Tuesday, July 01, 2008

The half-mother stays single for now

France Telecom has withdrawn its bid for TeliaSonera, a mixed offering of shares and cash valued at EUR 33 billion. That leaves the half-mother of Lattelecom and holder of just over 60 % in mobile operator LMT "still single". The Swedish side initially rejected the offer and subsequent negotiations between the companies were apparently fruitless.
TeliaSonera was probably right to shrug off the bid, where the share portion could prove to be rather volatile in value, especially if it were to have taken the merged company a couple of years to get its act together.
As for Latvia, this should (theoretically only) remove a reason for the endless footdragging by the Latvian government that would finalize a deal allowing it to divest its last remaining holdings in LMT, and to at least temporarily nationalize Lattelecom in the hope of reselling at least the 49 % held by the half-mother to someone else.
In other words, no one can say : "What if we are soon owned by the French, then what?"and wait to see what it is that "the French"may want. Maybe they aren't (and, indeed, turned out not to be) interested in the Nordic-Baltic region?
My view: just because an excuse for delaying is gone, doesn't mean that there won't be any delays. The economy is in rapid decline, inflation will top 20 % with 25 % not an impossibility, so the value of almost any Latvian asset is being undermined. Who will make 100 LVL of Lattelecom worth 125 LVL next year just to stay a small distance ahead of inflation? It may even be prudent for the government to wait, although this will be mitigated (or rather, vitiated, worsened) by other factors such as stagnation on the Latvian telco market, the inability (without the participation of the by now totally frustrated and apathetic half-mother) to move boldly ahead. etc.
Whatever happens, we will be lucky to see a resolution of the privatisation or other disposition of Lattelecom and LMT sometime in 2009. But don't hold your breath.

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