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BOTTOM OF THE FOOD CHAIN

  • 2000-10-26
The current takeover of Latvia's second largest telecommunications operator, Baltkom GSM, by Swedish NetCom is indeed a welcome move. Everyone will benefit: the telephone users who already are being promised cheaper service rates, Baltkom's founders who managed to curve this cushy deal, and Latvia's economy which will get the investment and all the benefits that follow from it.

Yes indeed, Peteris Smidre, the former chief and founder of Baltcom GSM, can proudly call himself now the first legal Latvian multi-millionaire. It came as a surprise for everyone to find out that Baltkom GSM, that all-time runner-up which even ended the year $2 million in the red, was sold for $277 million, a deal only few other companies in Latvia could make. Even the shares of the monopoly gas supplier Latvijas Gaze, which were sold to foreign investors this spring, did not reach such a price level. According to stock market experts, even such market leaders as the oil transit company Ventspils Nafta and Parex bank, if sold, could hardly fetch such a price.

One of the losers could be Baltkom's competitor, Latvijas Mobilais Telefons, which had to change its price strategy and customer approach when competition first appeared in the market. Its former post-Soviet type of arrogant attitude was quickly changed to more contemporary client-oriented service. So now, with fierce competition leveling everything in its path, the current market leader might find itself in a position of measuring up.

The other loser might be the all-mighty telephone giant Lattelekom, whose customer service has reached a level where if you as a customer had the choice of paying the same amount or slightly more for a mobile phone you would change companies just for the sake of not having to deal with Lattelekom's staff.

Putting speculations aside, it might seem that the Swedes have started a major takeover in all spheres of business in the Baltics. The Swedish bank Scandinaviska Enskilda Banken, also known as SEB, is to fully take over the three largest Baltic banks in order to draw them off the stock exchanges. The Swedish-owned telecommunication services are expanding in all three Baltic countries, and there could be many more examples mentioned. However, it should be noted that the Baltics are at the bottom of the global business food chain, and that swallowing up companies, i.e. consolidation, ends here but starts somewhere else outside this grazing area of only 8 million people.