Privatization agency objects to Lattelecom nationalization

The Latvian Privatization Agency (LPA), the formal holder of the state's 51 % stake in fixed network operator Lattelecom,  has said in a report that it saw legal obstacles to Minister of Transport Ainars Slesers proposal to completely nationalize the company.

According to news reports, Minister of Economics Kaspars Gerhards (whose ministry supervises the LPA) confirmed that there were legal objections to the proposed swap of TeliaSonera's 49 % holding in Lattelecom for the 23 % stake in mobile operator LMT held by the Latvian State Radio and Television Center (LVRTC). Citing confidentiality, he declined to disclose details about the LPA's position. The agency had been asked to evaluate different proposals for changing the current ownership of Lattelecom, including a sale of the company and LMT to TeliaSonera for 500 million LVL. 

It also appears now that there will be an emergency meeting of the government on March 27 ahead of a March 31 working visit by Prime Minister Ivars Godmanis to Sweden, where he will most likely meet with TeliaSonera and present the government's position.

The position of the week, if you ask me. We will see what new twists and turns this neverending, increasingly bizarre story takes in April...

PM: Latvian government split on telco privatization

The Latvian government is split on the issue of privatizing Lattelecom and Latvian Mobile Telephone (LMT) Latvian Prime Minister Ivars Godmanis told journalists following a regular government meeting on March 18.
He said it would be difficult to reach a decision without a vote of all cabinet members, which he said he would be ready to take.
Godmanis also said he would be going to Stockholm after Easter to speak to officials of TeliaSonera about the various privatization proposals.
The Swedish-Finnish telecoms group has said it wants to buy all remaining government stakes in Lattelecom and LMT for LVL 500 million, then split Lattelecom into a whole sale/network and retail/services unit.
The Latvian government has said it would not sell both the fixed and mobile operators to TeliaSonera, citing fears of a monopoly. TeliaSonera has said that, if given no other choice, they would settle for buying LMT alone and develop it as a full service provider, including fixed network services.
Latvian Minister of Transport Ainars Slesers has proposed swapping TeliaSonera's 49 % of Lattelecom for the 23 % of LMT held by the Latvian State Radio and Television Center (LVRTC), effectively nationalizing the company 100 %. This initiative was denounced by other members of the coalition government as an unapproved, individual initiative by the minister. Slesers send an official letter with the proposal to Sweden on March 17, having previously said that TeliaSonera had agreed in principle to the deal.
All plans by The Blackstone Group to get a stake in Lattelecom can be regarded as clinically dead, waiting for the right breeze to topple them over like a dead horse, eyes glazed and tongue hanging out...
The mess continues...

Russian-American telco mogul vanishes in Latvia

Leonid Rozhetskin, the Russian-American founder of LV Finance, a major shareholder in Russian mobile operator Megafon, has vanished from a home he owns in Jurmala, Latvia.
According to Latvian press reports, police found traces of blood in the house. A sports utility vehicle owned by the St. Petersburg, Russia born millionaire was found in Jurmala.
Rozehetskin, a Harvard Law School graduate who worked for prominent US law firms, was a founder of the Russian investment back Renaissance Capital and was on the board of Norilsk Nickel. The 41-year-old lawyer-entrepreneur lived in the US from the age of 13, but returned to Russia in the 1990s to become an entrepreneur there. Recently, he has been involved in the US film industry.
He is said to have arrived in Latvia late last week by private jet and was last seen on March 16, when he was reportedly visited at his Jurmala home by unknown persons.
It is, of course, a bit off-topic, but I have yet to see international media reports on this. If Rozhetskin has fallen victim to common criminals, one can only hope he will reappear well and unhurt. However, if the American financier has been taken-- for whatever reasons (probably not telecoms related) -- by the "long arm" of the Russian mafia, it has disturbing implications for Latvia's security and the security of many wealthy Russians who have bought second homes and residences in Jurmala, apparently considering EU member Latvia a safe haven.

A Later Note:

Leonid Rozhetskin may not currently be a shareholder in any mobile telecommunications company, but his past activities probably merit the title of mogul. The Latvian press and Wikipedia may not be 100 % up to date on this person's business involvements.

