State reluctant to exit telecoms market

It will take a lot of persuasion to get Latvian Prime Minister Laimdota Straujuma agree to the sell-off of the controlling stakes that the Latvian state currently holds in two telecommunications companies --Lattelecom and Latvijas Mobilais Telefons (Latvian Mobile Telephone, LMT), the prime minister told the press after a cabinet meeting on Tuesday.

 

She said that no such option was discussed on Tuesday but “it would take very strong persuasion” for her to agree to the sell-off.

"I would be very, very cautious about such possibility,” Straujuma said.

The government is awaiting a formal proposal from Scandinavian telecommunications group TeliaSonera, the other shareholder in Lattelecom and LMT, about the future of the two companies. The government cannot discuss proposals based on press reports, the prime minister said.

She also praised the work of Economics Minister Dana Reizniece-Ozola as the chairwoman of the ministerial working group discussing what to do with the state-held shares in the two telecommunications companies.

The Economics Ministry presented a report about the management of the state-held shares in Lattelecom and LMT at the Cabinet meeting behind closed doors on Tuesday, and the government instructed the Latvian Privatization Agency (LPA) to invite TeliaSonera to make a formal proposal regarding the future of Lattelecom and LMT.

The Latvian government has been debating the possibility to sell off its stakes in LMT and Lattelecom for quite a long time already, but no agreement has been reached on the issue so far. A working group established earlier studied the options for the future fate of the state-held shares in LMT and Lattelecom and concluded that there was no need for the sell-off of the state-held shares in the two companies in the short term but synergies between LMT and Lattelecom should be strengthened, possibly by merging them in one or other form.

Merging the two telecomms has been suggested as one of the options, and the possibility of separating the infrastructure from the business operations and customers was also discussed. But the Latvian competition watchdog has voiced concerns about the risks to the competition that the merger of LMT and Lattelecom might cause.

In early March this year the government re-established a working group which will have to hold the talks with the Scandinavian telecommunications group TeliaSonera, a shareholder in both LMT and Lattelecom, about management of the state-held shares in the two Latvian telecommunications companies and their business development. The working group has to produce the final report on the future of both telecommunications companies by September 1 this year.

LMT is the oldest mobile operator in Latvia. LMT shareholders are the state-owned Latvian State Radio and Television Center (23 pct), Lattelecom electronic services provider (23 pct), the Latvian Transport Ministry (5 pct) and Scandinavia's TeliaSonera (49 pct).

Lattelecom, established in 1992, is a provider of integrated electronic communication and IT services in Latvia. Lattelecom shareholders are the Latvian state (51 percent) and TeliaSonera (49 percent).

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