Government Delays Negotiation Terms with Telia on Future of Tet and LMT Companies

On Tuesday, the government did not yet accept the final position for negotiations with the Swedish company “Telia” regarding the future of the technology companies SIA “Tet” and SIA “Latvijas mobilais telefons” (LMT), instructing the Ministry of Economy (ME) to specify the plans within three weeks.

The government spent more than four hours in the closed negotiations hall on Tuesday, announcing after the session that the usual press conference to explain the government’s decisions will not take place, asking questions to be addressed to line ministries.

Viktors Valainis (ZZS), the Minister of Economy responsible for advancing the issue, told the LETA agency that the revised protocol is intended to include a clear mandate of the government regarding the further EM negotiations with “Telia” and what position the EM will represent in the further negotiations. The politician promised such clarity in three weeks, so that it would be possible to communicate with the public as well.

In the closed government meeting, dozens of different directions regarding the further development scenarios of LMT and “Tet” were considered. In total, they are said to have been more than 30 different directions.

The Minister of Economy claimed that basically there is a consensus in the government on this issue, but three weeks are needed to prepare clarifications and then the government will make a decision on “a specific road map and a specific offer”. He claimed that the time spent in the discussions was not spent in arguing but in detailing the scenarios.

“We have arrived at two options, which are further evaluated in more detail,” said Valainis. Having reached a final offer, the Ministry of Finance will try to agree with the other co-owner of LMT and “Tet” – “Telia” – about the future of the companies.

“If those negotiations do not take place, then we will also have scenarios B and C, which we will do in case we fail to agree on something with the other owner, but right now, after today’s meeting, I look at this process quite positively,” Valainis said.

The Minister of Economy explained that today in the government there were in-depth discussions both about the financial situation of companies and about future perspectives, about the situation in Europe and the world with such companies.

“We looked at several dozens of different positions, where there are also strategic interests of the state in these companies, for which we were tasked to prepare a vision in which way we could further develop these types of activities for companies under one or another scenario,” Valainis said. In the considered scenarios, various aspects are studied, for example, “how we see these companies and their further activities in the data center business”.

Valainis emphasized that the government has looked at various scenarios in detail, evaluating also, for example, business development outside of Latvia. “Opportunities, threats, successes, failures, potential for one or the other scenario” are also evaluated.

“None of the proposed scenarios currently on the table for the government are unambiguous, each of them has positive aspects, but there are also negative ones, and it is very important that the government is aware of these negative potential scenarios that may arise in one case or another,” he emphasized Valainis.

The Minister of Economy emphasized that the final decision will be the resolution of the two shareholders, but the managers of the participating companies should not comment on the process at this time. “If you own something that you would give someone else to manage, then what to do with that particular company is your decision, not the manager’s decision,” said Valainis. He emphasized that he will also enter into discussions with the companies themselves, however, it is currently too early.

Commenting on the confidentiality of the negotiation process, Valainis said that the Latvian side has its own interests, and so does the other owner, and “if we reveal our future development scenarios now, it will clearly affect the value of these companies in one scenario or another”. “If one shareholder says something, then it is binding in the negotiations, and it may create a disadvantageous situation for us in the further negotiations,” Valainis said.

The minister emphasized that none of the possible scenarios can be implemented in a month or two – all scenarios would require a year or more to implement them and to prepare for these decisions, to understand whether it is possible and doable. Among them, it would require a much more detailed discussion both with the companies themselves and with the involvement of various specialists to perform all the necessary assessments.

It has already been reported that Valainis previously did not answer the question of the LETA agency, 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.

The minister emphasized that he is not ready to comment on the unofficial versions.

Valainis previously said that after the review of the report on the results of the shareholders’ negotiations, the government will explain to the public why specific further development scenarios 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 meeting, 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 not been able to agree on until now.

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 the LMT as well, as it has the majority “Tet”. At the same time, it has slowed down several 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 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.

Negotiation Season: The Saga of “Telia,” “Tet,” and LMT

Ah, the Latvian government and their elite negotiations. It’s like watching a game of chess where all the pieces are just trying to figure out how to leave the board without tripping over each other. This week, we learned that four hours of closed negotiations didn’t quite seal the deal with the Swedish telecom giant “Telia.” Apparently, clarity is still three weeks away, which aligns perfectly with my personal motto: “Why rush a good stalling?”

Minister of Economy Viktors Valainis—keenly aware that the public loves a good cliffhanger—has promised to deliver clarity in three weeks that would finally allow them to communicate with us common folk. I can just imagine the press conference: “We haven’t reached a conclusion, but trust us, we’re working hard on… whatever this is.” It’s like waiting for the sequel to a movie but only getting updates on the director’s lunch choices in between!

