The three-week UMTS wonder auction, apply now

The Latvian government, spurred by the Ministry of Transport, has announced it will auction the third combined GSM/UMTS licence on January 7, with a starting price of LVL 1.3 million. Applicants for short-listing must apply by December 21. The terms of the auction will also require the new entrant to build an entirely independent network and invest at least EUR 150 million.
According to this blogger's sources, the auction was railroaded through over the objections of officials inside the Transport Ministry and the profound skepticism of the Public Utilities Regulatory Commission (see my earlier post). It appears – and some international analysts agree – that this auction, like its predecessor in 2002, will fail. Back then, the government set a starting price of LVL 5.8 million. The Communications Department of the MoT, which advocated a starting price of LVL 500 000, is understood to have abstained from endorsing the fast-track auction.
One reason no one may show up is that even if LVL 1.3 million is not a huge sum for major international operators, it still has to be spent based on a careful and considered study of the Latvian market and a detailed, up-to-date set of documents outlining what it is the operator will be getting. It appears that as far as the terms of the auction, the MoT has simply cut, pasted and switched some key figures in the 2002 tender documents. With a three week deadline, it is hard to see how any company can make a reasoned and prudent decision. The operators listed in the 16-page (appendices included) market study seem to have expressed nothing more than a polite interest in Latvia, IF...etc. It is doubtful that the MoT, which ordered this criticized report, has any detailed, up-to-date documentation to offer potential bidders, answering such questions as easements (to put up base stations on public and private buildings), the possibility of roaming (with incumbents on reasonable commercial terms), etc.
While the MoT's cut and past may be OK as a way to avoid writing a largely standardized document from scratch, it doesn't address the issues of whether there is actually a market for a third UMTS/GSM operator in Latvia and whether UMTS is a viable solution for a small, saturated and relatively poor market such as Latvia.
There are now probably around 1.4 million mobile phone users in the country, out of a population of around 2.3 million. Any new users are unlikely to be the kind of high ARPU generating business users that a UMTS operator needs to cover its costs, never mind make any money. If one talks about 3G rather than UMTS, then there already is a "third" operator, Triatel, actually the first to offer 3G services via CDMA-450. Meanwhile, one would expect incumbents LMT and Tele2, who must start their UMTS services by year end, to be making a major Christmas marketing effort. But we see nothing, yet, not a peep about how they will each at least make their first commercial lat on UMTS by December 31. There must be some reason for this hesitation with LVL 5.8 million sitting as a piece of paper in the corporate files of each company.
In addition, there have been strides in technology that seriously threaten UMTS in the mobile urban business environment. While browsing at a Nokia boutique at the Stockmann department store in downtown Riga, I was told that the latest Nokia Communicator (the 9500 0r 9300) would be Wi-Fi enabled. This means that users will be able to log on to data links as fast or faster than UMTS at its best (around 2 Mbps) and to use their devices to make internet phone calls rather than using any of the mobile networks. Internet telephony over WiFi is a "GSM killer" app if there ever was one, especially if your device makes or at least suggests your choices for you. A multistandard mobile phone of the near future could, for example, default to the user's Skype account when in range of a WiFi hotspot and automatically log on to it and make the call. Who will be the first to buy these devices? The high ARPU business user every operator is after.
I believe that once a significant number of hotspots are set up at business venues (restaurants, hotels, the airport and train station), and especially if Lattelekom launches WiMax, the use even of GSM for voice in the "electronically dense" urban environment (Riga, some other city centers) will decline in favor of "free" internet voice (well, flat-rate, at least).
So who is ready to spend at least LVL 1.3 million, topped by EUR 150 million to build a (superflous) autonomous network nationwide? Probably nobody. So look for another flop. Or at best, some really weird, never-heard-of company coming in and taking the licence on its firts and only bid.

IT integrators cozying up to Triatel?

Triatel, the CDMA-450 operator that started operations on November 15, has several IT integrators and ASPs waiting to talk about some deals, sources told this blogger. The idea is to package the mobile, fixed mobile and wireless internet solutions with the IT companies applications on demand, VPN service and the like. It seems that some of the companies want to offer a kind of "corporate-network-in-a-box" incorporating Triatel fixed and mobile phones, a VPN, servers and networked PCs, applications such as CRM or ERP, whatever.
This is apparently a sign that Triatel is seen as being the right magnet for business users of what are, in fact, 3G services. Triatel subscriptions are not going to be used to watch videocasts (using free video minutes) of lunch at the high school cafeteria, as this blogger's 17-year-old (from my first marriage, lives in Sweden) says some of his classmates do with their 3 phones. The target of some 40 000 users set by Triatel seems realistic in the number of total lines that could be used for business purposes (some companies going entirely wireless, whether with mobile, desktop phones or laptop cards) and by some high-end private users. We may also see Triatel drop the other shoe and announce a pure DSL-type wireless internet subscription, either with high speed or a competitive flat rate price.
It is interesting what Lattelekom will do - it is seeking some CDMA 450 spectrum, supposedly for reaching out into the remote countryside. But will it stand aside and watch Triatel take high revenue business customers (alone or through IT integrators), or will it act? In that case, how? Could Verdi, the brand Lattelekom uses for its IT solution provider, be one of those waiting to talk to Triatel? Certainly, the more natural partner, Latvian Mobile Telephone (LMT) isn't rushing to get its UMTS service up and running by year end as its licence stipulates. And the idea of a mobile office-in-a-box that can be up and running almost in a plug and play mode for its simpler functions (voice, fax, internet, video conferencing) is pretty attractive. If Lattelekom doesn't offer it, someone else will.

