Latvian Prime Minister Einars Repse has requested that the state auditor's office investigate Lattelekom, the state-controlled fixed-line telephone provider, to determine if the company has been intentionally devalued.
The government is currently embroiled in a lawsuit with the Danish company Tilts Commun-ications, a large shareholder in Lattelekom, over the future of the company.
Repse said the government "must gain clear, objective and current information on the company's operations considering the fact that the government has resolved to reach a settlement as fast as possible with Lattelekom's other owner, Tilts Communica-tions."
The Latvian Communications Workers Union asked for the audit after it said plans had surfaced to lay off thousands of Lattelekom employees, a move they said was intended to devalue the company.
Lattelekom executives said the job cuts were needed to reduce costs. By year's end, some 960 employees will lose their jobs, leaving 3,000 workers at the company. The cuts are scheduled to continue through 2007, with the goal of maintaining a workforce of 2,200 people.
Lattelekom has set up a 2.6 million lat (4 million euro) compensation fund for workers who lose their jobs, company officials said.
The job cuts will save the company 6 percent of total costs.
The auditors office is expected to decide on whether to launch the investigation this week.
Lattelekom officials would not comment on the audit request.
Lattelekom was the monopoly fixed-line provider until Jan. 1, 2003, 10 years before it was originally scheduled to give up the sole operating rights. The move, which the company said was required by trade agreements, prompted the lawsuit from Tilts Communications, which said it bought a stake in the company partly because its monopoly status was guaranteed through 2013.
Tilts, a subsidiary of the Scandinavian telecom giant TeliaSonera, is seeking 87.6 millions lats in damages. Latvia has countered with a 600 million lat lawsuit against Tilts for failing to invest in company upgrades.