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.
The Minister of Economy Viktors Valainis (ZZS), who is responsible for advancing the issue, told LETA agency that the detailed 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 negotiate 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 at the moment, 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 examined 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 government’s table 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,” Valainis emphasized.
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 further negotiations,” said Valainis.
The minister emphasized that none of the possible scenarios can be implemented within 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.
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 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 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, was also considered.
It has already been reported that on July 16 this year, in a closed meeting, the government agreed on the further scenarios in the negotiations with “Telia” and instructed the Ministry of the Interior 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 asset manager” (“Possessor”), 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 a majority in “Tet”. At the same time, it has slowed down several strategic decisions that require consensus.
“Telia” initially proposed a scenario where 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’s share, while the missing 1% LMT share would be obtained from Tet, 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 the shares of LMT and Tet from Telia is being considered.
VAS “Latvijas Valsts radio un televisije 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 – the optical network infrastructure.
The president of LMT, Juris Binde, also supported this option, stating that, in turn, 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 merged company would belong to the Latvian state and 49% to “Telia”.
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% – up 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 a year earlier, while the company’s profit increased by 20.6% and was 34.864 million euros.
The Drama in Latvian Government Negotiations: What’s the Deal with Telia?
Welcome to what can only be described as the theater of the absurd that is the Latvian government’s negotiations with the Swedish telecom behemoth, Telia! Picture it: a closed-door session that lasted over four hours. Yes, folks, that’s longer than many feature films, and with less plot development. Out of this cryptic conclave, the government emerged and declared—wait for it—a complete and utter lack of clarity. Bravo, team!
Minister of Economy, Viktors Valainis (let’s just call him the Minister of Kinda Important Decisions), spoke to the LETA agency, promising a detailed protocol that would guide further EM negotiations with Telia. If you thought you’d get that information today, well, you probably also thought a trip to the dentist would be fun. He assured us that three weeks would bring enlightenment—a governmental oracle of sorts—allowing some crumbs of clarity to be shared with the public. How generous!
“In the closed government meeting, dozens of different directions regarding the further development scenarios of LMT and ‘Tet’ were considered.”
But why stop at two options when you can parade a whole buffet of thirty scenarios? That’s right, they’ve been cooking up a storm, contemplating everything from corporate mergers to the possibility of sending our telecoms to Mars for a fresh start! In an astonishing display of decisiveness, Valainis informed us that they’ve reached two options for further evaluation. Thank goodness for the clear direction!
It’s nice to know that these discussions weren’t just a bunch of honking geese, quacking at each other. No, no! They were “detailing scenarios,” whatever that means—probably over a lovely latte and a pastry. I imagine Valainis gesticulating with pastries in hand, confidently declaring, “Look, this croissant symbolizes our progress!”
Valainis reassured us that should the negotiations with Telia go south, the government isn’t just sitting there twiddling its thumbs. Oh no! They’ve got “scenarios B and C” at the ready. Consider it a governmental version of a backup plan—because clearly, nothing says preparedness like having an alphabet of options prepared.
“None of the proposed scenarios currently on the government’s table are unambiguous, each of them has positive aspects, but there are also negative ones.”
With Valainis’s insights, it appears that the government has embarked on a detailed analysis of the financial situations of both LMT and Tet. They’ve assessed “opportunities, threats, successes, failures, potential,” and well, they sound like they’ve been taking business classes from an overly enthusiastic motivational speaker. “You can do it! Just believe in synergy!”
In the midst of this verbal tango, the minister hinted at a major twist: if anyone, besides themselves of course, were to spill the beans on their development scenarios, they risk jeopardizing the value of the companies involved. Oh, the tangled webs we weave when confusion is our primary tactic!
Now, as we meander down this winding road of indecision, we’re left asking—what’s the ultimate solution? Merging LMT with Tet? Forking over a ton of euros to Telia or just throwing caution to the wind and buying both companies outright? Choices, choices! Our man Valainis seems to be playing a high-stakes game of poker, but that’s fine—after all, who doesn’t love a good gamble?
As the tides of this political drama ebb and flow, one thing remains clear: the wait-and-see approach is alive and well in Latvia. In a land where decisions seem to take longer than a Slavic winter, we can only hope that when the dust settles, someone—preferably not a government official—will explain to the public why one option was chosen over the others, because let’s face it, we’re all in this circus together!
Conclusion: An Ode to Latian Political Ballet
In the end, it appears we’re spectators in a grand performance of political choreography—a dance where each spin brings us closer to uncertainty but proves endlessly entertaining. Stay tuned, folks! We’ll be here, popcorn in hand, as we await the Minister’s “clarity”—or at least the next thrilling episode of “As the Politicians Turn.”
On Tuesday, the government convened for more than four hours in a closed-door negotiations session, ultimately announcing that the customary press conference designed to elucidate the government’s decisions would be canceled. Instead, inquiries related to the negotiations are to be directed to the respective line ministries.
