TALLINN-RIGA - TeliaSonera, the Scandinavian telecommunication corporation, had an unusually trying week in the Baltics last week, as the Estonian government rejected its buyout proposal and Latvia's prime minister hinted that a recent out-of-court settlement between the company and the government might lose force.
In Estonia, the Cabinet rejected TeliaSonera's offer to buy the state's 27 percent stake in Eesti Telekom, saying the price offered was too low. The Scandinavians were prepared to pay 111.3 kroons (7.11 euros) per share on condition that they could raise their stake from 49 percent to 85 percent. (Eesti Telekom would have bought the remaining shares from small shareholders.)
Finance Minister Taavi Veskimagi said that a fair price would be 133.5 kroons per share based upon the six-month weighted average and the ministry's evaluation of the company's value.
Veskimagi told reporters that TeliaSonera executives had failed to make a new offer despite knowledge of the state's position, and therefore the offer was rejected.
"The state is not obliged to sell the shares. We are ready to hold talks also in the future on divesting our shareholding in Eesti Telekom. I am sure that TeliaSonera or some other company will show interest in Telekom shares in the future," the minister said.
In a situation such as this, the state said it was more advisable to carry on as a shareholder, keeping in mind the dividend income such a lucrative company would provide.
Although at the time of the offer the market price of Eesti Telekom stock was higher than TeliaSonera's proposal, by now it has dropped below the offered price. On June 10 the stock ended the trading day at 104.8 kroons. One trader was quoted as saying that TeliaSonera might start buying up Eesti Telekom stocks on the open market to raise its stake above 50 percent in order to procure the right for a mandatory takeover offer.
In Latvia, Prime Minister Indulis Emsis delivered a blow to TeliaSonera when he said that if the government refused to begin talks over privatizing its 51 percent stake in Lattelekom, the out-of-court settlement reached in March might lose force.
Emsis told the press on June 10 that the Justice Ministry had said the settlement was problematic in that it was tied to the cooperation memorandum calling for talks on Lattelekom's selloff. "If the cooperation memorandum loses effect, this will invalidate the settlement, and that's a big problem," said Emsis.
Another problem with the settlement was in the fact that the international arbitration between the state and TeliaSonera, the two Lattelekom owners, was terminated by a court resolution and not a court judgment, which is superior to a resolution, said Emsis.
However, a spokesman for Clifford Chance, which had represented the state at the court, told the Baltic News Service that the firm's lawyers assured Latvia that the settlement was binding and there were no grounds to dispute it.
The settlement with Telia-Sonera had lasted three years and was signed on March 3 by the government of the then outgoing prime minister, Einars Repse, in its last days in office. The parties agreed to drop mutual claims and organize a task force which would negotiate the sale of more state-held shares in Lattelekom and Latvia's leading mobile phone operator, LMT, to TeliaSonera.
The legal battle between the two sides began in 2000 when Sonera, then owner of Tilts Communications, owner of a 49 percent stake in Lattelekom, demanded compensation for ending the Lattelekom's fixed-line monopoly by 10 years.
Latvia responded by filing a 600 million lat (900 million euro) counterclaim over Sonera's failure to carry out the modernization of the telecommunication company.
