Telecom share swap approved

  • 2008-04-16
  • By TBT staff

OUTVOTED: Economy Minister Gerhards wanted to sell Lattelecom entirely, but the Cabinet opted to keep a 51 percent stake indefinitely.

RIGA - Latvia's government finally decided the fate of Lattelecom, approving a complex share swap with Scandinavian-owned TeliaSonera that in the end may net up to 270 million lats (385 million euros).
The swap with TeliaSonera, which the Transport Ministry pushed, was selected over an alternate option proposed by the Economy Ministry that recommended selling 100 percent of Lattelecom outright at an auction with strategic investors.

In accordance with the swap, the government will retain its 51 percent stake in Lattelecom, while TeliaSonera's will first be purchased by the Latvian State Radio and Television Center 's a technicality that TeliaSonera has insisted on 's and then sold to a strategic investor.
It remains unclear whether an investor would be interested in a 49 percent stake, or what guarantees and rights the investor would demand before agreeing to a deal.
The Economy Ministry wanted to capitalize on growth in the telecommunications market and sell both TeliaSonera's 49 percent and the state's 51 percent stake in Lattelecom at an auction. As is practice, investors are willing to pay a premium for full control.

TeliaSonera, in exchange for handing over its stake in Lattelecom, will receive the state's 28 percent in LMT, a lucrative cell phone operator, and Lattelecom's 23 percent interest in LMT. 
On April 15 the government finalized the protocol for the swap deal, which will be sent to TeliaSonera. Depending upon the Nordic-owned company's reply the deal will be set into motion.
Prime Minister Ivars Godmanis told reporters on April 14 that the Economy and Justice ministries 's both are which are controlled by the For Fatherland and Freedom party, which is against the swap 's would include their objections into a statement that would be attached to the protocol.
Godmanis also said that TeliaSonera has recommended that Lattelecom be divided into two separate units 's an operator of the land-lines and a retail sales division 's in line with EU regulations, but that the government wouldn't go along with it.

"We do not tie these two things together since, first of all, we consider the European Commission's regulation invalid, and second, our laws do not demand it, and we will not do this in the present situation while we are in a 'bridge' agreement with TeliaSonera," the prime minister said.
If TeliaSonera approves the swap, the government will entrust the privatization agency with drawing up the sequence of transactions that will have to take place for the swap, Godmanis said.
If all goes according to plan, the swap could be completed by the end of the year.
In the words of Transport Minister Ainars Slesers, "I believe it is a good deal as we would simultaneously sell off the 49 percent in Lattelecom... for a maximum." He reiterated that it was not a good idea to fully privatize the company at this point.

The minister said the state could fetch 270 million lats for the stakes in LMT and Lattelecom.
The Economy Ministry has claimed that its proposal would have brought nearly a half billion lats to state coffers, which would have been the largest privatization in Latvia's history.
The opposition New Era party said the state would lose money as a result of the swap, and it would be better to sell 100 percent of Lattelecom to a strategic investor and maximize revenue.
The Lattelecom group posted revenues of 153.5 million lats in 2007, up 5 percent year-on-year, while earnings decreased 2.4 percent to 38.1 million lats.