Decision -- on April Fool's Day ??:)

It now looks like a government decision on the privatization or nationalization or continued muddlization of Lattelecom will take place at a government meeting on April 1, not March 18, as previously thought.
The government may have been blindsided by Minister of Transport Ainars Slesers sudden announcement that he backed the nationalization of the fixed network operator by swapping the 49 % stake in Lattelecom held by TeliaSonera for 23 % of mobile operator LMT held by the Latvian State Radio and Television Center (LVRTC).
The other offers on the table, at least nominally, are TeliaSonera buying out all of Lattelecom and LMT for LVL 500 million (you don't often see that much cash on the card table in these parts) as well as a clinically dead offer by The Blackstone Group to buy the TeliaSonera stake and somehow roll the rock from the tomb and bring back Nils Melngailis as CEO.
I hope Nils has been having job interviews, YGTBFC* to come back to this. In fact, even with ironclad management contracts, Blackstone has to be PFC** to even think about sharing ownership with the Latvian government.
I think the April Fool's joke will be that the muddle will continue. The only one who made a decision before Easter was Melngailis and some others at Lattelecom who are departing on that very day, April 1, no joke.
And then there was the move by the Bulldozer (as Slesers was portrayed in 2006 campaign posters). Dramatic, decisive, probably totally batshit.

*you gotta be fuckin' crazy

**pretty fuckin' crazy

Lattelecom nationalization proposed

Minister of Transport Ainars Slesers has proposed the effective nationalization of Lattelecom by swapping the 49 % of Lattelecom shares held by TeliaSonera for the 23 % shares in mobile operator Latvian Mobile Telephone (LMT) held by the state-owned Latvian State Radio and Television Center (LVRTC).
The transaction would effectively make Lattelecom one of the few entirely state-owned telcos in Europe. Slesers said that he hoped that under state management Lattelecom could develop into a strong national company "like Nokia"(the maker of mobile telephone handsets and infrastructure equipment and software).
He didn't exclude selling off the LVRTC's 49 % of Lattelecom in a few years in an open auction he said would be attended by many investors, including telcos of the caliber of Deutsche Telekom, which he used as a hypothetical example.
The LVRTC currently operates the analog television broadcast network using a nationwide network of point-to-point wireless links, some optical fiber and cables. It carries some mobile telephone backhaul traffic from base stations that are located on some of its transmission and microwave link towers.
Lattelecom faces the pressing problem of providing mobile services in addition to its fixed network offering, and Lauris Dripe, the board chairman of the LVRTC, said this would be a priority if and when the deal went through. Slesers said that TeliaSonera had virtually agreed to the transaction but it needed full government approval.
Dripe hinted in a private conversation with this blogger that mobile WiMax tests being conducted in cooperation with Lattelecom could be one solution, as could buying another operator or cooperating with an incumbent. (This corrected to remove ambiguity about who spoke about mobile WiMax, it was not the minister)
Petras Kirdeika, the Tele2 CEO in Latvia, has said he was open to cooperation with Lattelecom by allowing the fixed line operator to buy capacity and start a virtual service on Tele2's network.

The political storm rises?

Roberts Zile, a European Parliament deputy and head of the government coalition party Fatherland & Freedom has accused Slesers of harming Latvia's international image by conducting negotiations on his own with TeliaSonera.
Minister of Economics Kaspars Gerhards, a member of Zile's party, has also distanced himself from Slesers' actions, calling them a "personal"initiative that did not represent the views of the government as a whole.
Slesers told journalists that he had had "support in concept" from Prime Minister Ivars Godmanis for the talks with the Swedish company and would be sending TeliaSonera a formal proposal shortly. He said the Swedes had agreed in principle to the transaction and claimed it was the first time that they had agreed readily to anything.
Slesers asserted that TeliaSonera had vehemently opposed the management-buy out advocated by Nils Melngailis, the outgoing CEO of Lattelecom. TeliaSonera, however, signed the letter of intent approving the deal last year.

Latvian minister out on a limb on Lattelecom?

Minister of Transport Ainars Slesers may have gone out on a limb offering to arrange the sale of TeliaSonera's 49 % stake in Lattelecom to a third party (not The Blackstone Group that has been bidding so far).
Minister of Economics Kaspars Gerhards said that this was not the official position of the government, which may be declared after the next Cabinet of Ministers meeting on March 18, when all options for privatizing Lattelecom (and mobile operator LMT) should have been considered.
Gerhards said that any offer to TeliaSonera should be considered "the initiative of (Slesers) on hios own"and not the position of the Latvian government.
It is beginning to look like an internal dispute may be breaking out inside the coalition government. Slesers has called a press conference for 1430 March 13 to explain his position.
The Minister of Transport has been considered somewhat of a loose cannon, having earlier approved, for instance, airport fee cuts for low-cost carriers seen as discriminatory and in violation of European Union rules. During the 2006 election campaign for Latvia's parliament, the Saeima, there were campaign posters of bulldozers and space shuttle launches apparently to symbolize his approach to getting things done.

