RIGA - Last week's settlement between Latvia and TeliaSonera, the Finnish-Swedish shareholder in both fixed-line operator Lattelekom and mobile operator LMT, have given rise to fears that the two companies will be controlled by one giant foreign investor and competition in the local telecommunication industry will be all but buried.
Although TeliaSonera only owns 49 percent in Lattelekom (through Tilts Communications) and an equal amount in LMT, the memorandum signed by the government did not rule out the possibility that the investor could eventually gain control over both companies.
This, in the opinion of Competition Council Chairman Peteris Vilks, would only hurt Latvia's telecommunication market.
Vilks did admit that the March 3 memorandum would help bring clarity to the market, but any further privatization and change in ownership would have to be studied thoroughly.
In fact, the competition law might now allow for the concentration of Lattelekom and LMT shares in the hands of one investor should the merged company's aggregate influence on the market increase significantly as a result.
"It should be evaluated precisely on what markets the two companies are operating and how their market share will change after the merger," said Vilks. "In any case, the competition council will evaluate if Lattelekom and LMT want to merge."
In 2002 the competition council approved the merger of Sweden's Telia and Finland's Sonera on the local market, although several conditions on their combined Latvian operations were imposed.
Vilks said many problems on the telecommunication market, including the lack of competition, could be solved by legislation that would provide for the precise obligations of telecom companies toward less developed regions in Latvia.
One possible solution to the dilemma could be the introduction of a third player on the mobile phone market.
On March 8 a government committee agreed that a study should be performed before deciding whether an auction for a third mobile operator should be organized.
Outgoing Transport Minister Roberts Zile stressed that any license to the third mobile operator should be auctioned as soon as possible in order to promote competition.
"The main goal is not to receive the money but to create an environment for competition and for the entry of the third operator," said Zile, who criticized the haste with which the government arranged the agreement with TeliaSonera.
Outgoing Prime Minister Einars Repse expressed fear that the new government could sell the license to some company that "already is in a monopoly situation," but Zile responded by saying that the license auction would be organized by the regulator, which is an independent institution.
Moreover, the auction would only take place if the market study revealed that a third player on the mobile phone market was necessary.
The government committee recommended that the Public Services Regulatory Committee prepare the license auction by the end of the year in case the outcome of the study turned out to be positive.
