Tuesday, January 29, 2008

Melngailis last stand - why?

Why is Lattelecom CEO Nils Melngailis, whose MBO plan was rejected by the government and who was removed (for no clear reasons) as board chairman, still hanging on?
One explanation is precisely that -- no clear reasons for him to "take the hint" and resign. Lattelecom has performed well in its financial indicators, and proposing an MBO that was initially accepted by both shareholders is not a a breach of trust as some Latvian commentators have suggested. Were this so, there would be very few MBOs in the world, as any management member proposing one would face dismissal for disloyalty, breach of trust and the like.
It is clear, however, that the Latvian government does not want Melngailis running Lattelecom, and TeliaSonera, the other owner, is probably not completely at ease with him. However, neither side can really show cause for his dismissal, so that it is an issue of honor for Nils not to resign "under a cloud" that has nothing of substance in it. Indeed, to propose the MBO and to get so far as to have The Blackstone Group and a bank consortium assembled, ready to execute, was a high risk move, showing entrepreneurial courage. It should, in proper context, be a significant merit on Nils CV even though it was ultimately torpedoed by the Latvian government.
Melngailis was recruited and hired to lead Lattelecom, to be a strategist (coming from IBM's Business Intelligence unit), not as a hard-charging, win-at-all-costs dealmaker. That he got as far as he did with the MBO is remarkable, given that, on the government side, we are dealing with capricious and irrational decision-makers.
Which brings us to the next question: WTF are Blackstone still doing here? If they want to buy 49 % of Lattelecom and share it indefinitely with the loonie-tunes 51 % government owner, there is a bridge that many Blackstone execs cross every day that may be for sale...
Here, again, the reason may be Blackstone's reputation as hard bargainers -- bulldogs, as one source put it. So they are playing out the bulldog role until -- I think quite soon -- they will drop their end of the bone.
An interesting question -- what about the four banks who are putting up LVL 200 million of the LVL 290 million deal. How long can they provisionally budget significant funds (around LVL 50 million from each) that will never be lent. Isn't it time to write off this deal and rebudget the lending plan for 2008?
My prediction -- the whole thing will be dead by Easter, Blackstone gone and Nils heading for a continued international career in a less irrational business environment. The next confrontation may well be TeliaSonera against the government's efforts to force it to sell out. A straight deal, Lattelecom shares plus cash for Latvian Mobile Telephone (LMT) and basta was also ignored by the government. They are the wavering, paranoid (everyone will sue us), hallucinating (many will come to an auction of Lattelecom), insecure and blatantly ignorant (of international business practices) villain (or simply idiot) in this whole game.

Friday, January 25, 2008

What sucks? Yahoo? Dulles Airport WiFi??

Another Foxtrot, Foxtrot Sierra* moment as I cannot get into my Yahoo e-mail (I am logged in, just doesn't click through to my mail) here at Dulles International waiting to fly back to Latvia via Frankfurt (I was at Lotusphere 2008 in Orlando). Is it Yahoo (time to switch completely to Gmail???) or the Dulles Wifi? Dumbassedness seems to be abundant here, I can hardly see what I am writing while sitting in a waiting area seat (ok, I could move...) because the bozo architect who did the terminal (a huge indoor hiking area) apparent;y wasn't taught about the sun (as in low winter sun shining blindingly through the windows). Hello! Photosensitive awnings?

*for fuck's sake!

Thursday, January 24, 2008

Mike Rhodin's keynote at Lotusphere 2008

Here is part of a keynote speech by Mike Rhodin, general manager of Lotus Software/IBM. It was very difficult getting this to you. The Disney Swan & Dolphin Resort  internet connection (both Ethernet and WiFi, including the free Lotusphere WiFi)  is simply abysmal or, to put a better spin on it, a trip back to DialUp Land. This has also seriously hindered me in doing videoblogs for my day job at LETA
Some of the good news for the Baltics is that Lotus/IBM will be focussing more on small and medium businesses with its announcement of Lotus Foundations (much of the Lotus collaboration suite prepackaged on a server) and of the Bluehouse software as a service project, which will have an increasing spectrum of Lotus functionalities and will be resold through various channels. This is not in the video, however. 

Wednesday, January 23, 2008

Dialup nostalgia at Lotusphere 2008

Remember dialup upload speeds? Remember small town America? Once you could experience th latter at a Disneyland Main Street, but now you get the former as well. I am at Lotusphere 2008, the big IBM event in Orlando While my main purpose is to blog and gather information for a magazine article for my day job at LETA, I did some English language video interviews that I thought of sharing with the readers of this blog. Unfortunately, all internet connections (Lotusphere WiFi, paid hotel Ethernet and WiFi)at the Swan and Dolphin Disney resort seem to work at dialup upload speeds of around 5 - 10 kilobytes.  So this stuff will have to wait :(. 

Friday, January 18, 2008

Lattelecom CEO comments MBO rejection

Lattelecom CEO Nils Melngailis comments the rejection of the MBO proposal (would have been the largest transaction in Latvia to date). I filmed this while Nils was speaking to a journalist from Bloomberg News.

