State, TeliaSonera jockey for position around Lattelekom, LMT

  • 2005-07-27
  • Staff and wire reports
RIGA - Latvia's government and TeliaSonera, the Scandinavian telecommunication company, traded public feelers last week over the state-owned stakes in fixed-line operator Lattelekom and the LMT mobile phone company.
Prime Minister Aigars Kalvitis told the Cabinet on July 19 that TeliaSonera has offered 274 million euros for the state's 51 percent interest in Lattelekom and 168 million euros for its 28 percent in LMT.

Kenneth Karlberg, Telia-Sonera's CEO in Denmark, Norway and the Baltic states, told reporters the same day that the company is willing to negotiate the price for both the companies.

TeliaSonera has estimated total value of Lattelekom at 400 million euros and of LMT as 600 million euros.

Asked about the monopoly ramifications, Karlberg said TeliaSonera would be ready to sell Lattelekom if Latvia's Competition Council rules that full ownership of both Lattelekom and LMT would undermine the rules on competition. "Such consequences are not ruled out," he said.

Uldis Danga, a member of the Competition Council, said TeliaSonera would control 90 percent of Latvia's fixed line market and 70 percent of the mobile communications market if it acquired shares in Lattelekom and LMT. He added the council would have to assess the deal based on provisions regarding mergers of market players.

"The entrance of new fixed and mobile players on Latvia's telecommunications market would be obstructed considerably," said Danga, adding that it would be a measure restricting competition and the competition council would assess such a deal.

TeliaSonera owns a 49 percent stake in Lattelekom, while the state owns 51 percent. TeliaSonera owns 49 percent in LMT while a 23 percent stake in LMT is owned by Lattelekom, 23 percent by the Latvian state indirectly through a digital television company, and another 5 percent stake in LMT is owned by the state.

Meanwhile, Kalvitis muddied the waters by stating in an interview on July 20 that the government could offer to buy shares in both Lattelekom and LMT from TeliaSonera if the Scandinavian company's price for the state's stakes is dissatisfactory.

He said the government formed a work group to assess various sale schemes for both telecommunication companies. The group will submit proposals within a month. "The options are very broad 's to the point that the state might offer TeliaSonera to buy their shares if that price is seen as too low," said Kalvitis.

In response, Kjell Lindstrom, a spokesman for TeliaSonera Baltic, said the company was not going to sell its shares in either company. He said TeliaSonera was interested only in increasing its holdings.

"We would be ready to sell the shares only in the event the Competition Council raises objections to both [Lattelekom and LMT] being under control of TeliaSonera," he said.

Lindstrom voiced a hope that both parties will be able to reach an agreement on selling Lattelekom and LMT, adding that TeliaSonera is ready to pay a "fair price" for the two companies.

The task force will be headed by Economy Minister Krisjanis Karins. Finance Minister Oskars Spurdzins and Transport Minister Ainars Slesers will sit on it as well.

Karins also did not rule out telling the Cabinet meeting Tuesday that the price offered by TeliaSonera for the state stakes in the two companies was too low. "Our analyses which we have already submitted show that the selling price, possibly, could be different," he was quoted as saying.

The government has on several occasions received offers from TeliaSonera to buy the state's stakes in Lattelekom and LMT.

Lattelekom generated sales of 131.4 million lats (186.9 million euros) in 2004 and made a net profit of 33.5 million lats. LMT posted astonishing earnings of 54.6 million lats, up 29 percent on 2003, on sales of 149.3 million lats.