A short note

I've been away from Latvia for several days at a film market in Germany (my wife is a filmmaker). I am now back and hope to provide the latest rumors, gossip and facts from the Latvian telecoms and IT scene. On December 4, I will be heading for Oracle World in San Francisco and hope to do some blogging from there.

Lattelekom takes bids for TV-capable network

Just as SBC Communications and Microsoft have signed a deal in the US enabling the telecoms operator to send TV signals (presumably TV over IP) to the home, Lattelekom is winding up a bidding procedure to complete its high speed MPLS network in Riga. One of the specs for this network is that it will be able to handle TV over IP, so-called internet television. This, then, will be the basis of Lattelekom's television strategy, announced earlier this year after Nils Melngailis took over as managing director.
According to this blogger's sources, Lattelekom has already completed a high speed MPLS network in the rest of Latvia and Riga was left unfinished because of some technical problems, causing a new tender to be announced. Cisco, the global provider of internet routing equipment (and IP telephony) is among the bidders.
Once the Riga network is completed, Lattelekom will have laid the groundwork for eventually switching to an all-IP network and for reducing voice communications to a limitless, nearly free service for those customers having flat-rate broadband connections.
The old circuit switched network, which cost Lattelekom (and its various private sector shareholders) nearly LVL 500 million, is not about to be shut down, In fact, the former monopoly is installing and expanding interface solutions between what are essentially two networks. However, my guess is that once broadband useage moves into six figures (close to the 200 000 target Lattelekom has set), you will see IP phones being offered together with new broadband links. Also look for connection speeds to jump radically higher from the present 128 kbps (for City Internet) and 256 kbps (HomeDSL) to the megabit and multimegabit level (at least as a premium service).
All in all, Lattelekom is gearing up to use the reach and power of its nationwide network to meet challenges such as the triple-play offered by cable TV, internet and fixed network operator Baltcom, as well as the slightly crackpot plans to launch yet another carrier network by merging several state owned networks into The Alliance (see earlier posts).
I may add to this later. It's Latvian Independence Day and snowing in Riga.

Latvia's regulator dodges "mission impossible"

Latvia's Public Utilities Regulatory Commission (SPRK in Latvian) has issued a statement calling a recent survey of the potential market for its "third" GSM/UMTS mobile operator licence vague and unprofessional. Essentially, the SPRK said it cannot undertake organizing a licence auction based on the survey done by Ticon, which found that there was general, conditional interest in the auction by a number of foreign and Latvian companies. The regulator said it could not design an auction based on this data, which the agency said gave no specific recommendations for the pre-conditions for such a sale.
The statement is a signal of an ongoing, underlying conflict between the cautious regulator and the Ministry of Transport, which seems determined to hold an auction by the end of the year. Sources at the Ministry's Communications Department told this blogger that the regulator was foot dragging and dodging its responsibility to conduct the auction with due speed.
The regulator, however, seems determined not to repeat the disastrous attempt at a third-licence auction in 2002, when both incumbents, LMT and Tele2, bought UMTS licences for a fixed price of LVL 5.8 million, but no one showed up for the "real" auction of the third licence. However, the starting price for the current licence has been indicated at around LVL 500 000.
The controversial statement by the SPRK came on the same day as CDMA-450 operator Triatel was scheduled to start operations as Latvia's de-facto third mobile operator, offering 3G services. The incumbents, whose expensive licences required that they start UMTS operations by year end, have yet to announce the start of this service.

The wild card hit

Well, it was a previously unknown Finnish company, AffectoGenimap, that merged with Mebius of Latvia's Lithuanian parent, Informacines Technologijos. So one of the wild guesses in the previous post was sorta correct.
The Finnish company believes it will sell its GIS solutions in the Baltics. Good luck to them, because as someone in the GIS business in Latvia said (a couple of years ago) -- there will be no widespread adoption of GIS as long as digging is cheap. This was said in reference to the use of geographical information systems (GIS) for planning street maintenance and the like.
The Lithuanians apparently see an opportunity to offer their rather extensive and low-cost Oracle implementation experience in Finland.
That's my short comment, sitting here at Riga Airport on a fast WiFi link.

Finnish-Baltic IT merger rumors fly

A major merger of a Finnish and "Pan Baltic" IT company is to be announced in Helsinki on Friday. On the Baltic side, there is a short list of "the usual suspects", so here are the hottest rumors:

1) It's Latvian IT Alise (with 10 employees in Estonia, I guess it is Pan-Baltic) and TietoEnator, the Finnish-Swedish IT company. With IT Alise, TietoEnator would broaden its potential customer base in Latvia from it's narrow-focus, bank-card system oriented ("Chipcards in Borneo 'R Us) Latvian subsidiary and pick up a company that has "done" Lattelekom, LMT, and is installing a big m-f of an Oracle eBusiness Suite system at the biggest corporate m-f of them all in Latvia, Latvenergo, the national energy utility. The word is out that the companies have "dated" regularly in the past, but not gone home with each other. One never knows...