New investor proposed for Lattelecom deal

Latvia's Minister of Transport Ainars Slesers has proposed selling TeliaSonera's 49 % share in Lattelecom to a new investor, while TeliaSonera says it will insist on implementing functional separation at Lattelecom if this deal goes through.
Slesers proposal effectively kills any chance of The Blackstone Group participating in the privatizaion of Lattelecom.
According to Kenneth Karlberg, head of TeliaSonera's Mobility business and the Sisyphus who has been rolling the privatization rock up the Latvian government hill for several years, the investor is someone "closer to the government" but apparently an entity that TeliaSonera could do business with. Karlberg declined to name the investor, saying that he was awaiting a formal written proposal to be delivered early next week.
Sisyphus (who may actually be getting the rock to the mountaintop this time) indicated to this blogger that TeliaSonera would still prefer doing a LVL 500 million deal to acquire 100 % of both operators, but if this fails, plan B is to develop LMT as a full spectrum competitor to Lattelecom, including fixed line services. Karlberg said that buying network and copper last mile capacity from a future Lattelecom wholesaler was an option for LMT.
He stressed that any deal selling 49 % of Lattelecom to the new investor would have to include covenants committing the new owners -- call them Brand X and the government -- to implementing the functional seperation of Lattelecom into wholesale network and retail services companies as proposed in TeliaSonera's last letter to the government where it proposed buying both companies.

Blackberry comes to Latvia

Bite Latvia, the mobile operator, has started offering a Blackberry package. The madness has arrived in Latvia, with the businessperson's electronic body part selling for around LVL 199 (or less with various plans) and the service available starting at LVL 20 per month.

Fred Hrenchuk, CEO of Bite Latvia, tells more in this video:

Click To Play

The rock rolls back for the half-mother

News agencies are reporting that a planned meeting March 12 between Sisyphus (Kenneth Karlberg) of TeliaSonera, the half mother of Lattelecom and Latvian government officials has been cancelled.
Karlberg, currently head of TeliaSonera Mobility, had planned to meet with Minister of Economics Kaspars Gerhards and Minister of Transport Ainars Slesers to argue in favor of the modified proposal presented by TeliaSonera to buy the government's stakes in Lattelecom and mobile operator LMT.
In other words, the rock has rolled back down again, just as in the Greek myth. Some say that the futile attempts to break down the bizarrely- (non) argued resistance of the Latvian government have become an obsession for TeliaSonera, a need for the Swedish group to prove that it can get something done (after, not without struggles, getting control of both fixed and mobile telcos in Estonia and Lithuania).
Slesers is said to favor a deal where TeliaSonera would sell its stake in Lattelecom to The Blackstone Group. However, this plan B is already dead in the water with one essential element missing -- Lattelecom CEO Nils Melngailis has resigned. The fact that some other key staff, unsurprisingly, his press secretary Maija Celmina, are leaving indicates that this film will not be rewound.
There will be another indecision point for the government on March 18. It looks like the wise men and women running the country have made the decision by indecision to let Lattelecom drift toward the devil's mother (pie velna mātes), at the same time driving off a giant American investor (who is, to be sure, experiencing some financial pain from what is happening on the markets) with all that implies for the image of Latvia's investment climate.

LATE BREAKING NEWS

It seems Sisyphus did meet with Minister of Transport Ainars Slesers today, contrary to the muddled disinformation spread by, alas, my own news agency LETA. I may be able to get more info on what they discussed on March 13, when Kenneth Karlberg is back in Stockholm, doing exercises for his next run up that hill with the big rock.
My guess is that Slesers verbally told Sisyphus to work something out with Blackstone, but then Blackstone is all but officially out of the picture.

No decision on Lattelecom privatization

As predicted in this blog, the Latvian government failed on March 11 to take any decision on the privatization of Lattelecom (and the parallel sale of the state's remaining stake in mobile operator LMT).

