At least two applicants for Latvia's auction pre-select

There are at least two applicants who filed for preselection for the March 31 auction of Latvia's third UMTS/GSM mobile operator licence. They are Danish TDC's Lithuanian subsidiary Bite GSM and a consortium consisting of telecoms entrepreneur Peteris Smidre's Alina and MVC Capital Inc., a US business development fund that last year invested USD 10.5 million into a Latvian car dealership. MVC started out as a dotcom era venture capital fund that almost burned out, but is now recovering under new top management and making relatively conservative investments in food processing, manufacturing, agricultural equipment and finance.
A big surprise was that the mysterious International Telecommunications & Technologies (IT&T) pulled out at the last minute, leaving its local representative, Edgars Zakrizevskis, fuming that he had wasted a year of his time and effort paving the way for the virtually unknown, partly Lebanese-based consortium. Zakrizevskis thinks the last minute retreat could have had something to do with the car bomb assassination of former Lebanese prime minister and billionaire Rafik Hariri. Another theory is that the whole IT&T thing was a scam to begin with. This blogger raised the scam issue early on, but then backpedaled a bit when it seemed there were real people behind IT&T. But then most con-men are real.
Guntis Macs, the high Ministry of Transport official who heads the auction commission hinted that there might be some other applicants not mentioned in the press previously. He is not at liberty to say anything to the press except that that applications have been filed, but not their number.
One "dark horse" could be China-based Huawei, who is advertising for an office manager in Latvia. Previously they have denied having anything going in Latvia. Huawei was also mentioned as a possible partner for IT&T. Perhaps they have joined with another unknown participant. Mainly a builder of infrastructure and telecoms equipment, Huawei is a rising star mentioned, for example, in Business Week in the same breath as Cisco.
The next critical date is around March 14 or perhaps March 22, when the names of those who have passed pre-selection involving a check of their business and investment plans by international auditors are announced.

Lattelekom and Smidre both go down

Lattelekom announced it will implement a maximum 45 % cut in interconnect tariffs that was previously rejected by the Public Utilities Regulatory Commission (the regulator set a cieling of LVL 0.008 per minute that amounted to a 80 % cut from the highest rates hitherto). The cut is made possible by a court's suspension of the regulator's cieling. The long term goal of Lattelekom is to cut interconnect rates to the European average, which an EU study says was 0.59 eurocents in 2004.
Meanwhile, as this blogger predicted, the Ministry of Tranport has rejected telecom entrepreneur Peteris Smidre's call for a postponement of the third UMTS/GSM licence auction until interconnect issues are resolved. The Ministry wrote, among other things, that a postponement would only prolong the present situation with high tariffs for both interconnect and for services to consumers and businesses.

Licence auction suspension will be rejected

The government will reject Latvian telecoms entrepreneur Peteris Smidre's appeal to suspend the third UMTS/GSM licence auction until issues concerning Lattelekom's interconnect rates are settled. A statement will be issued later today, February 16.
Smidre's letter to the government has, in fact, generated negative speculation about the true reasons for his appeal.
According to one version being discussed in government circles, Smidre is trying to delay the auction indefinitely because he has not gotten a committment from the American partner he hinted would join his personal company Alina in the bid. One reason for this could be the turmoil on the US mobile market, with mergers and aquisitions taking place from week to week. No one will pay much attention to an auction in a market that, at best, will yield as many customers as a mid-sized Midwestern city, say, around 200 000.
The other grounds for rejecting the appeal is that it effectively postpones the auction indefinitely, until Lattelekom and the Public Utilities Regulatory Commission finally adjudicate their dispute. Rumor has it that the case on the legality of the sharp cut in interconnect rates will be heard as early as March, but if it is appealed, the process could drag on for months or years. That would essentially kill any prospects for a third operator coming into Latvia (at least formally, by winning the licence auction) during 2005. In effect, it would defeat the government's efforts to get a "real" third operator (not counting Triatel, which honored its 1000 th customer today) into the Latvian mobile market.
It looks like Smidre's efforts will not only fail but may raise (perhaps unnecessary?) doubts about his own readiness to apply (in a consortium) for pre-selection on February 25.