2) It's MicroLink and God-knows-who in Finland (some company with more k-s and ä-s than you want to see in your life). MicroLink is truly pan-Baltic, it is a mid-sized m-f in its own right in the market (Exigen now has a bigger one ....turnover, watch'cha think, since it attached Dati over the summer). For MicroLink this would fulfill the prophecy of one of its founders, Alan Martinsson, that Baltic IT companies cannot stand alone for long. Alan has, unless I am hallucinating this, gone off to some kind of venture capital/investment banking outfit, and might be involved in doing the deal. Don't know, haven't called the man. But it would make sense. Also, the Estonians, who started MicroLink, would probably feel better selling it to their Finnish cousins, who, BTW, are pretty much at the top of the world IT list in terms of smarts, useage, etc.

3)It's one of the Lithuanian upstarts. Varos Group with its retail and access control solutions sounds a little to narrow, unless we are talking a peer-to-peer type of deal, meeting their obscure Finnish clone, Kurrattperkelääkeskustakoskenkorvakatu Oy ...oy...oy... or whatever. Sonex, which I don't follow, is still tiptoeing out of the hardware business. Mebiuss, just recently came into Latvia, had its obligatory scandals (who doesn't, IT is the # 2 customer for this state outfit) with the Procurement Supervision Board (IUB in Latvian) but has yet to build up a really solid reputation.

So I don't really know, but I'll put my five santims on the IT Alise deal.

Then there are the loonie rumors (although not entirely). The one I heard today from some top folks in the Latvian IT business is that Lattelekom is buying MicroLink. Sorta fits with the Estos mid-range vision of their baby growing up to marry a mid-sized IT & T company. It also fits with the idea that Lattelekom may split into a) a network operator (getting some pan-Baltic assets in the data networks area from MicroLink), b) a service provider (consumer, broadband, cable TV, all that sh**t) and c) a business service provider (heavy into outsourcing your entire IT&T needs, putting in all from the network to the PCs to the rent-an-applications services, just sign here on the SLA...). The latter is going to take a lot of IT competance and weigh. MicroLink has some of it. Rumor also has it that Verdi, the unborn fetus of an IT subsidiary that Lattelekom has been carrying for years is losing folks to international biggies like Accenture. Buying MicroLink might make Lattelekom a more exciting place to work (well, with other excitements like "who's getting reorganized this month?")
One also mustn't forget that, sooner or later, even people like Indulis Emsis and Ainars Slesers will figure out that you can either sell Lattelekom to TeliaSonera, or wait to sell it to DeutscheT-Sonera in 2008 or whatever, but there ain't gonna be too many choices beyond that, and certainly no mad bidding war even for this prize. And don't call out the riot squad to stop the people stampeding off Air Lebanon to bid for that fourth third mobile licence the second time around, while you are at it...

Friday will tell all. Can't make it myself, gotta go to Stockholm with my youngest son that evening on family matters. Otherwise, if it were just a question of spending the day in Helsinki, I would dog-leg it with Finnair to Tukholma as they call it.

The lethal 13 % solution -from SME to BRK?

Sorry for getting around to this after the fact, but there were amusing telecoms stories to tell. The Latvian Information Technology and Telecommunications Association (LITTA) reported on October 26 that Latvian software companies recorded only 13 % of their sales as being to small and medium-sized enterprises (SMEs). The average for Eastern Europe is 42 %. Even accounting for a high rate of "unofficially obtained" software, this means that the use of IT at SMEs is at best well below the average for the region (i.e. assuming about 50 % use IT, but don't have licences, bringing the uptake rate to 26 %).
To my mind, IT plays the role of electricity say, 110 years ago. Companies in the 1890s are said to have had vice-presidents for electricity, some had their own generators and power plants. Now, asking whether a company runs on electricity will qualify you as an idiot in Latvia and anywhere else. Yet information processed by IT systems is the electricity of business since the 1980s at least. It certainly is in the 2000s, and the pace of change is much faster than when businesses electrified more than a century ago.
Some years ago I met some Swedish businessmen from the wood processing sector. One said that he had one and only one initial question for any potential Latvian partner: can you work with numerically driven machine tool files? In other words, FORGET IT if you do not have an IT driven, networked production line where I can stick in a diskette in Stockholm and have tabletops machined Latvia and delivered, say, a week later.
No amount of craftsmanship, no hard working best practice Latvian handicraft will get you past that. Unfortunately, the figures show that Latvian SMEs are at best, good mid-1950s small businesses by global and EU standards. Do we see any 50s-style businesses around anymore? No!
These indicators of SME IT use in Latvia are a signal that in the EU/global market, a very large number of Latvian SMEs are going to be business road kill (BRK) very soon. For readers who don't know American slang, road kill are the flat squashed remains of animals who, if there is any expression left, look like they don't know what hit them.

