentially...

The shareholders of Lattelecom (Latvian government 51 %, TeliaSonera 49 %) declined to extent the mandate of Nils Melngailis as managing board chairman of the company. He will continue as managing director, but the move is seen as a clear expression of no-confidence in his plans for a management and employee buy-out of Lattelecom. The decision also effectively torpedos the 300 million LVL deal which depended on Melngailis and his team continuing to run the company. Among the intended investors in the MBO was The Blackstone Group of the US, one of the world's largest private equity companies.

Lattelecom CEO out, but not...?

The Supervisory Council of Lattelecom has decided on December 6 not to recommend the extension of Nils Melngailis mandate as a member (and chairman) of the Lattelecom Managing Board while recommending to shareholders the re-election of two other board members whose terms expire in a few days.
The stakeholders (Latvian government 51 % and TeliaSonera 49%) are holding an electronic meeting on December 7 to vote on these recommendations.
The council's actions amount to a defacto dismissal of Melngailis, but no replacement candidate has been recommended. Supervisory Council chairman Gundars Strautmanis predicts that despite the Council's recommendations, Melngailis will be re-elected and also continue to work as managing director (CEO) of the company, a position theoretically unaffected by his loss of a board seat.
Meanwhile, lame-duck prime minister (his government resigned on December 5) Aigars Kalvitis says this is the best time to privatize Lattelecom (!?), a surprising reversal of the government's defacto rejection by delay of the MBO offered by Melngailis with a consortium including several banks and The Blackstone Group to finance the deal. The fact that the government has apparently voted against recommending re-election of Melngailis also amounts to a rejection of the MBO, even though some officials say this is not so.
My interpretation -- make things such a murky mess that the MBO consortium, especially Blackstone, will go away all by themselves. Then, perhaps, the carcass can be divided among local vultures...:)

Wednesday, December 05, 2007

Nokia's mobile journalism solution

qwdzbHere is a video of a rather chaotic talk with a Nokia person about Nokia's mobile journalism solution (an experiment) for Reuters. The press room situation has improved slightly, it seems you click on downloading the Boingo app but them (and no one tells unless you ask) you get offered free WiFi for the Nokia event. I have actually managed to get a LAN wire and a mooch socket (to recharge/run my MacBook) but earlier it would have been impossible. There were people sitting along the walls in this press room. The pressure is off a little.
The event has been interesting, for example, Chris Anderson of WIRED (on how more and more stuff and services will be " free" ) and others talking about (Joseph Paradiso of MIT) talking about ubiquitious sensors and Google for Reality (finds your sensor-traceable possessions) and other rather far out stuff.

NokiaWorld-- the good news :)

There is lots of good news from Nokia World, some interesting presentations (Chris Anderson, editor of WIRED, among others) and the stunning announcement that Nokia would be giving away downloads of all of Universal Music's collection for one year with the purchase of any music-capable phone. Also Nokia internet radio sounds interesting, I could listen to Boston's WZLX anywhere on my phone. Just wonder what it would cost in terms of connection fees - data transmission charges and the like.  I hope to upload a video interview with a Nokia guy on their mobile journalism project, but the press room facilities are still crowded and barely adequate (did get the deceptive free WiFi to work after being told the non-obvious way to start it up, 

Tuesday, December 04, 2007

Clusterfuck award 2007 -- the Nokia World Press Room

Sometimes going to international events, I make a bet with myself that something may happen to justify the use of the term clusterfuck. It happened at 3GSM World in Barcelona in 2006, where the Qualcomm sponsored press room went down-- no power, no internet, almost nothing. It did get fixed later.
This year's clusterfuck award goes to the Nokia World press room in Amsterdam, which promises free WiFi but actually tries to drag you into a Boingo subscription through a one week free trial with software that can only be downloaded for a PC (I have a Mac) or a Nokia phone. In addition, there are almost no power outlets for one's own laptop in the press room, just lots of IBM think pads or some other faceless laptop chained to the table and attached to a LAN. I am not happy unplugging these or mooching the LAN, but I will do that. What else can I do.

Oh yes, and the press work room is severely overcrowded. No place to sit, no place to mooch a LAN cable. No internet connection unless you join BoingoWorld. Doesn't anyone arranging these events ever learn that it is bad to fuck with the press?

Good news-- OVI, the Nokia WebNG (as in next generation) application/platform will be available for Mac. Well, as the Swedes say – good morning axe handle at last! Also, all Universal Music's songs will be available for free download for a year on any new Nokia music capable phone. Great news for kids and 20 somethings and yes, I have an iPod and an N95 too!

More later. Gotta write for my Latvian blog who is paying salary for me to be here.

Monday, December 03, 2007

Melngailis kicked -- it's semioffical

Acting Latvian economics minister (and Minister of Justice) Gaidis Berzins told journalists he saw no legal or economic reason to extend the tenure of Lattelecom CEO Nils Melngailis. Berzins qualified the statement by saying it was his personal view, but the ministry he heads (after the resignation of Minister of Economics Jurijs Strods) is the holder of the state's 51 % share in Lattelecom. This effectively torpedos the LVL 290 million management-employee buy-out that Melngailis had proposed as a way of breaking the defacto deadlock and uncertainty the company faced because of its unresolved ownership issues. TeliaSonera, which owns 49 % of Lattelecom was told that the government would not sell it the rest of the company. The Swedish group has been asking for years to get 100 % or at least a majority in both Lattelecom and Latvian Mobile Telephone (LMT), where it currently indirectly (through a proportional share of Lattelecom's 23 % of LMT ) holds a majority. It appears the Latvian government, which will resign on December 5, will not do....whatever...

Report: Government effectively fires Lattelecom CEO

The Latvian daily Diena reports that Nils Melngailis, CEO of Lattelecom, has been effectively fired by the Latvian government. Minister of Justice and acting Minister of Economics Gaidis Berzins reportedly told Melngailis that the government, which owns 51 % of Lattelecom, would not extent his tenure as chairman of the management board.
The newspaper points to Melngailis support of a management-employee buy-out of Lattelecom as the reason for the government's step. Reported Baiba Rulle suggests that former prime minister and founder of the ruling People's Party, the so-called oligarch Andris Skele may be behind the effort to unseat Melngailis.
She earlier wrote that Melngailis brought the large US private equity group Blackstone into the MBO deal in order to checkmate efforts by Skele to get a piece of Lattelecom. Skele has been known for making extremely complex and byzantine arrangements to take an almost untraceable interest in major projects. He allegedly backed the discredited Latvian TV digitization project through several layers of offshore companies.