However, Prime Minister Ivars Godmanis indicated to journalists that the government had not changed its view that both companies should not be sold to the same buyer -- TeliaSonera. The Swedish telecoms group had said it was willing to modify its offer for both operators and promise to split Lattelecom into  legally separate wholesale and retail entities. This has been done in Sweden with TeliaSonera' s network operator Skanova.

At the same time, the government has effectively rejected two alternative bids -- the proposed management and staff buy-out financed by The Blackstone Group and a bank consortium and a "plan B" whereby Blackstone would buy out TeliaSonera' s 49 % holding in Lattelecom and later bid on the 51 % held by the government.

However, even the plan B bid was based on the continued management of the company by CEO Nils Melngailis and the signing of a management agreement that would have kept the government at arms length from Lattelecom.

Melngailis is definitely leaving the company on April 1, and some of his staff have already moved on. Press secretary Maija Celmina is joining the press staff of President Valdis Zatlers'  office. Agris Tamanis, a key executive at Lattelecom BPO is also said to be leaving his post on April 1.  It appears he will be joining a start-up together with social network draugiem.lv founder Lauris Liberts. It is not 100 % certain that Tamanis departure has anything to do with the failure of the MBO and Melngailis departure, but it could have influenced a choice to work with the start-up full time.  Among Lattelecom middle management there also appears to be a sense of uncertainty as to what will happen with the company and the direction set by Melngailis after April 1.

And now for some weird theories:

1) A seemingly frivolous lawsuit by an unknown, small Latvian company, Time Investments demanding participation in the privatization of Lattelecom (now heading for Latvia's highest appeals court) is rumored to be backed by Ventspils business interests and possible investors from Russia. Claiming to be acting on behalf of unnamed investors, Time Investments is seeking to set aside the rights of first refusal of the current stakeholders in Lattelecom and open the privatization to any and all. 

2) Minister of Transport Ainars Slesers is rumored to have supported the MBO and the Blackstone plan B, having seen the implications of rejecting a global American investor and the benefits of having American investment. In the wake of the "giant" Blackstone, other American investors would come to Latvia. Naturally, Slesers business partners and even the minister himself could benefit (if political conditions change) in a legitimate way. Some American deals could go to Slesers business associates and in the future, there could be deals for a then ex-minister.

Government non-decision likely on Lattelecom

The Latvian government will take up the issue of Lattelecom's privatization today March 11, but will very likely reach no decision, according to press reports.
Diena's Baiba Rulle writes that no decision will be reached. while a letter may be written to The Blackstone Group indicating that its request to buy the 49 % of Lattelecom held by TeliaSonera is something to discuss with TeliaSonera. This ignores the fact that the government has a right of first refusal to the stake that it must formally waive.
Also, it is avoiding the issue of Nils Melngailis continuing as CEO, something that Blackstone has politely insisted on, at least between the lines of its most recent letter. As it looks now, Melngailis is resigned to resigning (he is vacationing, not likely to return, probably will do some consulting for the new honcho to smooth transition). So I say Blackstone is out of the picture and the whole process, in all probability, is going nowhere, as before. But it is going nowhere with no one really at the wheel anymore...
I wrote earlier that a working group would consider TeliaSonera's latest offer to split Lattelecom into a wholesale and a retail unit and buy the remaining government stakes in the fixed network operator and mobile operator LMT for LVL 500 million. Now it appears the government will examine this offer directly today rather than on March 18, as it would have, had the working group examined it March 12. It may still do so, since the Swedish Sisyphus, Kenneth Karlberg, the head of TeliaSonera Mobility, is coming on March 12 to roll the rock...I mean, present his case again.
Going to a TeliaSonera lunch with some honcho presenting on how the wholesale-retail split would work, so I may be able to report some more late.

A week or more of indecision ahead on Lattelecom

On March 12, a Latvian government working group will hear the half-mother TeliaSonera's arguments, yet again, for buying the remaining government stakes in Lattelecom (51 %)  and LMT (28 %, depending how you calculate it) for a mere 500 million LVL (the price, at least, of a nice bridge*). This will concern the augmented offer which includes a promise to split Lattelecom into wholesale and retail units , plus to place some of TeliaSonera's R&D in Latvia. 