Mobile operator in a "Nigerian Letter" reaches Latvia

Everyone gets them, the letters from Nigeria, other African countries and even from Russia (claiming to be from Yukos owner Khordokovsky). They offer fabulous "business opportunities" arising from the fact that the Minister for Crocodile Breeding on The White Nile died and left USD 78.6 million in his safe. His faithful servant Kwame, is now offering to share this with you.
Not interested?
The Latvian Ministry of Transport went out with a press release announcing that it, too, had received what is, to my mind, the equivalent of a Nigerian letter offering a fabulous deal in mobile telecommunications. The MOT, of course, was serious.
A company called International Telecommunications and Technology Inc, or IT&T Company is offering to buy licences for GSM, UMTS, and CDMA-450, as well as to build its own independent nationwide network in 12 months, spending between EUR 150 and 220 million. It says it will pay LVL 1.3 million for the licences, which are not officially up for bids yet, but whose starting pricc has been pegged at LVL 500 000.
IT&T Company is nowhere and everywhere. Google it and you see the power of Google, everything ever put on the net about IT&T, meaning information technology and telecommunications. I did no better on the Federal Communications Commission (FCC) website, since IT&T Company claimed to be an FCC licenced operator offering some kind of carrier services in the US and 95 other countries.
The latest word is that IT&T Company is based in Lebanon, but I think there are only two mobile operators there - Libancell and Cellis, or something like that. Both were involved in some kind of scandals, Syrian influence, the Assad family, etc.
In any case, there are probably more than 1.3 million mobile users in Latvia, and a very optimistic estimate says there might be 300 000 potential additional users. The high ARPU business user has been taken (some might be skimmed away by Triatel with its CDMA-450 based 3G services), the middle ground is covered rather well by Tele2's strong Golden Fish prepaid card brand, by LMT's youth-oriented O-karte and the virtual operator Amigo hitting the teenybopper market. So that basically leaves the geezers, grannies and toddlers. Even some of them have mobiles, paid for by their children or grandchildren. So how is the EUR 200 million investment going to be returned?
All of which led me to conclude, almost at first glance, that the whole IT&T Company offering was a crackpot deal. Nobody among my telecoms contacts at Pyramid Research, the Latvian Telecommunications Association, or the Public Utilities Regulatory Board had heard of this outfit. Nor had Dana Al Khatib, an analyst at Arab Advisers Group, who I phoned in Amman, Jordan, for my newspaper. The company had done a comprehensive survey of telecoms companies in the Middle East, but apparently missed the mysterious IT&T Company.
What gives a touch of black humor to this, as to many other political events in Latvia, is that the MOT decided to publicize this lunacy as a sign that there was "interest" in the so-called third GSM/UMTS licence. I'm not belittling that, an auction may have a fighting chance, but by that standard, I get "expressions of interest" amounting to billions every week. Let's see, did I toss out that e-mail from Kwame, who is mournfully remembering his most honorable minister, deceased most horrible when he slipped and fell into a crocodile breeding tank...
Those sums are more eye-popping than what this mysterious allegedly Lebanese company has to offers.

Triatel: Latvia's first metrosexual operator

To loosely borrow the term "metrosexual", it refers to an attractive, intelligent and aesthetically refined male person who exhibits what many would consider the best attributes of positive stereotype gay and straight men. There is a flair, an intelligence, a touch of arrogance, perhaps, but all in all, an attitude and "je ne sais quois" which leaves you wondering just which side of the fence this guy is on.
So what does this have to do with Latvian telecoms? Triatel, the brand used by two operators, Telekom Baltija and SIA Radiokoms, has launched a kind of metrosexual set of services. They are state of the art, 3G, mobile, fast (5.2 Mbps download is just around the corner) and at the same time fixed, no different from your slightly upscale home phone, except that there is this little antenna, no cord, but a dial tone just as if there was one. They are equally at home in the city (and this is where Lattelekom or at least some of the wireline ISPs should watch out) and in the increasingly prosperous suburbs. They can look "fixed line" and be mobile very quickly. In fact, you can pack that home desktop phone in a bag and take it to the summer house, just like a 1992 vintage Motorola (except you can safely drop the Triatel phone on your foot, the Motorola is not to be tried at home...). The number and phone portability (within Latvia) is very Vonage-y, but there is no flat rate service yet.
So that's how Triatel is going to look -- cool looking odd brand flip phones, desktop phones and faxes with the cord missing on second glance, and the bright little secret that this company is actually, henceforth, doing everything via CDMA 450 and calling some of it "mobile".
This is just a weird way of looking at Triatel after their presentation today. Everyone else thinks it is some big deal that they are planning to get 40 000 cream of the crop subs, or 2 % of the Latvian market. As long as their interconnect and roaming issues are settled (they are in process), who really cares how big a market share they have as long as they generate decent ARPU.
One thing though, as a Lattelekom executive points out (he sees them as competition, and rightly), is that Triatel has to get the customer outcomes right, because it is no longer just abot the technology or the network. The network connection on the fixed wire (no little antenna) is heading for near zero cost in the big markets. So it all boils down to making business processes work seamlessly and flawlessly and, yes, metrosexually, regardless of the identity of the network, fixed or wireless.

Are the Germans coming?

Three or four years from now, don't be surprised if Lattelekom and Latvian Mobile Telephone (LMT) are subsidiaries of TeliaSonera which, in turn is a subsidiary of Deutsche Telekom. Or worse, Lattelekom is a 49 % stranded investment of TeliaSonera, though that is less likely now that the government of "no privatization on my watch" Indulis Emsis has fallen.
According to my source, speaking in my ear at a crowded wine-drinking event ahead of my newspaper, Dienas bizness annual awards event, the word is out to "start learning German".
This information is to be taken as seriously as any cocktail party rumor, but against the background of rumors that France Telecom was interested in TeliaSonera, it does sort of make sense. It also meshes with my own view, which I tell anyone who says "TeliaSonera taking over LMT and Lattelekom will be a supermonopoly", that TeliaSonera is a midsized fish in the European and global telecoms shark tank. It just looks big to us. To the really big, TeliaSonera looks like lunch. Not ready to be served yet, not, maybe, for quite a while, but still, lunch...

