HELSINKI - Two former top managers at Lattelekom aired out their frustration last week, telling a Finnish paper that the company was essentially the Latvian politicians' punching bag and that TeliaSonera's efforts to obtain majority control over the firm were doomed to failure.
Christer Nykopp, who sat for 10 years on Lattelekom's executive council on behalf of TeliaSonera, which owns 49 percent of the Latvian telecommunication company, told the Kauppalehti daily that TeliaSonera had no hope of acquiring a controlling stake in the company as the government would not consider further privatization for the time being.
The statement underscored TeliaSonera's frustration in Latvia, especially after the Swedish-Finnish telecom giant signed a memorandum of understanding with the outgoing government of Einars Repse in March, providing the possibility to sell Lattelekom shares to TeliaSonera.
Former CEO Leena Suhonen confirmed Nykopp's understanding, adding that the Latvian government interferes in company affairs.
"Pressure on the company has been strong," she was quoted by the paper as saying. She mentioned the government's attempts to influence the telecommunications market despite a law liberalizing the market that went into effect in April.
"Political meddling in the running and operations of the company has clearly been much more modest in Lithuania and Estonia," Suhonen said, referring to TeliaSonera's operations in Eesti Telekom and Lietuvos Telekomas.
A coalition and related management agreement concluded years ago between Sonera (before the merger with Telia) and the Latvian state expired in January, after which the company's Finnish CFO was replaced with a Latvian. Suhonen retired in April.
Of Lattelekom's 38 foreign top executives, only one remains.
The company's new finance director is U.S.-born Latvian Nils Melngailis. Kauppalehti wrote that although he's known as a competent financial specialist, he does not know local conditions very well.
Lattelekom last year earned the largest profit in its history - 27 million lats (40.2 million euros) on sales of 139 million lats. The state has said it wants to retain the profit to develop rural telephone networks.
Meanwhile, in Estonia TeliaSonera has remained firm in its stance on increasing interest in Eesti Telekom, saying it was concerned only in upping its stake to 85 percent and at the price it recently offered. Currently the firm owns almost 49 percent.
Kenneth Karlberg, head of TeliaSonera's Norwegian, Danish and Baltic operations, was quoted as saying in Tallinn last week that the government should not overlook the fact that increasing TeliaSonera's stake in Eesti Telekom would benefit all of Estonia by creating new jobs and investments.
"The government should discuss this subject in depth and seek relevant counsel," he said.
He stressed that if the government rejected the offer on the table - 111.30 kroons (7.11 euros) per share for the state's 27 percent stake - the bid would fail. For it to succeed, not only the state but minor shareholders will have to sell as well, considering TeliaSonera's insistence that it possess no less than 85 percent of Eesti Telekom's stock.
The usual practice with such cash offers is to win the support of a couple of major shareholders before the offer is made, but this was not the case with Eesti Telekom, Karlberg noted.
"When we discussed the matter earlier with government representatives, we realized that they could not make us such a promise," he said. "I believe there was some political reason behind it, but I don't know what it was. A pre-election situation reigns at present in Estonia."
The government has maintained that the price offered by TeliaSonera was too low. Finance Minister Taavi Veskimagi reaffirmed this position last week at a meeting with investors.
Vekimagi was quoted as saying in April, "It is surprising that TeliaSonera stuck till the end to the position that it can acquire a controlling stake in Eesti Telekom offering a price considerably below the market price." In his words, it made more sense for the government "to continue as a shareholder, earning every year a solid dividend income for the state budget."
Karlberg, for his part, stressed that TeliaSonera had no intention whatsoever of raising the price and investors needn't pin their hopes on a higher offer at some point in the future.
A final government decision is expected on June 10.