Smidre asks extension of licence auction deadline

Latvian telecoms entrepreneur Peteris Smidre has asked the government to delay the planned auction of a third UMTS/GSM mobile telephony licence until unresolved issues concerning the regulation of interconnect fees are settled. Smidre is planning to enter the contest through his private company Alina together with an unnamed American partner. Smidre also heads the Baltkom fixed telecommunications and cable-TV group.
The pre-selection deadline for the auction was already once postponed from December 21 to February 25 after the Latvian Telecommunications Association said the auction was being rushed.
Smidre's PR consultant Evija Ansonska told this blogger that Smidre intends to go ahead with a preselection application on or before February 25 if the government doesn't change its plans.
A dispute arose after the Public Utilities Regulatory Commission sharply slashed the interconnect fees that Lattelekom, the dominant and incumbent fixed network operator, could charge. Lattelekom appealed the decision, effective January 1, to the Administrative Court and won a suspension of implementation of the new lower tariffs. The regulator sued to invalidate the suspension, but lost.
It appears unlikely that the government will extend the auction deadlines yet again, especially since the final settlement of the dispute between Lattelekom and the regulator, if appealed at all possible levels, could take years. It is rumored that the appeal against the lower interconnect rates will be heard on the merit some time in March. Lattelekom is challenging both the way that the regulator calculated the new interconnect rate ceiling as well as the legality of any regulation of these rates per se.

Lattelekom - coming to a video screen this spring?

Lattelekom looks ready to launch IP TV services - at least experimentally- sometime later this spring. This blogger's sources say the company is shopping for, or perhaps has already bought some Ethernet DSL equipment needed to provide the kind of high-bandwidth connections that TV over IP, fast internet and voice over IP combinations services required.
"Look for an announcement after Easter (which falls at the end of March)" said one highly-placed informant.
By offering TV over DSL, Lattelekom would be fulfilling predictions made by its managing director Nils Melngailis and following in the footsteps of "half-mother" :) TeliaSonera which just announced IP TV services in Sweden. Lattelekom has already had one experimental videocast – a concert by Latvian popgroup Brainstorm late last year.
With Baltkom TV, Latvia's largest cable TV company pushing triple-play internet, voice and digital cable and hinting that video on demand may be one of its first interactive premium services, Lattelekom has to move into the game quickly. Certainly, the telecoms incumbent has a customer base of some 630 000, but at best it can hope to get a portion of its 40 000 broadband customers to upgrade to TV/video services.
Both companies will benefit from the fact that digital terrestrial TV is practically dead in the water here with no resolution in sight (the existing project was denounced as a fraud by the earlier government of Einars Repse and will be dragged through various courts for years, scaring off other potential partners). If we simply look at digital moving images (the old concepts TV, video, etc. are actually falling apart) as a product for the middle class with disposable income (and forget, for better or worse, the public service aspects of TV), then we can see the seeds of some business models for the telecoms sector.
Instead of broadcast programming (except for breaking news), the tendency will be toward self-programmed entertainment and information, anytime, anyplace, any platform. So there are synergies in having digital content that can be fed to PCs or ordinary TVs (though a wireless LAN adapter, even Bluetooth), played (and eventually recorded) to 3G phones, stored on Video iPod-type devices and the like.
Aside from making the technology work, a problem facing both Lattelekom and Baltkom will be making money from an initially small customer-base with high-cost quality content Baltkom's selection of old Russian movie channels, Ukrainian MTV or whatever, Russian dubbed Discovery Channels can go only so far as the audience becomes more sophisticated and wants to see better quality content in a variety of languages (digital already makes this possible). With Baltkom hinting it will offer video on demand in the second half of 2005, Lattelekom has to get a jump on what in this market sector is it's major competitor.