I'm in the phone booth, thinkin' 'bout the government

That bad misquote of an ancient Bob Dylan song (the line, I believe, orginally was "Johnny's in the basement, mixin' up some medicine, I'm on the pavement, thinkin' bout the government") brings me to record some preliminary thoughts about the fall of the minority coalition under Indulis Emsis and its possible impact on the telecoms sector.
It isn't exactly the first thing that comes to mind, but here are a few speculations.

1) The realignment of political forces, especially if New Era (Jaunais laiks) returns to government, could break the deadlock on the privatization of Lattelekom, which would mean that TeliaSonera would get a better chance to increase its stake in the company significantly above the present 49 %. Emsis has been opposed to privatization and has said it would not happen as long as he was in government. Indeed, he has suggested what would amount to an operational renationalization of both Lattelekom and its sister company, Latvian Mobile Telephone (LMT) by "taking charge" in the government's interest in both companies.

2) The government crisis will postpone the auction of a third GSM/UMTS licence, which Emsis insisted had to be held even before Ticon Latvia had made its feasibilty report. Now, after closer study, that report appears to have been done rather superficially, finding not so much genuinely interested operators as companies who talked to the interviewers out of politeness and made essentially polite statements of "we might be interested" rather than analyzing the market in depth and discussing options based on that.
In fact, this blogger has learned that Ticon even got the name of one company, listed as J Tong Telecom Inc, wrong. The company is actually called J-Tone and is part of larger Taiwanese telecoms group. According to my sources, J-Tone (which means quick call or something like that in Chinese), was and remains essentially clueless about the Latvian telecoms market, but more or less said something like "why not"?

3) The fall of the Emsis government may also derail plans to start a second government owned telecoms wholesaler (or whatever it is supposed to be) called The Alliance (see earlier posts). It seems that Ainars Slesers, the Deputy PM and Minister of Transport rolled into one, favored this plan, as did the Ministry's Communications Department. Indeed, the idea came up in a sectoral policy concept published earlier this year, before the Repse government fell (this stuff happens often here, we're no worse than the Italians), so it may be picked up again even if whatever right-of-center government that reconstitutes (like the "policeman" in Terminator II) keeps Slesers out in the cold.

4) If New Era gets a strong position in a new government, it may heat up the pursuit of "the guilty" in the digital TV scandal, which had essentially faded from sight during the Emsis interlude. So far, they got found one culprit, a Mr. Bean look-alike financial planner associated with Andris Skele, founder of the People's Party, the folks who just sank the Emsis government. Unlikely that they will resume the hunt for the elusive digital fraudsters, as there is one theory that links the little-known Kempmayer Media Ltd, blamed for the digital TV scandal (although it delivered on all of its contracts) to Skele through some byzantine network of offshore companies. Meanwhile, digital TV, mostly by cable and MMDS, is moving ahead under private sector steam.

This, indeed, may be the best thing about a governmental interlude yet once again, one more time, whatever...
I don't mean that some digital schemers should go unpunished, but that while the scattered hogs are finding their way back to the trough, it is unlikely they will interfere in any way with private activities to develop telecoms and other, converged digital services that the market demands.

Lattelekom appeals price comparison decision

Lattelekom has appealed to the Administrative Court a decision of the Competition Council condemning advertisments published earlier this year comparing the price of calls on Tele2's mobile network with calls on its own fixed network.
The Competition Council ruled that voice calls on different networks were not a proper basis for price-comparitive advertising. Lattelekom maintains that most telecommunications users have access to both fixed and mobile phones and may be legitimately informed that making fixed-network calls, when available, is cheaper.
Lattelekom has yet to decide on whether it will appeal a similar Competition Council decision with regard to its ads comparing using a mobile phone when a fixed line is available to riding a cow or eating with a shovel. Once again, the complaint was filed by Tele2, which seems to be making litigation one of its core businesses (don't worry, at Lattelekom, it's reorganization :) ).
Sorry, no key-words boldfaced in this post, left my Powerbook with its Firefox browser home with the 9 year old.

Vodafone, Elisa, others show mild interest in Latvia's third 3G licence

Vodafone, French Bouygues, Canada's Bell Mobility, Finland's Elisa, Russia's MTS and Taiwan's J-TONG Telecom Inc all have shown mild interest in participating in a planned auction of Latvia's third GSM/UMTS mobile operator licence.
Among local companies, the cable TV and fixed-network telecoms operator Baltcom, which started and built up Baltcom GSM between 1997 and 2000 (when it was sold to Tele 2) may be ready to return to the mobile market, said director general Peteris Smidre. He confirmed that he had been interviewed by Ticon Latvia, a consultant hired by the Ministry of Transport to do a quick feasibility study.
A copy of the 17 page document was obtained by this blogger.
Smidre said that the LVL 500 000 starting price for a licence auction officially suggested by the Communications Department was acceptable, and that if the right conditions were offered to a third operator, including some protection from the market-dominant incumbents, low interconnect rates and incentives to cooperate on infrastructure (shared towers, initial domestic roaming, etc), Baltcom would make a try to return to the mobile market.
According to the report, the main risks seen by the foreign companies that agreed to be interviewed were in the smallness of the Latvian market (where there are already more than 1.2 million mobile users of a population of 2.4 million) and doubts about whether a combined operator (especially on the UMTS side) could make an adequate profit.
Also named among local companies was Canadian-affliated CSC Telecom, a so-called alternative service provider currently offering low-cost overseas calls, internet and other services to business and residential customers, and Latvenergo.
The Latvian national energy utility said, however, that it had apparently been misunderstood by the Ticon interviewers. The company has no plans to bid for the third licence but is interested, instead, in offering infrastructure and transmission capacity on its internal network.
One source told this blogger that the interest of local companies was mainly to partner with international operators on any bid. Only Baltcom has any experience of building a mobile network from scratch, and it was initially aided by its American shareholders (Western Wireless among others) and the fact that Smidre is a telecommunications engineer by training.
The Communications Department is urging the Public Utilities Regulatory Commission to arrange an auction by year-end. The regulator says it has to finish evaluating the Ticon report before it can say whether this is possible. Sources close to the regulator suggest privately that they don't want to rush any auction, especially in view of the fiasco with the last attempt in 2002. The Communication Department, however, insists that one needs merely to update the previous documentation in order to sell the licence by New Year's Eve.

