Lattelekom signed on July 14 an interconnection agreement with Telekom Baltija, making it the first such agreement by the former fixed line telephone monopoly with another operator after deregulation of the market in January of this year.
According to the agreement, clients of both operators will be able to make phone calls to each other as soon as this September.
Martins Klivers, Telekom Baltija's commercial director, told reporters the company will eventually provide domestic fixed-telecommunication services, though in the beginning it will deal mainly with international communications.
"No doubt we will expand the market share of fixed communications gradually while continuing to provide international connections," said Klivers.
Lattelekom has said it plans to sign several more interconnection agreements in the near future with operators that have received telecommunications licenses, signing some five to six agreements by the end of the year.
A number of specialists have criticized the interconnection tariffs charged by Lattelekom as too high, emphasizing that the company still continues to use its former monopolistic position on the broad fixed-communication network.
Actual competition on the fixed-telecommunication market in Latvia is predicted to take place in several years amid development of alternative networks.
Also, Lattelekom officials announced that they have decreased the registered capital of the company to 146 million lats (225.4 million euros) from 196.2 million lats.
Lattelekom President Gundars Strautmanis said that the decrease was carried out under the Lattelekom framework agreement on repaying loans from company co-owners — the Latvian state and Tilts Communications — in proportion of their holdings in the company and reducing the registered capital accordingly.
As a result of the capital decrease, a 25.6 million lat loan will be returned to the state, and its share in Lattelekom's capital will be reduced to 74.5 million lats from 100.1 million lats, and TC will recover 24.6 million lats with its share falling to 71.5 million lats.
Strautmanis said the loan from Tilts Communications would be paid immediately to save interest, although under the framework agreement the loan may be paid off by the end of this year.
The loan from the state will be wrapped into a bond issue that the state will sell in a closed auction. If the auction fails, Lattelekom will have to buy the bonds itself.
Under the agreement, the loan must be paid back to the state by the end of 2013.
According to sources, prior government approval was obtained by Lattelekom managers before the phone company decreased capital.
Strautmanis said the company had informed all banks with which it was cooperating and none of them had objected to the move or insisted on alterations to loan agreements. The capital decrease will therefore have no adverse effect on the company's performance and ability to repay loans, said the company's president.
The Latvian state holds 51 percent in Lattelekom, and 49 percent belong to Tilts Communications, which is owned by TeliaSonera, with both sides locked in a legal battle.
Tilts Communications wants 87.6 million lats in compensation from Latvia for cutting short Lattelekom's monoply on fixed-line services, while Latvia has placed a 599.5 million lat claim against Tilts for nonperformance or delays in fulfilling its obligations to upgrade Latvian telecommunications.