TCIL drops third licence bid after visa hassle

Telecommunications Consultants India Limited (TCIL) has dropped out of contention for Latvia's third GSM and UMTS mobile telephony licence, citing visa-related travel problems for its executives who wanted to visit Latvia in early January.
TCIL finance director Chandra Shekhar told this blogger that a TCIL delegation attempting to fly to Riga, Latvia on Aeroflot from New Delhi via Moscow was denied boarding because they did not have Latvian visas in their passports. It is a widely-accepted airline practice to check whether international passangers have valid travel documents to their final destinations, since they can be fined and/or required to undertake return transportation of persons not admitted to country.
Shekhar said that TCIL executives travel widely across the world and could not, as a practical matter, send their passports from India to London to be processed over several days by the Latvian Embassy there.
Guntis Macs, the head of the licence tender commission and a deputy state secretary in the Ministry of Transport, said that every effort had been made to facilitate the arrival of the TCIL executives. Apparently, there was a misunderstanding or failure to communicate to Aeroflot that the India citizens would be issue visas upon arrival at Riga airport.
Whatever the reason, TCIL's withdrawal leaves only three known likely applicants for the pre-selection deadline on February 1 -- Denmark's TDC through its Lithuanian subsidiary Bite GSM, Latvian telecoms enterepreneur Peteris Smidre through his company Alina (with a possible US partner) and the mysterious International Telecommunications and Technology (IT&T), a consortium apparently formed for the sole purpose of bidding for the Latvian licence. Yet another executive for a major international telecoms supplier, who spent several years in Lebanon (where IT&T purports to have one of its offices) told this blogger none of his Middle Eastern contacts had heard of the company.
A rumor circulating in Riga claims that IT&T may be a front for Russia's Vimpelcom, though it is unlikely that such a large Russian operator would need to come into Latvia under a "front organization". The rumor is perhaps illustrative of the suspicions and speculation generated by the secrecy and obscurity around IT&T.

Interconnect battles - the Great Satan resurgent :) ?

Around 40 minutes into an angry press conference called by the Latvian Telecommunications Agency (LTA) on February 1, I remarked to the panel of speakers that "some of us have to hurry to another press conference by the Great Satan." This drew some smiles and giggles, as most of the small crowd of Latvian telecom & IT hacks was also heading for a briefing, coincidentally scheduled an hour later by the incumbent Lattelekom.
The events were sort of about the same issue. The LTA 's president and Baltcom board chairman Peteris Smidre and LTA managing director Janis Lelis launched both humorous and angry diatribes against an interim decision by Latvia's Administrative Court to suspend a ceiling of LVL 0.08 per minute on all interconnect charges imposed on Lattelekom by the Public Utilities Regulatory Board (hereafter, the regulator, as I keep varying the English translation for this outfit). The interim ruling, pending a full hearing of an appeal by Lattelekom on the merits, apparently put several alternative operators in Latvia in a bind -- they had already factored the up to 80% cut in interconnect charges (for national long distance connects) into new tariffs.
Smidre lambasted the decision as typical of a country that was "a circus with clowns" while Lelis, with uncharacteristic passion, called the interim ruling a "catastrophe" for the non-incumbent telecommunications industry in Latvia. He even went so far as to say that the suspension of the lower charges could torpedo the planned auction of Latvia's third UMTS and GSM licence (although the two incumbent operators, Latvian Mobile Telephone /LMT/ and Tele2, have prospered with the interconnect arrangements hitherto, which are different than for fixed line operators -- I think /?/). Smidre read parts of the court ruling, which I have not seen, and indicated that he thought the judge was a buffoon who blatantly sided with Lattelekom.
Inna Steinbuka, the chairman of the regulator was an invited guest to the LTA's panel. She called the ruling "an affront to the professionalism" of the regulator. Later in the day, the regulator said it was filing a pleading to (weird Latvian name - blakussudziba/ "side-pleading" ?) to overturn the suspension imposed by the Administrative Court. It also demanded that the court sit with a new panel of judges, excluding judge Kaspars Berkis (the man lambasted by Smidre).
Raimonds Bergmanis, director of the Ministry of Transport's Communications Department, the main telecoms policy unit, also sat in the LTA's panel and said the court ruling would not advance the national policy of fostering competition.
At its press conference, "the Great Satan" presented figures from an EU report showing that Latvian telecommunications charges tp consumers were low to moderate compared with the rest of the EU. The line subscription charge to households, in euro, was the lowest in the EU and other charges compared favorably. Lattelekom officials did admit, however, that interconnect charges were high for "historical reasons" and that for international fixed line calls, Lattelekom did not have the lowest prices on the Latvian market, though it could claim better coverage and quality.
So what is the battle about? Obviously, the alternative operators would like interconnect charges pushed lower. As Baltkom's Smidre said, the charges even when capped are still almost twice what the EU average is 1.14 eurocents instead of 0.59 eurocents. The issue of whether the cap of LVL 0.08 is correct, however, is an issue to be decided on the merits, and the real issue here is procedural. Should a disputed norm be applied when it has an immediate UNAVOIDABLE effect only on one party -- in this case, Lattelekom "The Great Satan" in the eyes of the alternative operators. Lattelekom was obliged to cut its interconnect rates from January 1. The alternative operators had a choice whether or not to risk cutting their tariffs accordingly, since it was, as the Latvian saying goes, like "amen in Church" that Lattelekom would appeal the regulator's action and that there could be procedural demands to suspend the disputed regulation until a hearing on the merits. The slashed interconnect rates by some accounts would have decreased Lattelekom's profits by 10%. Now some, like the LTA, say that Lattelekom's earnings are quasi-monopolistic, but that goes to the merits of the case, not the issue of whether a one sided (whether you like the side or not) impact should be delayed.
According to my informants, a court date for a hearing on the merits of Lattelekom's appeal against the regulator will be set for some time in March.