Latvia's mobile numbers to run out?

The numbers allocated for mobile phone operators in Latvia may run out by next spring, according to Inna Steinbuka, chairman of the Public Utilities Regulatory Board, which is currently charged with distributing numbering resource.
Steinbuka and Gundega Rutka, an expert with the regulator, say that in the next two weeks, the last 200 000 available numbers will be allocated – 100 000 apiece – to Latvian Mobile Telephone (LMT) and Tele2. Rutka estimates that at present rates of consumption – LMT recently reported a monthly increase of around 30 000 customers – the numbers should be fully used up in March or April. That effectively means that both operators will have to stop ordering new SIM cards, as there will be no authorized numbers left to use with them.
The regulator advocates a rapid switch to eight-digit numbering, something which the agency has been reminding the government (more precisely, the Ministry of Transport's Communications Department) of since the summer. In fact, Steinbuka and Rutka suggest that it may already be too late to do this in an orderly fashion.
Another unexpected side effect of the number shortage is that any new so-called third operator will have no resources whatsoever. In fact, announcing an auction for the third GSM/UMTS licence will, in effect, be a misrepresentation, since whoever buys it will have no number resources whatsoever.
There may, however, be more to this whole oncoming mess than meets the eye. For one thing, the regulator under the final draft of Latvia's new Law on Electronic Communications will lose the power to allocate numbers. Steinbuka's attitude is "good riddance" as the regulator has enough to do already.
But at the Communications Department, sources told this blogger that the alarmist statements from the regulator are seen as part of a bureaucratic battle – the regulator doesn't want to lose some of its authority to the Ministry of Transport. Whatever the case may be, Steinbuka describes the handling of the numbering issue as "a football" that has been kicked between the regulator and the Communications Department for several months with no useful result.
Raimonds Bergmanis, the director of the Communications Department says that a government decree is being drafted concerning the adopting of eight-digit numbering. It will be adopted by the Cabinet of Ministers and issued in the next few weeks. He personally is skeptical about any imminent crisis for the mobile operators and says that for the immediate future, it would suffice to better manage existing resource by finally charging for their use or reservation.
Bergmanis points to a database on the regulator's website www.sprk.gov.lv, (follow the links in Latvian) that he says adds up to around a million numbers set aside for each existing operator (I have not played around with them in their downloadable Excel format). That means that even if each of the operators has around 700 000 users (LMT says it does, Tele2 doesn't report these figures), there are still around 600 000 mobile numbers left. Also, says Bergmanis, if all of these numbers were, indeed, to be allocated, it would mean that every living inhabitant, including infants and subsistence-level pensioners, could get a mobile phone.
A list of number resouce allocations since fall, 2002 shows that 770 000 numbers have or soon will be allocated, covering, roughly, the time the regulator has been in existence. The figures don't show how many numbers were already apportioned to both operators at the time.
Yet another interesting issue is how many numbers are actually in some kind of churn-lag, for lack of a better term. These would mainly be Tele2 prepaid cards whose lifetime (six months for some) has not expired, but which are effectively not being used (they were bought by short term visitors and then discarded). Only once these numbers are "legally dead" can they be reissued. The same problem faces Amigo, the virtual operator as well as LMT's O-Card program.
In a statement showing, to my mind, the underlying tensions between the Communications Department and the regulator, Bergmanis said that it was possible the existing operators had effectively staged a kind of number resource "land grab" so that there would be nothing left for the third GSM/UMTS operator. With number portability, anyone switching to "Newbie3GCom" (my hypothetical name) would face a stiff fee, which the incumbent operators, theoretically, could charge. By pointing this out, the Communications Department director is effectively saying that the regulator allowed the "land grab" and may have been profligate in meeting the operators' demands for more and more numbers.
Meanwhile the regulator is documenting that it was, in fact, conservative if not miserly with the numbers by pointing out that it took several tries for each operator to get a new allocation and by showing this blogger correspondence with LMT telling the operator to use up what it already has in stock before coming to them for more.
So what we have is a multifaceted process going on, with bureaucrats fighting for turf or to say (as the regulator may well want to), "I told you so", with the operators sharing the belief that they are heading at high speed for the end of their number allocation rope, and with not a few people in the business asking – will there be SIM cards available around Easter?

Lawyers. pick up your phones...

