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.

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