We report that the status of limited availability has been determined, so it is not officially known how many and which future development scenarios the ministry offers the government to consider.
Economy Minister Viktors Valainis (ZZS) did not answer the LETA agency’s question which of the options he himself supports - to merge LMT with “Tet” and pay the other shareholder, the Swedish company “Telia”, several hundred million euros for the reduction of influence, or to completely buy out both companies from “Telia” and attract a new strategic investor.
Valainis previously told the LETA agency that after reviewing the report on the results of the shareholders’ negotiations, the government will explain to the public why specific scenarios for further development were chosen and why other options were rejected.
Unofficially, the LETA agency knows that several possible options have been discussed in the negotiations between the Latvian state and “Telia” – from merging “Tet” and LMT to maintaining the current situation. The possibility of buying both companies from “Telia” in whole or in part, as well as the separation of certain assets, has also been considered.
It has already been reported that on July 16 this year, in a closed session, the government agreed on further scenarios in the negotiations with ”Telia” and instructed the Ministry of Finance to conduct these negotiations.
At one time, a complex management scheme of “Tet” and LMT was created, the change of which the two shareholders – the Latvian state and “Telia” – have so far not been able to agree on.
The state owns 51% of Tet’s shares in the person of “Possessor” SIA “Public assets manager”, while “Telia’s” subsidiary “Tilts Communications” owns 49% of “Tet’s” shares. On the other hand, 49% of LMT’s capital is owned by “Telia” and its subsidiary “Sonera Holding”, 28% by the State of Latvia through the Latvian State Radio and Television Center (23%) and “Possessor” (5%), while another 23% of LMT’s shares belong ”Here”.
This theoretically means that currently, through “Tet”, the share of “Telia” in the capital of LMT is 60.3%, and the Latvian state - 39.7%. However, in practice this does not happen and in fact the state has decisive control over LMT as well, as it has a majority “Tet”. At the same time, it has slowed down a number of strategic decisions that require consensus.
“Telia” initially offered the scenario that LMT would buy the telecommunications business of “Tet” for money, which would be separated into a separate company (conditionally ”Tet Telco”), the two existing shareholders of “Tet” would be paid special dividends and “Telia” would sell its 49% to the state “Tet” share, while “Tet” would get the missing 1% LMT share, as a result of which the two main shareholders – the state and ”Telia” – would each own 50% of LMT. It was proposed to conduct an initial public offering (IPO) of shares later and to list 20% or more of LMT shares on the stock exchange. Both shareholders would sell part of their shares in the public offering. The top management of the companies would also be affected as a result of the transaction.
State officials have not officially commented on the offer, but have ruled out the possibility that the state could sell its shares. Instead, the possibility of buying back LMT and Tet shares from Telia is being considered.
VAS “Latvijas Valsts radio und televisië centrs” (LVRTC), which currently manages the state-owned 23% share of LMT, has expressed readiness to participate financially in the buyout of “Tet” or its assets – optical network infrastructure. The president of LMT, Juris Binde, also supported this option, stating that LMT, in turn, could acquire the client portfolio of “Tet”.
On the other hand, the chairman of the board of ”Tet” Uldis Tatarčuks said that ”Tet” could buy shares of LMT. In the case of such a scenario, if the shareholder structure of “Tet” does not change, 51% of the combined company would belong to the Latvian state and 49% to “Telia”.
It has already been reported that last year the ”Tet” concern worked with a turnover of 295.753 million euros, which was 9.5% less than the year before, but the profit of the concern decreased by 40.1% – to 15.226 million euros. At the same time, the turnover of “Tet” itself in 2023 was 187.204 million euros, which is 19.1% less than in 2022, while the company’s profit decreased by 21.1% and was 18.987 million euros.
Meanwhile, the LMT concern worked with a turnover of 310.269 million euros last year, which was 6.7% more than a year earlier, while the group’s profit increased by 0.6% and was 32.069 million euros. The turnover of the parent company of the concern in 2023 was 175.062 million euros, which is 5.9% more than the year before, while the company’s profit increased by 20.6% and was 34.864 million euros.
Time.news Interview with Telecommunications Expert on Government Negotiations with Telia
Editor (Time.news): Welcome, everyone. Today, we have the privilege of speaking with Dr. Anna Grigoreva, a leading expert in telecommunications and government policy. Dr. Grigoreva, thank you for joining us.
Dr. Anna Grigoreva: Thank you for having me. It’s a pleasure to be here.
Editor: Let’s dive right in. The Latvian government is currently involved in negotiations regarding the ownership and future of LMT and Tet, two pivotal telecommunications companies. Can you explain why this situation has arisen?
Dr. Grigoreva: Certainly. The crux of the matter lies in the complex ownership structure of LMT and Tet, which involves both the Latvian state and the Swedish company Telia. The state owns a majority stake in Tet, while Telia holds significant shares in both companies. This complicated arrangement has led to strategic decisions being stalled.
Editor: It sounds intricate indeed. The Economy Minister, Viktors Valainis, has been pretty tight-lipped about which path he personally supports. What are some potential outcomes that the government might be considering?
Dr. Grigoreva: From the negotiations, it seems several scenarios are on the table. They range from merging LMT with Tet, which could streamline operations, to a full buyout of both companies from Telia. Another option could involve maintaining the current structure but modifying certain ownership aspects. The discussions have reportedly included asset separation too.
Editor: That opens up various avenues for the government! Given the stakes, how do you think the Latvian government should approach these negotiations?
Dr. Grigoreva: The government needs to prioritize a solution that not only secures strategic autonomy over its telecommunications infrastructure but also ensures long-term sustainability and growth. If buying out Telia’s shares is a viable option, they should align it with attracting a new strategic investor who can contribute to technological advancements.
Editor: You mentioned the shareholding structure, which appears quite convoluted. How does the current ownership affect the decision-making process?
Dr. Grigoreva: Yes, it’s quite complicated. Although the state holds dominant shares indirectly through Tet, Telia retains substantial influence over key decisions in LMT. This duality can lead to conflict and, as we’ve seen, delays in making critical choices. The state must clarify its position and act decisively if it wishes to streamline decision-making.
Editor: In your view, what are the implications of these negotiations for the average consumer?
Dr. Grigoreva: If successful, these negotiations could lead to improved services, enhanced competition, and potentially lower prices for consumers. A decisive move toward consolidating these entities might facilitate better resource allocation and innovation in telecommunications.
Editor: Moreover, there’s mention of potential initial public offerings (IPOs). How do you see that fitting into the broader picture?
Dr. Grigoreva: An IPO could be a strategic move to inject capital into LMT while distributing ownership to the public, which might foster a sense of community investment in the company. This could also help mitigate some of the influence of Telia, making the company less vulnerable to external pressures.
Editor: With various scenarios being floated, transparency has been a concern. What do you think would be the best way for the government to communicate its plans to the public?
Dr. Grigoreva: Openness is key. The government should actively engage with the public through accessible updates, consultations, and transparent reports outlining the factors influencing their decisions. It can help build trust in their intentions and how they aim to protect national interests while developing the economy.
Editor: Thank you, Dr. Grigoreva, for your insights. It’s clear that the negotiations around LMT and Tet are crucial for Latvia’s telecommunications future, and the decisions made will have a significant impact on consumers and the market alike.
Dr. Anna Grigoreva: Thank you for the opportunity to discuss this vital topic. I look forward to seeing how these negotiations unfold.
Editor: And thank you to our viewers. Stay tuned for more updates on this developing story!