Lattelekom hears static on the line

RIGA - Riga's district court told the state phone monopoly that it can't cut off customers who use callback long distance services to save toll charges. Lattelekom must refund reconnection fees to companies and individuals whose service Lattelekom interrupted in November and December of 1998, the court said. The decision, which came down to the Council of Competition, said that businesses may also sue for loss of revenue during the cutoffs.

Lattelekom has been trying to block customer use of its equipment to circumvent its long distance charges by dialing computers in the United States. The computers connect them to lower-cost long distance exchanges.

Lattelekom appealed to the Ministry of Economics and another court for relief from the Competition Council's original demand that it stop its malicious use of its monopoly. The appeals were not successful. Lattelekom can appeal the latest ruling to the Supreme Court. Ilze Zozule, CC member, told the newspaper Diena that she did not think there had been violations in procedures used by the CC to reach its decision. Anita Leiskalne, Lattelekom spokeswoman, referred questions to Lattelekom Director John Steel who was not available.

On a brighter side from Lattelekom's view, the state Telecommunications Tariff Council has given it a clear signal to hike local and long distance charges effective from April. The cost of local calls per minute will go up by 33 percent, from 1.5 santims per minute to 2 santims. Monthly subscription fees will jump 20 percent, from 2.5 lats to 3 lats ($5.25).

Coming with the bad news for fixed line users is good news that the cost to call mobile telephones will drop from the current 26 santims per minute to 19 santims, a 37 percent reduction.

The new rates are not indelible. Minister of Transportation Anatolijs Gorbunovs has charged Communications Director Inara Rudaka with taking a look at the increases to see if state requirements including the improvement of service have been met. The TTC can change its resolution approving the raises, Chairman Raimonds Jonitis said.

The rate increases come while Tilts Communications, 49-percent stakeholders in Lattelekom, and the Latvian Privatization Agency are dickering to lop 10 years from a contract that gives Lattelekom a monopoly until 2013. Finnish Sonera owns Tilts Communications except for 10 percent of Tilts held by the International Finance Corp. Latvia owns the remaining 51 percent of Lattelekom. Latvia's membership in the World Trade Organization and its lust for EU membership preclude monopolies.

Still, Sonera has first refusal rights when the Latvian government puts its share up for sale. Germane to negotiations is the method by which Sonera can buy the 2-percent stake it needs to gain control of Lattelekom.

Central to negotiations is how much the Latvian government must give Tilts Communications and Sonera to back off the contract. Tilts and Sonera, which claims compensation for paying a high price to get a monopolistic hold on Latvia's phone service are asking for compensation for investments that would have paid off in years 2003-2012.

LPA chief Janis Naglis said in a press conference in December that he expects the stake owned by the state to be listed on the Riga Stock exchange in 1999. LPA said it would offer Lattelekom's shares for privatization vouchers.

Consultants from Nomura Securities who also helped to broker the deal between Skandinaviska Enskilda Banken and Unibanka are participating in the talks.

Lattelekom in 1997 had a profit of 12 million lats. According to its annual report, Tilts executives earn $385,000 (215,600 lats) a year.