Presenting the case will be the Swedish Sisyphus (the legendary Greek dude condemned to rolling this huge rock up a hill repeatedly, only to have it roll back again) Kenneth Karlberg TeliaSonera's head of Mobility.  Kenneth knows the routine, he will still know it when he retires in 15 years and hands off the task of dealing with the indecisive Latvians to his succesor. 

Whatever the working group recommends (I suspect it will be a) nothing or b) send them svenssons to hell) will then be presented to the government (the Cabinet of Ministers) for their March 18 meeting. I would bet a modest amount that the government, too, will table this (do nothing) or, unremarkably, reject the Swedes yet again.

I was just reading in the latest WIRED magazine that autism may not be a disease but simply a different way that people's brains are put together (i.e. to prefer mumbling, head banging and deriving multi-digit prime numbers instantly to what we consider normal). Anyway, the majority way of wiring brains is called neurotypical (i.e. the way most people are).

Why do I bring this up? I think the reason that Kenneth Sisyphus Karlberg isn't getting anywhere, and that Nils Melngailis has been hounded (by non-barking hounds) from the post of CEO, along with The Blackstone Group being shown the door, is that the Latvian government is not neurotypical. Whatever and however these people think, is not of this planet and may involve bizarre combinations and assumptions.

Like autistic folks, they have not responded (so I am told) to any written communications (although many real autistics prefer, if they are able, to write rather than speak). The government may well be seeing(behind TeliaSonera's offer) some kind of non-obvious threat, or it may have its own scheme of what to do with Lattelecom in mind, perhaps with regard to hidden local interests. That could involve running the company into the ground in order to "get" it on the cheap, but then again, what, exactly, would one get? Maybe a barely profitable fixed network operator with 500 000 customers ( 120 000 lost in coming years to mobile for fixed substitution). It takes non-neurotypical thinking to understand what is going on.

It should be an interesting, though in many ways predictable 10 days ahead. I hope I am wrong, but hope is the last to fade, isn't it? :)

*the so-called Southern Bridge now being built across the Daugava, the river that bisects Riga, is estimate to cost around LVL 500 million, by my reckoning, the same or more in present day dollars than the huge Verrazano Narrows Bridge in New York, which was the costliest bridge in the US at USD 320 million when finished in 1964.

Yahoo mail down, Ryanair bullshit

My Yahoo! mail isn't responding when I need it to. At the moment, it is f**ked even without being owned by Microsoft. OK, this is a rare event, but at the this time, I need it, because just went through another online clusterf**k of a site, the travel insurance hustlers known as Ryanair. This website, designed for the semiliterate and mentally challenged, has a multitude of options to check or pull down, almost all of them in order not to pay some outrageous fee for having your bag checked or to confirm that you have read all the small print on each of multiple pages. And the most persistent one of all is the constant badgering about travel insurance. I happen to have a private travel insurance policy, since I have been traveling a lot on business and privately. I DO NOT F**KING NEED ANY MORE!!

But there is no way I can make the website remember this. And all the way to paying by card, the travel insurance popups keep coming. I think the business model for Ryanair is to give almost free flights (my round trip to Stockholm is for LVL 14, I am not knocking that) and make money on travel insurance and little plastic bags of booze. I am surprised that didn't send me (I had to give them my mobile phone number) an SMS saying "Do you really, really, absolutely finally not want travel insurance".  Well,  FUCK NO!!  Do you understand?

Oh yes, then on my Safari browser another popup appears saying it doesn't trust the certificate on the Ryanair site. So I click  for a look, and this huge banner rolls down with all kinds of info how this is a Verisign certificate signed by God in septuplicate for each day of creation and belongs to Ryanair etc, etc.  Trouble is, there is no way to scroll down and click OK, the fucker doesn't scroll and I can't scroll the larger window so I end up force quitting the whole thing and waiting nervously for my Ryanair e-ticket to arrive by e-mail. It does and Yahoo! classifies it as spam, but when I try to move it to my regular inbox to print later, Yahoo screws up. A wonderful middle of the night (waiting for our son and my mother-in-law, who we sent to Tenerife, to get back on some red-eye delayed charter).

On free speech: Latvia locks up Bozo the Nazi

The few times I have gone off topic on this blog it has been on free speech issues. Two years ago, the Latvian authorities banned a Gay Pride march, something that is normal in most West European capitals and which I would otherwise view with benevolent indifference. But I believe that free speech, 99 % absolute free speech, is very important for any democracy. And free speech means more than, say, my expressed preference for Ballentine whiskey and someone else's for Jameson. The test of free speech is the right to say or otherwise express repulsive, shocking, offensive views. Sorry, but that's the way it is -- blame growing up in America with the First Amendment.

