RIGA - Tele2 Telekom, a subsidiary of telecommunications giant Tele2, announced last week that it intended to sue Latvia's regulator, Public Utilities Regulator, for issuing licenses to Lattelekom that, according to Tele2, will kill any chance for competition in the fixed-line market for the next three to four years.
"We have decided to sue the regulator for issuing a license to Lattelekom," Mats Tily, executive director of Scandinavian-owned Tele2, told a Nov. 13 news conference.
The license, according to Tele2, essentially allows Lattelekom to maintain its monopoly until 2007 and therefore violated the 2003 law on telecommunications. This in turn affects interconnection rate charges, which Tele2, an operator that wants to expand onto Latvia's fixed-line market, claims will make fees too high and competition impossible.
"It's like paying two lats and receiving one," Tily said.
Immediately after the press conference Lattelekom sent out a press release claiming that Tele2 had "mislead society."
Lattelekom claimed that Tele2 was also guilty of price-gouging, charging too high prices for calls from one network to another. As an example it cited the high cost of making a call from the Tele2 business network to Tele2 Telekom.
In anticipation of the counterattack, Tily rejected the criticism, saying that Tele2 could change its prices within a day.
Tele2 currently offers mobile phone services in Latvia, but Lattelekom, which is 49 percent owned by TeliaSonera through Tilts Communications, still enjoys a monopoly in fixed-line services.
The monopoly was due to end early in January 2003 in accordance with the country's deregulation plans before EU accession, but even this is being disputed by Lattelekom's owners. Telia Sondera was given a monopoly until 2013 in exchange for the investments necessary for rebuilding the nation's phone network, in some places from scratch.
But the government, intent to meet the legislation deadlines for EU accession, sought to end the monopoly 10 years early. As a result, TeliaSonera has taken the state to court.
Curiously, in the over 20 countries that Tele2 operates in, Latvia and Lithuania are the only ones where Tele2 does not have a fixed-line service.
Despite the dramatic announcement, analysts, however reacted coolly to the news.
"I wouldn't say that Tele2 is 100 percent correct," Peteris Avisans, an expert in telecommunications, said.
"I can't understand why [Tele2] are so aggressive at the moment," he added, though he said that fees for interconnection agreements were "very high."
In the long run, experts say, the issue of licensing and monopoly operators will resolve itself.
"In the new [EU] system which we will be a part of, licensing simply disappears," Alf Vanags, director of the Baltic International Centre for Economic Policy Studies, said. "Under the new system anyone can be an operator. In general there is nothing to be done to prevent competition," he added.
But Tele2 seemed determine to fight what it calls "discriminatory" practices on the market. Introducing competition will decrease costs for Latvia's residents, Tele2 managers claimed.
"Latvia has one of the highest fixed telephone prices in Europe," Tily added. "So far the deregulation of the fixed telephone market has failed," he added.
According to a Tele2 strategy report on the European market, Latvia's Public Utilities Regulator "has set unreasonably and unacceptable long terms-up to year 2007 regarding the full introduction of carrier selection services."
"The interconnection rates are 5-13 times higher than the European average...It is cheaper to call from Estonia to Sweden than to make a long-distance call within Latvia," the Tele2 report continued.
But Tily was realistic about the prospects of resolving the conflict in the near future. "We suspect the political will to change the situation is not very high," he said. "The regulator has delayed the liberalization. Competition will be delayed by 3 to 4 years."