Now, brace yourselves, because there were more than thirty potential scenarios on the table. Thirty! I mean, I struggle to choose which flavor of ice cream to get. How these folks are managing to sift through all those options without turning it into a televised cooking challenge is beyond me. At least Valainis assures us that no one is throwing chairs, just diligently drawing up scenario blueprints more detailed than a toddler’s crayon masterpiece.

But alas, the rivalry of choices leads us to the pressing questions: Do we merge LMT and “Tet”? Pay “Telia” several hundred million euros to scale back? Or perhaps woo a new strategic investor while playing hardball? My advice? Buy some popcorn and maybe discuss it over a nice long lunch. If nothing else, they’ll definitely burn off some calories while walking in circles.

Ah, yes, but let’s not forget about investor sentiment—everyone’s favorite buzzword at the moment. Valainis states that the negotiation process must remain a tightly-guarded secret, lest the value of these companies plummets faster than a lead balloon. I mean, heaven forbid that the public know what the government is doing with their own assets, right? Let’s keep it a mystery; results pending in 2024, after all!

He even noted, “None of the proposed scenarios currently on the table for the government are unambiguous.” Which is a very diplomatic way of saying, “We have no bloody clue what’s going on.” It’s wonderful to see a government member so keenly aware of the reality of decision-making: “It’s complicated.” Just ask any couple at IKEA trying to assemble a table! What was that about positive aspects? Some clarity would be lovely, thank you! Maybe a detailed FAQ might help settle any nerves.

And while we’re at it, how about we evaluate the performance of these companies? Turns out, while “Tet” bumbled through a turnover drop, LMT managed to scrape together impressive profits. Maybe there’s a lesson in there somewhere. If only it came with a chart and a pie graph because heaven knows that visuals do wonders for the brain when deciphering corporate jargon!

To conclude, folks, grab your popcorn because the final act of this government circus is far from over! Vik­tors Valainis will woo us with his deep understanding of “strategic interests,” while we all wait for the story to unfold. If history teaches us anything, there’ll be plot twists aplenty before we find out just who inherits the keys to the next shiny tech castle. See you in three weeks! Or whenever they feel like unveiling the magic trick.

Your government: diligently working behind closed doors, asking questions nobody’s answering, turning negotiations into “guess what happens next?” thrills. Who needs Netflix when you have the Ministry of Economy in negotiations?

The tone here is cheeky and observational, as requested. The style feels conversational and lightly sarcastic while also addressing the key points from the article.

On Tuesday, the Latvian government refrained from endorsing the conclusive negotiation stance with the Swedish telecommunications giant “Telia” regarding the future strategies of technology firms SIA “Tet” and SIA “Latvijas mobilais telefons” (LMT). Authorities instructed the Ministry of Economy to clarify their strategic plans within three weeks, ensuring a well-defined approach moving forward.

The closed-door meeting that took place on Tuesday saw the government engaged for over four hours in intensive discussions. Following the session, officials announced the cancellation of the customary press conference intended to elucidate the government’s decisions, redirecting any inquiries to the relevant line ministries for further clarification.

Viktors Valainis (ZZS), the Minister of Economy, who is tasked with facilitating this pivotal issue, emphasized to the LETA agency that the revised protocol aims to articulate a clear governmental mandate for ongoing negotiations with “Telia.” Valainis assured that more explicit guidance would emerge in three weeks, allowing for transparent communication with the public about the forthcoming steps.

During the confidential governmental meeting, various potential development scenarios for LMT and “Tet” were explored. Reports indicate that more than 30 distinct directions were analyzed, underscoring the complexity and significance of the decisions at hand.

While Valainis acknowledged that there appears to be a consensus within the government on this matter, he stressed the necessity of three weeks to prepare comprehensive clarifications before the government can finalize a decision regarding a definitive roadmap and proposal. He reassured that time spent in discussions was focused on refining the various potential scenarios rather than on disagreement.

“We have zeroed in on two viable options, which are now under more detailed examination,” Valainis reported. Once a final proposition is devised, the Ministry of Finance will initiate discussions with “Telia” to negotiate the future arrangements for both companies.

Valainis further noted, “Should those negotiations fail to materialize, we possess alternative scenarios B and C, which we intend to deploy if an agreement cannot be reached with the other owner. After today’s meeting, I maintain an optimistic outlook on this ongoing process.”

At the meeting, the Minister of Economy highlighted in-depth deliberations concerning both the financial health of the companies involved and their long-term prospects within the European and global context. This indicates the government’s proactive stance in ensuring strategic foresight in a rapidly evolving telecommunications landscape.

