Potential strategic investor for Tet and LMT needs to know the telecoms market - Silina

RIGA - The potential strategic investor of the technology companies Tet and Latvijas Mobilais Telefons (LMT) should be one who knows the telecommunications market, therefore an international company is being sought, Prime Minister Evika Silina (New Unity) told members of the press.

She stressed that LMT and Tet are extremely important companies for the country, but the failure of several previous governments to take a decision on the further development of both companies has generally not contributed to the increase in the value of the companies. "It is therefore important that we do not delay in taking decisions, because competition in this market is huge," said Silina.

The Prime Minister stressed that the decision-making on both companies is important not only from a financial point of view, but also from a critical infrastructure point of view, as both LMT and Tet provide a number of important security functions for the country.

In the potential bid made to Latvenergo and the Latvian State Radio and Television Center (LVRTC), it is important that a company familiar with the telecommunications market participates as a strategic investor. "Rather than simply coming and asking the state for additional funding, they should come with a lot of equity capital, an international brand, like Lufthansa did with airBaltic, which gives these companies even more international value," the prime minister said, adding that the value of the Latvian companies could potentially reach a billion euros.

Silina also said that the initiative to get involved in the sale of LMT and Tet came from LVRTC and Latvenergo themselves. "The government is not in charge of business, it is the responsibility of the capital companies," she stressed. The government in this case is only a shareholder and a manager of budgetary resources, the prime minister added.

As reported, Swedish company Telia Company (Telia) has signed a memorandum of understanding with Latvia, Latvenergo and the Latvian State Radio and Television Centre (LVRTC) on the sale of all its shares in the fixed network operator Tet and mobile operator LMT.

The parties aim to sign a final agreement by the end of 2025, and are targeting a closing of the transaction in the first half of 2026.

Latvenergo informed that the Cabinet of Ministers has supported the initiative of Latvenergo and LVRTC to approach Telia about a possible acquisition of its shares in Tet and LMT.

It has also been reported, until now, representatives of the Ministry of Economics have been negotiating with Telia on the future of LMT and Tet, but now Latvenergo and LVRTC, wholly owned by the state, have been authorized to make an offer to buy the shares.

Several possible options have been discussed in the negotiations between the Latvian state and Telia, ranging from a merger of Tet and LMT to maintaining the status quo. The possibility of a full or partial buy-out of the two companies from Telia, as well as the divestment of certain assets, have also been considered.

A complex management system was once created for Tet and LMT, and the two shareholders - the Latvian state and Telia - have so far been unable to agree on changing the system.

The state, through Public Asset Manager Possessor, owns 51 percent of Tet, while Telia's subsidiary Tilts Communications owns 49 percent of Tet. In LMT, on the other hand, Telia and its subsidiary Sonera Holding own a total of 49 percent, the Latvian state owns a total of 28 percent through the Latvian State Radio and Television Center (LVRTC) and Possessor (5 percent), while Tet holds another 23 percent.

This, in theory, means that through Tet, Telia controls 60.3 percent in LMT, while Latvia's stake in LMT is 39.7 percent. This, however, is not how it works in practice, as the Latvian state still has a decisive control of LMT, because it is also a majority shareholders of Tet. This complex ownership scheme has been impeding several strategic projects requiring unanimity.