My personal view: It is time for Nils to move on in his career. There is no point in being a masochist in a business environment (Lattelecom's state owner) that is more like a monkey house or an insane asylum that a place where rational choices are made.

Thursday, January 17, 2008

Latvian government kills Lattelecom MBO

The Latvian government has rejected the LVL 290 million management and staff buyout proposed by Lattelecom CEO Nils Melngailis and financed by The Blackstone Group and a consortium of banks.
Prime Minister Ivars Godmanis proposed, instead, that TeliaSonera sell its 49 % holding in Lattelecom to Blackstone or someone else, getting a chance to buy mobile operator LMT in return. At some undefined time in the future, the government will then auction its 51 % share of Lattelecom to a select shortlist of serious European Economic Space (European Union plus Switzerland and Norway) companies but NOT TeliaSonera.

First impression-- I was right that this deal would be effectively killed by the government.
The government's scheme is, to say the least, bizarre. It rejects the only "serious EU telco"that has been trying to buy Lattelecom for the past five years on specious anti-monopoly grounds. There is no one I can imagine who would bid for Lattelecom, a fixed-network only company 49 % owned by god-knows-who (if Blackstone, as one would expect, politely declines to buy in and have to deal with these lunatics).

Look for Blackstone and Nils Melngailis to bow out soon. TeliaSonera may make one last bid, but probably write off its holdings in Lattelecom as a stranded investment.
The company will flounder for a while, no one will come to the auction, and the state will have effectively screwed up a potentially powerful Latvian company.

I am somewhat saddened to have been right...

Tuesday, January 15, 2008

Another day, another idea...

So now it seems the Latvian government, having defacto rejected the management and staff buy-out of Lattelecom (the new government has not even set a date for talking to CEO Nils Melngailis about it, a subtle way of showing the middle finger to him and his ideas on top of the previous government stripping the man of his Lattelecom chairmanship), and having dismissed a proposal to privatize Lattelecom through the Riga Stock Exchange, then having said it wants to keep the status quo and hope TeliaSonera finds someone to buy its 49 %, now says it wants to talk to TeliaSonera again.
Well, Foxtrot Foxtrot Sierra*, where was the Latvian government in 2004, when TeliaSonera offered to pay something like SEK 9 million (or maybe it was USD) just for starting talks with the Swedes by the end of that year?? Nothing happened. Nor did anyone hold any kind of talks until 2006, when the sides agreed to do separate valuations of Lattelecom and mobile operator LMT in order to go ahead with a swap of TeliaSonera's holdings in Lattelecom for the rest of the state's share in LMT. Then that deal was never done. Then came the MBO proposal, also effectively dismissed.

So now what?

1) Nils should seriously consider working for someone who is not majority owned by a wacko banana republic loonoid government.
2) TeliaSonera should write off its 49 % in Lattelecom as a stranded investment that may yield a few more dividends.
3) TeliaSonera should focus on making LMT a full spectrum, mostly wireless electronic communication service provider, including fixed wireless phones, high speed wireless internet (HSDP, WiMax), wireless cable TV, and wireline broadband (fiber to the home) where possible

*for fuck's sake

Friday, January 11, 2008

A half-mother forever?

The latest twist in the Lattelecom saga that I can discern from where I am -- vacationing in Orlando, Florida-- is that the government of Prime Minister Ivars Godmanis wants to keep the state's 51 % share of Lattelecom and let TeliaSonera do as it pleases with its 49 % -- preferably sell it.
What this means is that the Latvian government -- seriously -- is telling the Swedes to find someone to pay for sharing a bed with a proven capricious majority owner. Under Latvian law, the government has the right of first refusal, which takes us back to the situation before the MBO proposal, when TeliaSonera offered, in effect, to let Lattelecom be nationalized in return for getting 100 % of Latvian Mobile Telephone and even paying cash to the government. 
Latvia has a new goverment, but the muddling, bumbling and equivocating on the privatization of Lattelecom has not stopped. 
Is there a serious private investor -- a mutual fund, whatever-- never mind a telecoms operator, who would share owning and running a fixed-network only company with this kind of co-owner? Unlikely.  You have something that looks very much like a stranded investment, TeliaSonera

Monday, January 07, 2008

Back to the Bourse for Lattelecom?

The Riga Stock Exchange (owned by Sweden's OMX) has proposed organizing an auction of stakes in Lattelecom as an alternative to the MBO proposed by CEO Nils Melngailis. This has been proposed earlier by the RSE in somewhat different form. It is a plan that passes the Alfred E. Newman test "not insane". It will end up giving Lattelecom to TeliaSonera and a few other bidders, probably at a lower price, if the Swedes can be persuaded to divest and buy back their 49 % stake.
I am in the US at a borrowed computer, hence writing this in a somewhat different style.
Whatever happens, I am still convinced that the Latvian government will "sink" the MBO, get rid of Melngailis and effectively slash the price of Lattelecom for some future sale process, be it an auction or something else.