Latvia to undergo massive telecoms sell-off

  • 2007-08-01
  • Staff and wire reports

MONEY TALKS: Berndt Kenneth Karlberg, Chairman of the Board of LMT, believes the deal will be finalized in a matter of weeks.

RIGA - Agreement has been reached between a governmental working group and Sweden's telecommunications company TeliaSonera that paves the way towards privatization of Latvia's leading mobile telecoms groups Latvijas Mobilais Telefons and fixed line operator Lattelecom.
The Latvian state and related agencies expect to receive up to 425 million lats (607 million euros) from selling off its shares in both companies. The state currently owns a 51 percent share of Lattelecom, and along with related companies a 39.7 percent stake in LMT. TeliaSonera owns the remaining 60.3 percent of LMT and 49 percent of Lattelecom.

Though final prices have yet to be determined, Minister of Economics Jurijs Strods said, "we have agreed on the process to calculate the figure." A management- and employee-led buyout of Lattelecom will pay approximately 290 million lats, with financing yet to be arranged.
According to Baltic News Service estimates, the exact value of state-owned shares in LMT could reach 277 million lats.
Transport Minister Ainars Slesers said that this working agreement should meet government approval on Sept. 12, that "it seems the transaction now is a pure formality," and that the most important consideration is to conclude the transaction without delay. Reversing the decision of only a couple of days earlier, Slesers said that it's no longer necessary for repeated valuations of both companies, as this might only delay the purchase process. He stressed that he feels "the prices are fair" based upon valuations done eight months ago.
The Latvian transport minister underscored the government's intent that the privatization of Latvian telecommunications companies would increase competition in the area of telecommunications and added, "I can assure [customers] that the tariffs [phone charges] will decrease."

The chairman of the board at LMT, Berndt Kenneth Karlberg, told journalists that TeliaSonera is satisfied with the price tags for both Latvian telecommunications companies, saying that TeliaSonera agreed to the highest Lattelecom value because the Nordic company also will acquire LMT shares for their highest value, thus harmonizing the company's expenses and income.
He reiterated that TeliaSonera does not need a re-evaluation of the company, as the market price fluctuates and the government has agreed to sell the company for the highest price, established earlier. According to the report by audit company Ernst & Young together with investment bank Carnegie, as reported by the Latvian daily Diena, the average market value of Lattelecom was set in the amount of 260 million lats, while LMT's value was set at 668 million lats.

Karlberg said that he expected the transaction to be completed within one to 1.5 months after the final decision from the government.
A TeliaSonera representative said that after acquiring full control in LMT, the efficiency of the operation would only increase, as its administration and technical base will be supplemented by the parent company's knowledge and financial strength, and that corporate profit should remain stable.
"Keeping up the growth rates of the past will be difficult to maintain into the future," said Karlberg, but "we're bringing additional resources in for new services and data transmission across our mobile network," reported LETA.

Alluding to the possibility that Lattelecom could enter mobile phone territory, Karlberg doubted that Lattelecom could create serious competition for LMT. He said competition is created by the number of customers and Lattelecom doesn't have many in the mobile sector of the market right now. The company would have to start from scratch, which wouldn't be easy with competition from three major telecoms firms already operating in the region.
Karlberg also said he does not expect Lattelecom to compete on international mobile communications markets due to the company's lack of experience and size.
Lattelecom provides integrated electronic communication and IT services, telecommunications, network design and installation services in addition to data transfer and IT infrastructure solutions, Internet and contact center services as well as business solutions services. In 2006 the company earned 39 million lats profit on revenue of 143.7 million lats.

The same year LMT, Latvia's oldest mobile communications operator, earned 60.75 million lats in profit on revenue of 183.83 million lats.