...some strange and not so strange cases will be coming your way. I, for one, would like to sue Apple Computer. I paid around USD 2000 for my 867 Mhz Powerbook G4 in the summer of 2003. Now they are selling the same machines for a lot less, with 1.33 Ghz, never mind that the iBook, a G3 when I bought it in 2001, jumped to G4 last year. Boy do I feel discriminated with respect to anyone else who started blogging last week with a brand new Powerbook!
Tele2 in Latvia feels the same, but it paid LVL 5.8 million for a UMTS licence in 2002, as did LMT. Triatel, the CDMA-450 operator paid LVL 200 (100 for each alliance partner) to start operations and now it looks like the government expects to get at least LVL 500 000 for the combined "third" GSM/UMTS licence it still hopes to sell by auction sometime in the first half of 2005.
More details of the intended auction have emerged, and it now looks like the Ministry of Transport will urged the Public Utilities Regulation Commission to hold a combined beauty contest (selected a few best looking business models) and auction (letting the beauties with the most services for the least price try for the highest bid). The starting bid will be LVL 500 000, something that was omitted from a document submitted to the government, leaving the impression that this was all the money the government expects to get from the sale. In 2002, the bids were to star at LVL 7.6 million and no one came.
Tele2 strongly suggested it will sue to prevent the a sale for any amount less than LVL 5.8 million it paid, asserting any lower price is discriminatory. The Swedish-owned company is probably emboldened by its "victory" in the Competition Council against evil Lattelekom for accusing it of encouraging people to ride cows and eat with shovels (see my earlier post). Could the Latvian courts be equally wacko? You never know...
Alas for Tele2, the possible auction result is only one lower cost of entry for a "third" rival. Equipment prices have probably fallen since 2002. UMTS was just coming out of prototype then, now you have several networks up and burning cash..I mean running, for a number of operators, like 3, who has people chase you around Swedish shopping malls.
In addition, both Latvian mobile incumbents have had a moratorium on new entrants (even Triatel is coming in after the two year deadline) since the last failed auction. As one government official said: "Tele2 has been living twirling its hat and wallowing in fat:" Trust me, it sounds better in Latvian :). Even LMT, which has wallowed in around LVL 42 million of fat last year, has decide to shrug off the auction terms. In retrospect, LVL 5.8 million was a few days revenue or about a month and a half of profit for Juris Binde.
One should also remember that Tele2 had a choice (not withstanding stories that the government, in 2002, strongly suggested that both incumbents buy their fixed price UMTS licences). Like with GPRS until earlier this year, it could have stood on the sidelines until it saw that there was a market and some reason to turn on this feature (Tele2's former CEO in Latvia, Bill Butler, always used to say that the company was just one circuit board insertion short – at all of its base stations – of turning on GPRS. Bill went on to new challenges in Tele2 without snapping the gadgets into the slots even though LMT was already going nationwide with GPRS).
The other upcoming work for lawyers may be if and when Lattelekom decides to challenge a final (not yet decided) decision by the regulator to slash its interconnect rates to 0.8 santims per minute. Lattelekom officials suggest such a decision, if finalized, would violate European Union mandated procedures. Lattelekom maintains that such a step is not based on a throrough examination of costs, and that it would not benefit consumers, but merely drive down the incumbent's revenues (large proportions of interconnect fees come from alternative operators who terminate foreign calls in Latvia via Lattelekom, rather than from domestic interconnects for local and national calls). Also, there have already been cuts of between 20 - 40 % in various interconnect fees, based on Lattelekom's own cost-based calculations by methodology set by the regulator, which the incumbent says have not been passed on to consumers by such heavy interconnect users as the mobile operators. Had these cuts been passed on, they would have amounted, at most, to around 0.5 santim off of rates between LVL 0.12 and LVL 0.20 per minute, domestic.
Lattelekom would probably first try to apply EU law in the Latvian courts, but if the interconnect issue is pushed too far, you could see Lattelekom appealing directly to the European Commission in Brussels, perhaps aided by 49 % owner TeliaSonera and other European operator interested in avoiding what they consider a bad precedent in EU member Latvia.
Again, you saw this first on this blog.

More Triatel surprises, some problems...