Lattelekom - look what mom's doing!

TeliaSonera, Lattelekom's half-mother (I love mistranslating these foreign terms for parent company :) ), is starting IP television services in Sweden as part of a triple-play offering, according to the Swedish business newspaper Dagens industri.
The paper says that this puts TeliaSonera in direct competition with ComHem, the cable TV company it was forced to sell as part of the Telia and Sonera merger a couple of years back. The former Swedish monopoly will be able to reach 70 - 80 % of Swedish households via its copper wire network, since the TV will be pumped down DSL lines where speeds of 8 Mbps are not uncommon (I saw this in action when visiting my "middle son" who lives outside Stockholm and turned 18 over the weekend).
Baltkom TV offers a triple play package in Latvia (the uptake so far is only around 350 users) using its optical cable, but the TV here is delivered as a DVB signal over cable, whereas IP TV, I think, is another technical solution. At the end of the wire, if the user gets good picture (and the IP TV can be routed to an ordinary TV set), it really doesn't matter.
Nils Melngailis, the managing director of Lattelekom, has been hinting at a move into TV services. Now that TeliaSonera is doing it, it may be time to crystallize these visions. It may require an upgrade of the household DSL offering from a miserly 256 kbps (2 Mbps for some domestic network level services, like Apollo Internet's video on demand for various short films). Now that mom's doing it, it is time for the kids (half-kids, TeliaSonera holds 49 % of Lattelekom) to start getting into the act.
More sobering news for Nils -- The Economist writes this week that WiMax, another technology that Lattelekom has been talking about, to put it simply, isn't. According to the weekly magazine, there is "zero" WiMax equipment on the market. Depends on what you call WiMax, though, since some Swedish town recently set up an experimental network and it was reported Argentina was setting up a WiMax network.
Meanwhile, DI also reports a brouhaha in Sweden about whether cdma450 might be a cheaper 3G technology to give coverage to the vast wooded wastelands of our Nordic neighbor than UMTS, which requires loads of towers and base stations. Ericsson's research head Håkan Eriksson thinks even cdma450 would be a waste of money to get wireless broadband to the reindeer, but Jan Freese of Nordisk Mobiltelefon thinks it's a great idea.
Meanwhile, Latvia's cdma450 operator Triatel is apparently chugging along, though there are rumors of some kind of management reshuffles.

INTERCONNECT UPROAR
A court has suspended implementation of the Public Utilities' Commission's ruling that Lattelekom has to cut its interconnect charges to a maximum of LVL 0.088 per minute
pending a full hearing on the merits, leading to an uproar by smaller operators who had adjusted their domestic rates to reflect the changes now challenged by the incumbent.
Gotta run now to a press conference where the Latvian Telecommunications Association will have its say, followed by Lattelekom an hour later. Jogging on the snowy streets of Riga. Hope to get around to blogging what comes of these events.