Today, March 6, a Latvian court sentenced to 18 months imprisonment Andris Jordans, a 24-year old self-proclaimed neo-Nazi, who arrived in February 2007 at a forum on ethnic issues or the like, got up and told the somewhat baffled, disgusted but otherwise calm audience that 1) he was a neo-Nazi 2) that he didn't consider Jews and Roma (Gypsies) to be people and 3) that he favored ethnic cleansing. There is a YouTube item on this, partly with Jordans speaking (not ranting) in Russian, which I don't understand (I got the Latvian part).

Regardless of what Jordans said, I believe that the state has no right to imprison him for his words alone. The government that punishes speech, even harsh and offensive speech, is more dangerous than any individual, deranged speaker.

Just as in the Cicero correction SKOKIE Nazi march controversy many years ago in the US (neo-Nazis wanted to march in Chicago suburb where many Holocaust survivors lived), the state should have no right to prevent, restrain or punish peaceful but offensive expression.

This is a dangerous step in the direction of authoritarianism and censorship by Latvia, also disturbing in a broader context of European so-called hate speech laws and enforced political correctness. I as a libertarian (OK, this is the only time I flaunt my personal political views) strongly oppose this.
ADDED FOR READERS UNFAMILIAR WITH AMERICAN SLANG :)
A "Bozo" is a clown, an annoying idiot. There was a television clown of that name, who was a nice clown, but the meaning changed

So back to talking telecoms again....

ADDED MARCH 8,  LINKING TO ANOTHER OPINION

Alex Tapinsh, a Latvian-born, US educated (?) blogger who has spent many years in the US has a different view on this issue, which can be found here. This is a pretty good English-language blog on Latvia in general.  I would answer Alex's points, but I will stick to telecoms and to rants about internet based services, as my most recent post :)

New Lattelecom honcho to be chosen in closed process

A new CEO for Lattelecom will be chosen by a closed, invitation-only search and selection process, according to a report by the Latvian news agency LETA.
LETA, which quotes Lattelecom supervisory council chairman Gundars Strautmanis, says the selection process will be completed by April 10 to ensure a rapid transition of leadership following the April 1 departure of Nils Melngailis.
Melngailis resigned citing a lack of support from the stakeholders in Lattelecom (the Latvian state - 51 % and TeliaSonera - 49 %). Most likely, the government was the "villain"in this development, since it first approved, then in January rejected a management buy-out proposed by Melngailis almost a year ago. TeliaSonera is also probably not wringing its hands about Melngailis departure -- it's handwringing should concern what happens now.
It is unlikely that any international manager will jump into what is seen as an unstable, politically influenced hotseat at the top of Latvia's incumbent fixed-line operator. Juris Gulbis, currently the CFO of Lattelecom, has been mentioned as an insider who might be tapped for the CEO post.
Valdis Vancovics, a board member and head of network services, could, in my opinion, be another inside candidate. However, one can wonder to what extent he was involved in Melngailis' strategy of looking to export Lattelecom services abroad. The government, which seems, IMHO, to understand little or nothing of the telecoms business, has not said what kind of strategy it sees for the company after Melngailis is gone and his plans have been rejected.
Well, we will see who is tossed into the fire after April 10. :)

Latvian government says no Blackstone letter received

Latvian Prime Minister Ivars Godmanis' press secretary Edgars Vaikulis told this blogger that no letter has been received from The Blackstone Group reminding the government of the link between its offer to participate in a buy-out of TeliaSonera's 49 % share in Lattelecom and the continued leadership of the fixed network operator by Nils Melngailis. Melngailis has submitted his resignation effective April 1 and is currently on vacation.
I wrote in an earlier post that, according to an informed source, Blackstone had sent a letter to the Latvian government reminding it that the offer to buy out TeliaSonera was dependent on Melngailis remaining at his post. Logically, the between-the-lines message was: no Melngailis, no deal. For this reason, my assertion that the deal was dead was published with a question mark in the headline, but I would be surprised if it wasn't.
ADDED LATER
My sources insist that a letter has been sent, but say that the tone of it was very mild, just saying that Melngailis' departure increased the risks faced by the proposed deal. I still maintain that Blackstone, however politely and indirectly, is heading for the door.

