Wednesday, May 20, 2009

Latvia looks to improve mobile services procurement

Sorry to be a bit late with this, but on May 13, Tele2 organized a round table discussion gathering almost all players in the procurement of mobile services for the public sector in Latvia. Present were representatives of the host, Tele2, LMT, Bite, Baltkom, the State Auditor (Ingūna Sudraba in person), the Procurement Oversight Authority, the State Chancellery, the City of Riga, the Latvian Telecommunications Association and others.
After hearing complaints that procurement was biased toward certain players (implied was LMT), and that the state could save at least LVL 4 million by doing things differently, including regular reviews of tariffs and shorter contract periods (Bite's Fred Hrenchuk pointed out that no private business would ever lock itself into a 60 month or five year contract when mobile services prices were dropping month on month).
Jānis Lelis, managing director of the Latvian Telecommunications Association, said that mobile service consumers (including the public sector) need to be educated about their options, which would help them make considerable savings. He gave an example (naming no names) where the association had advised a customer to go to another operator and get an offer. The offer was for a substantial cut in costs, but the customer then brought the offer to his existing services provider and got an even better deal.
This confirmed my suspicions that Tele2 and perhaps Bite -- while their claims of lower tariffs are quite true -- are often used as bargaining chips by LMT customers to -- at the end of the day -- squeeze better deals from LMT. This doesn't mean that Petras Kirdeika, the managing director of Tele2 in Latvia is wrong in saying (as he has for about a year) that he can cut the public sector mobile bill by 30%.  He probably can. The incumbent, with some grinding of teeth, can probably offer 33 % (or some other package -- like free calls to all users from the same government agency) and keep the customer.
The most interesting outcome of the discussion was general agreement with Ms. Sudraba that public authorities could purchase mobile services according to one basic standard and possibly under one umbrella agreement rather than drafting tender rules and standards for each and every ministry, state agency and municipality. It would also avoid drafting unreasonable standards - such as 95 % national coverage for services to be used largely within a single municipality.  As Bite's Hrenchuk asked rhetorically: " Why do they need coverage near the Russian border?" (referring to a town a couple of hundred kilometers from the border zone.
It now appears that some kind of working group will be formed to work out how umbrella standards and procedures could be drafted for mobile (and telecommunications services in general) procurement. This would move Latvia toward the models used in other countries, such as Sweden's authority for coordinating state purchases


rupiawan said...

I believe that Latvia could set the policy rate with a fair and wise. I heard that Latvia's father worked in shipping and he died in latvia.

Henrik Kenani said...

Very interesting indeed. Does this only apply to the telecom procurment? there should be a couple of other sectors that should find this interesting too.