I've suggested to my day job newspaper that we interview Triatel's Mihail Zotov as a businessperson of the year for some kind of IT/Telecoms supplement magazine we plan to do (we do lots of magazines and supplements, actually it's no big deal). Mihail hasn't made the most money, Juris Binde of LMT takes that prize. Mihail simply upset everyone's apple cart. Paid 100 lats, set up shop (well, Telekom Baltija has been there for some time, to tell the truth), put up a test CDMA 450 network and there you have it – something ready to go commercial in those parts of Latvia where the money is. This left LMT and Tele2 gnashing their teeth. 5.8 million lats apiece for UMTS licenses up the chimney , as the Latvian saying goes.
But that is not the end of the story . Triatel is more than CDMA 450, that's only been the hot news. The brand actually applies to a range of services, mostly business oriented (but private customers are welcome). Much of that business is fixed line, but the real value in fixed line is in broadband and the services and QoS you can offer over the connection. There are close to 200 people in Latvia, including some businessy sounding names, who use Skype, and that's probably the tip of the iceberg, because not everybody fills in all blanks when they download and configure Niklas Zennstrom's latest toy. So voice, forget it...except mobile voice when you are not in a WiFi zone (saw some stuff on the net about Vonage and Boingo making something together, so there we go...). Plus John Tully (perhaps reader no. 6 of this blog) mails me that there will be WiFi/GSM triband handsets on the market.
So what's Triatel up to? My sources suggest the company may be going head to head with Lattelekom and all comers in using CDMA 450 as a high speed, fixed wireless internet platform. When fully equipped and juiced up, a CDMA-450 network can deliver 4 to 6 Mb downlink, so it is said. That's pretty good by comparison with ordinary DSL (256 kbps to the home via Lattelekom). It's the kind of solution you think of when Lattelekom asks an outrageous sounding price to wire a development of new homes, and the developer says "you should pay me for offering you to connect these people". A bit exaggerated, but a good point. The folks in this wealthy suburb would be spending money over the wire, and it's really Lattelekom's problem to scoop up some of that value. In the city, where everyone is wired or close to some fiber, maybe the fiber should be nearly free, so you expand the network participation as fast as possible and can start pumping premium stuff like digital TV, video on demand, games, whatever down the pipe.
So I see Triatel and Lattelekom competing in one way or another for the growing middle-class suburban customers who are a bit off the net in a 50 km radius around Riga. 6 megs to the home or between a few neighbors is a pretty good deal, especially if it's bundled with Triatel mobile subscription. Lattelekom's wireless RadioDSL has sort of dropped from sight (well, maybe I should ask them :) ), even though it was technically interesting, being genuine SDSL.
And now for the problems. Triatel will announce soon who its phone retailers will be, but according to my sources, it has been an uphill fight. DT Mobile, Latvia's biggest chain of mobile handset retailers (and an agent for LMT) hasn't come to a deal with Triatel. Look, also, for Triatel selling its phones on the net.

Wireless internet at Latvian road speeds :)

Siemens and Flarion are developing a high-speed wireless internet technology suited to, well, the high-speed customer:

FLASH-OFDM® systems enable users traveling at speeds of up to 250 kilometers per hour to utilize data services at average downlink speeds of 1 to 1.5 megabits per second, capable of bursting to 3.2 megabits per second in individual cases. The uplink typically offers users an average experience of 300 - 500 kilobits per second, bursting to 900 kilobits per second. With latency of only 50 milliseconds, the system is extremely well suited for enterprise or interactive applications.

So at last we have something for the black-windshield Mercedes and BMW crowd who strive to approach these speeds on Latvia's less than high standard highways and basically gonzo drivers (381 dead so far this year and counting...). As for trains, one of the best known trains (for tourists) is the Little Train (Mazais bānītis) where you can hop off and pick flowers or mushrooms and then catch the train again at a slow jog (so one says, I haven't tried it).

On a more serious note, it will be interesting to check whether Triatel, the CDMA-450 operator starting commercially in November, will be looking into this. Or Lattelekom, for that matter (although they are aiming at rural shacks, which don't move very fast).

Baby, you can't ride that (Lattelekom) cow

Ever so often (in Latvia, more often), state agency decisions deserve the colorful label of being totally fuckwit.
While I try to be serious in tone on this blog, this designation comes to mind after the decision by Latvia's Competition Council condemning a series of ads by Lattelekom asserting that it was plain stupid to call people on mobile phones when landlines (preferably Lattelekom's) were available.
Lattelekom compared this to other bizarre and stupid actions, such as riding a cow, combing one's hair with a rake and eating with a shovel. For comparison with landline rates, Lattelekom used numbers that looked suspiciously like Tele2's rates. Tele2 prides itself on being the "price leader" (although its price war with LMT has had a somewhat long truce).
Tele2 went to the Competition Council crying foul and asserting that its image had been damaged (a bunch of Swedish cow-riders, right?).
The Lattelekom ads were, though bizarre, memorable and successful, and for the Competition Council to call them unfair and to say that making a voice call in one medium or the other was unfair comparison is, well, you saw the word above, to put it mildly.
I would also suggest that Tele2 give it a rest. They may have scored a victory in this wacko dispute, but if Lattelekom has to take down its cows (seriously, they gotta retract the ads), then Mats Tilly, Tele2's Managing Director in Latvia, is riding away from his "victory" on a silly donkey, just like Don Quixote after his latest round with the windmills.

Lattelekom plans rural CDMA-450 in 2006

Confirming what has been written earlier in this blog, Lattelekom's network division head Valdis Vancovics confirmed that the incumbent fixed line operator has asked the Public Utilities Regulatory Commission to use some 450 MHz frequencies for rural, fixed-mobile CDMA-450 solutions. He said these would be implemented starting in 2006 as part of Lattelekom's modernization plan, adopted during the summer, to finish modernizing remaining 10 % of Latvia's network that does not have full digital services.
Vancovics says he hopes Lattelekom can cooperate with mobile operators Latvian Mobile Telephone (LMT), Tele2 and newcomer Triatel, as well as the Latvian Radio and Television Center, for base station, tower and other infrastructure deployment.
Services that Lattelekom hopes to offer to remote rural customers include basic voice telephony and internet at speeds initially up to 150 kbps (slightly higher than Lattelekom's basic, wireline CityInternet service).
Lattelekom's application for frequency allocation, filed last week, will be processed in a month.
An intriguing rumor is that the State Information Network Agency (VITA) is also looking into CDMA-450. This may be part of the ongoing plans to start a rival, state-owned operator to Lattelekom by merging the networks of four state-owned entities (see earlier posts).