Lattelecom flexes muscles on ISP market

  • 2007-04-25
  • By TBT staff
RIGA - Lattelecom, Latvia's dominant land-line telephone operator, has reportedly begun buying out small ISP firms with an aim to boost its client base while unfurling an ambitious digital TV system. Two papers wrote last week that Lattelecom, which has an approximate 87 percent share of the market for fixed-ling communications, was prepared to spend as much as 10 million lats (14.2 million euros) buying out Internet providers in order to increase its network of digital TV subscribers to some 25,000 users.

Company officials neither confirmed nor denied the reports, though a spokeswoman told the Bizness & Baltija paper that one of the company's goals this year was the development of broad-band Internet services in the Riga region.
An anonymous ISP representative told the same paper that Lattelecom's market share in Riga was weak and that it ostensibly intended to catch up through an aggressive acquisition campaign.

Earlier this month Gints Kirsteins, Lattelecom's business development director, said that digital TV would be broadcast through the Internet, which would require a data transmission capacity of 10 megabits per second. He also said that the company would be able to provide digital TV to 80 percent of its approximately 122,000 Internet subscribers as of the end of March.
Previously Lattelecom had provided digital television broadcasts that could be watched on a computer via the Apollo news portal.
Lattelecom, which is 51 percent owned by the state and 49 percent by Scandinavian-owned Telia-Sonera, has been active over the past year as it comes to terms with a rapidly changing market. Other than digital TV, the company has mulled over launching cable TV and mobile phone services. Last year was its first full year of Citrus Solutions, an ambitious network integration and maintenance system that targets large Scandinavian companies.

In the meantime, an enormous cloud of uncertainty hangs over Lattelecom's future ownership. The state has made it clear it wants to come up with a holistic plan for privatizing and nationalizing Lattelecom and LMT, the nation's leading mobile phone operator, but so far a solution has eluded government ministers.
In March Economy Minister Jurijs Strods admitted that none of the ideas tabled so far was attractive and expressed hope that a better one would materialize in the future.
There are four main scenarios. The first calls for swapping stakes in Lattelecom and LMT with TeliaSonera so that Latvia would gain 100 percent ownership of Lattelecom and the Scandinavians of LMT. A second would be selling both companies to TeliaSonera, which many say is fraught with competition hazards.

The third option would be maintaining the status quo, while the fourth would involve selling LMT to TeliaSonera while privatizing Lattelecom via an open auction on the Riga Stock Exchange at which the Scandinavian operator would be forbidden to participate. The fourth option would maximize state revenues.
Last year the two companies were evaluated by two appraisers, according to which LMT has been valued at about 668 million lats and Lattelecom at about 260 million lats. The estimations are valid for six months, which puts pressure on the state to make a decision.

The Lattelecom group posted a 39 million lat profit in 2006, up 12.6 percent year-on-year. Revenues amounted to 143.7 million lats, up 7.7 percent.
Revenues from leased lines, data transmission and Internet services increased 30 percent, while those from related services soared 84 percent.