Minister proposes stake swap for telecom companies

  • 2008-03-19
  • By TBT staff
RIGA - Yet another proposal involving Latvia's two state-controlled telecommunication companies has emerged, and this time Transport Minister Ainars Slesers has suggested that the state and Telia-Sonera swap stakes so that each side would be left with 100 percent ownership in one company.
Slesers has proposed that TeliaSonera give up its 49 percent stake in Lattelecom in exchange for the state-controlled 51 percent interest in LMT, a mobile phone operator.

The minister reportedly said that the new proposal 's essentially a compromise deal to break the current deadlock 's could satisfy TeliaSonera's interests and the government's wish to sell Lattelecom to another entity. The government fears that competition will suffer if one investor owns both companies.
TeliaSonera wants to control both LMT and Lattelecom and has offered 500 million lats (714 million euros) to buy the state's stakes.

The Transport Ministry provided scant detail on Slesers' proposal, other than the state would still attract an investor to manage Lattelecom until the government opted to privatize the company.
News of the proposal angered nationalists in the coalition, who accused Slesers of acting without the prime minister's approval. However, the Transport Ministry issued a statement saying that Ivars Godmanis was aware of the proposal.
Economy Minister Kaspars Gerhards told journalists on March 17 that he met with the Privatization Agency to discuss Slesers' proposal, adding that a special task force would convene on March 19 to hash it over. "Then we will look closer at the material prepared by the Privatization Agency, including legal and financial assessments," he said.

Gerhards, a member of For Fatherland and Freedom, criticized Slesers for being too hasty. The transport minister's approach "caused misunderstanding with our partners about the government's policy and also with the public, which does not see which direction the government is heading," he said.
In February TeliaSonera offered to purchase Lattelecom and LMT, though the government rejected the offer. TeliaSonera submitted a new proposal that boiled down to splitting Lattelecom into two companies 's network maintenance and retail sales 's but the government has yet to respond.

The Blackstone Group, a U.S.-based investment firm, has expressed a willingness to buy TeliaSonera's 49 percent stake in Lattelecom. Previously the company had hoped to finance a management-employee buyout of the company together with outgoing CEO Nils Melngailis. Under Blackstone's proposal, development of Lattelecom would be ensured for 2-3 years and its shareholder value increased.
The state holds a 51 percent stake in Lattelecom and LMT, while TeliaSonera has a 49 percent stake.