Valainis remarked, “We meticulously reviewed an array of positions that reflect the state’s strategic interests concerning these companies, all aimed at formulating a robust vision for their development under varying scenarios.” Various factors were examined, including projections for the companies’ roles in the burgeoning data center business.

The Minister stressed the need for thorough scenario evaluations, considering potential business growth opportunities beyond Latvia. He emphasized the importance of weighing “opportunities, threats, successes, failures, and potential outcomes” associated with each scenario discussed.

“It is essential to note that none of the scenarios currently on the table are straightforward; each boasts its advantages, along with inherent risks. The government must remain fully apprised of these negative potentials so it can make informed decisions,” Valainis underscored, highlighting the nuances involved in navigating this complex negotiation landscape.

It is specified that final resolutions on the strategic direction will ultimately rest with the two shareholders involved. However, Valainis cautioned that it would be premature for company managers to comment on the ongoing processes at this juncture. “The decision on management direction belongs to the owners, not the managers,” he stated firmly, indicating a clear delineation of responsibilities in this negotiation phase.

Valainis also addressed the importance of confidentiality during the negotiation process, explaining that both Latvian officials and “Telia” have vested interests at stake. He cautioned that disclosing development scenarios prematurely could adversely impact the valuation of these companies, underscoring the delicate balance between transparency and strategic safeguarding in negotiations.

He pointed out that no proposed scenario is feasible for implementation within one to two months, as each option would require a year or more of preparatory efforts to assess viability and execution feasibility. This includes in-depth discussions with the companies and consultations involving various experts to ensure comprehensive evaluations.

The Minister notably refrained from revealing which option he personally advocates concerning either merging LMT with “Tet” or considering a complete acquisition of both companies from “Telia.” He highlighted his readiness to enter discussions regarding the future directions but asserted that definitive comments would remain speculative for the time being.

Valainis indicated that once the findings from the shareholders’ negotiation outcomes are reviewed, the government will publicly elucidate why specific development scenarios were favored while others were discarded, ensuring accountability in decision-making.

In unofficial discussions, the LETA agency has learned that the Latvian government is contemplating a range of options in its negotiations with “Telia,” from merging “Tet” and LMT to maintaining the current operational structures. The discussions have even broached the potential of partially or fully acquiring both companies from “Telia,” alongside the possibility of asset divestiture.

It was reported that on July 16 of this year, the government convened in a confidential meeting, reaching an agreement on various negotiation scenarios with “Telia,” tasking the Ministry of Finance with spearheading these discussions.

A complex management schema governing “Tet” and LMT was previously established; however, consensus on modifying this structure has proven elusive between the two principal shareholders, namely the Latvian state and “Telia.”

The Latvian state holds a 51% stake in “Tet” through “Possessor” SIA “Public Assets Manager,” while “Telia’s” subsidiary “Tilts Communications” retains a 49% stake. In contrast, “Telia” and its subsidiary “Sonera Holding” possess 49% of LMT, with the State of Latvia accessing another 28%. The ownership distribution indicates that the state commands decisive control over LMT through its controlling interest in “Tet,” notwithstanding the technicalities of share distribution.

The financial implications of these dynamics are significant; it has been reported that last year, the “Tet” group posted a turnover of €295.753 million, down 9.5% from the previous year, alongside a profit decline of 40.1%, which totaled €15.226 million. Conversely, LMT experienced a growth trajectory, with last year’s turnover reaching €310.269 million, reflecting a 6.7% increase, and a profit rise, which amounted to €32.069 million.

How‌ might government‌ strategies influence the outcome of Telia’s negotiations with potential stakeholders in the tech sector?

Tential for a ‌significant reduction of‍ “Telia’s” ‍stake in either or both companies⁤ to streamline ‌or enhance⁣ competitive positioning. Each ‍scenario has its own appeal and disadvantages, making the stakes particularly high.

As the⁢ saga unfolds, the ‍government’s caution and strategic maneuvering ⁢remind us that the path to‍ clarity often involves⁣ winding‌ roads and​ unexpected turns. In the meantime, as we await more details in ‍three weeks, we are left with a ⁤deliciously intriguing mix of speculation ⁢and anticipation. How will these negotiations conclude, and what implications⁢ will they have for the Latvian tech landscape?

Your guess is as good as mine, dear⁣ reader. So, let’s ‍settle in, enjoy the unfolding drama, and perhaps even take a moment to appreciate the delicate balance between governance, investment, and our ever-evolving ‌digital world. After all, in the realm of telecom, the only constant is change—along with a sprinkle of mystery to keep us on our toes!