Knowing the Latvian Postal Service, the letter may simply not have arrived, although business communications generally are sent by courier or electronically.
Vaikulis confirmed that the government had received a letter from TeliaSonera that it would consider in a special working group on March 12, then submit the working group's recommendations to the regular government meeting on March 18. Vaikulis didn't disclose the content of the letter. This blog has written (and news agencies in Sweden report that TeliaSonera confirms) that the letter proposed dividing Lattelecom into separate wholesale and retail units to ensure competition.

Blackstone withdraws from Lattelecom offer?

Edited on March 4 for some run on sentences :)

The Blackstone Group has sent a letter to the Latvian government indicating that its offer to buy the 49 % of Lattelecom owned by Sweden's TeliaSonera was based on Nils Melngailis remaining as the fixed network operator's CEO. This according to informed sources.

Since Melngailis has resigned, apparently under political pressure, the offer, logically, must be withdrawn. That means that the giant American private equity group is withdrawing from Latvia as an investment environment, not just the individual deal.

The initial management buy-out of 100 % of Lattelecom financed by Blackstone and a bank consortium was rejected for no particularly convincing reasons on January 17.  Melngailis and Blackstone made another Plan B bid for TeliaSonera's share with the hope that the government would auction off its 51 % share in a reasonable time with the private equity company the only likely buyer (at this point, some kind of MBO plan would be executed). The purchase would also have involved covenants giving full operational and strategic control of Lattelecom to management (keeping the government at arm's length).

Now the whole thing has fallen apart, TeliaSonera has neither an exit nor a way to move forward with Lattelecom and mobile operator LMT (which it controls directly and indirectly just over 60 %). 

The government has postponed for at least two weeks deciding on TeliaSonera's latest mildly sweetened offer to split Lattelecom into two companies -- a network wholesaler and services retailer --and to pay the same price of 500 million LVL (see the earlier post). 

My opinion -- this is the start of another round of muddling around and procrastination. The government either doesn't know WTF it wants or it has some byzantine, bizarre "Latvian" plan for putting whatever will be left of Lattelecom in a few years into the "right hands". Time will show. 

Search process started for new Lattelecom CEO

The stakeholders in Lattelecom, the Latvian fixed network operator, have agreed to start a search process for a new CEO and board chairman to replace Nils Melngailis, who resigned effective April 1.
Lattelecom is owned 51 % by the Latvian government and 49 % by Sweden's TeliaSonera. Melngailis resigned in the wake of a management buy-out effort that was aborted by the government on January 17. With the company showing record 2007 revenues and earnings only slightly down from a year earlier, the departure of the experienced Latvian-American manager is seen as politically motivated.
Melngailis was not re-elected as chairman of Lattelecom's board in December, a signal that he was not wanted.

ADDED later:

Juris Gulbis, currently the finance director and acting board chairman, is rumored to have a good chance at the position. In view of the policized run-up to Melngailis resignation, it is doubtful that many international managers from outside Latvia will apply. Gulbis has a backrgound in a largely Russian-owned international alcoholic beverages distribution company as well as Latvijas balzams, a local liquour producer, so he has some internationa experience (Cyprus, Switzerland).

Cisco honchos on security, Eastern Europe

Last week there was a Cisco event in Riga where I got to talk to Peter Gibbs, a security honcho:

Click To Play

I also talked to Ali Kuralkan, who is in charge of Central and Eastern Europe:

Click To Play

Record revenue, earnings dip for Lattelecom

Lattelecom, the incumbent Latvian fixed network operator posted record revenue of 153.5 million LVL in 2007, up 5 %, while earnings dropped 2.4 % to LVL 38 million.
Revenues were the highest amount posted since the company was founded in 1994.
A preliminary report released by the company said Lattelecom's revenues from internet and data transmission services rose 22 %, but did not give exact figures. IT services and the network building business increased revenues by 17 %, while revenues from customer care services provided to third parties (outsourcing) were also up 22 %.

The financial results, despite a small drop in earnings, are not such as would normally merit the resignation of the CEO (Nils Melngailis announced his departure effective April 1 for what was widely seen as political pressure from the government, which owns 51 % of Lattelecom.) Companies such as Ericsson have suffered far more severe financial turbulence without losing their top management.