Viktors Valainis, the Minister of Economy from ZZS, who is spearheading the negotiations, informed the LETA agency that a detailed protocol is being crafted. This protocol aims to crystallize the government’s mandate for future discussions with “Telia,” clarifying what stance the Ministry of Economy will adopt during the ongoing negotiations.
The minister assured that a clear and comprehensive understanding would be provided within three weeks, enabling the government to communicate effectively with the public regarding the outcomes and next steps.
During the confidential government meeting, numerous pathways for the development of LMT and “Tet” were thoroughly examined.
Reports suggest that over 30 distinct strategies were evaluated, highlighting the complexity and the far-reaching implications of the government’s decisions surrounding these telecommunications companies.
Minister Valainis expressed confidence that there exists a consensus within the government on the overarching direction, although he emphasized the necessity of an additional three weeks to fine-tune the clarifications. After this period, a decisive plan involving a specific roadmap and offer will be presented.
According to Valainis, the extensive time allocated to discussions was utilized not for disputes but for meticulously analyzing various scenarios.
“We have arrived at two options, which will undergo further detailed evaluation,” Valainis noted. Once a final proposal is established, the Ministry of Finance intends to engage in negotiations with Telia concerning the prospective futures of LMT and “Tet.”
The minister outlined that if negotiations falter, alternative scenarios—termed B and C—are already prepared, ensuring that the government remains optimistic about the overall process despite the challenges of reaching an agreement with the co-owner.
Valainis also detailed that the discussions encompassed an in-depth assessment of the companies’ financial health, coupled with projections concerning their future viability in the evolving European and global markets.
“In our review, we focused on multiple positions reflecting the state’s strategic interests in these enterprises. We must devise a vision for how we may advance operations according to each possible scenario,” Valainis stated.
As part of the analysis, various aspects of the businesses were scrutinized, including “how we envision these companies expanding within the data center sector.”
The Minister emphasized the importance of conducting a thorough examination of all viable scenarios, even considering business trajectories beyond Latvia’s borders.
Evaluations also encompassed “opportunities, threats, successes, failures, and potentials,” as the government seeks to navigate this intricate situation effectively.
Minister Valainis underscored that none of the scenarios under consideration are without their complexities. Each option carries its unique set of advantages and disadvantages.
He reiterated the critical nature of being cognizant of potential negative outcomes as the government deliberates its path forward.
Final resolutions will emerge from the decisions of the two shareholders involved, yet Valainis cautioned that managers from both companies must refrain from publicly commenting on the ongoing process at this juncture.
“When you possess an asset and entrust its management to another, the strategy regarding that entity must stem from ownership, not management,” Valainis explained.
Although he intends to engage in discussions with the companies, he emphasized that it is premature to do so at this point in time.
Moreover, Valainis addressed the secrecy surrounding the negotiation process, indicating that both the Latvian state and the other shareholder have vested interests. “Revealing our future development plans now could significantly influence the valuation of these companies depending on various scenarios,” he stated.
He articulated that any premature disclosures by one shareholder could create an unfavourable negotiating landscape in subsequent discussions.
Valainis noted that the implementation of any proposed scenarios would require a timeline extending beyond a month or two, indicating that thorough preparations spanning a year or more would be necessary to assess feasibility and practicality.
This would necessitate extensive deliberations involving both the companies and a team of specialists to conduct the necessary evaluations.
Earlier, the minister refrained from expressing his personal preferences regarding the options on the table, which include merging LMT with “Tet” and subsequently compensating “Telia” several hundred million euros to diminish its influence, or completely acquiring both firms from “Telia” while seeking a new strategic partner.
Valainis abstained from commenting on speculative scenarios, preferring to await an official report following the shareholders’ negotiations before explaining the rationale behind selected developmental pathways and the rationale for discarding other alternatives.
Moreover, insider sources revealed that multiple scenarios have been deliberated between the Latvian government and “Telia,” including options for merging “Tet” and LMT or maintaining the status quo. Discussions surrounding the acquisition of both companies in whole or in part, as well as potential asset separations, were also highlighted.
Previously, on July 16, the government convened in a confidential meeting where it reached agreement on subsequent negotiation strategies with “Telia,” delegating the negotiation responsibilities to the Ministry of the Interior.
Historically, a complex management framework was established for “Tet” and LMT, which remains unresolved between the two shareholders—namely the Latvian state and “Telia.”
The Latvian state possesses a 51% interest in Tet via the asset management entity, “Possessor,” while “Telia” holds a 49% stake through its subsidiary, “Tilts Communications.” In the case of LMT, “Telia” and its subsidiary, “Sonera Holding,” control 49% of the capital; the state—represented by the Latvian State Radio and Television Center—owns 28%, and “Possessor” controls another 5%, with the remaining 23% held by “Here.”
Theoretically, this arrangement leads to a combined 60.3% Telia stake in LMT through “Tet,” leaving the Latvian state with a 39.7% share. However, in practice, the state exercises decisive control over LMT due to its majority in “Tet,” resulting in delayed strategic decisions that require unanimous agreement amongst shareholders.
One proposal from “Telia” suggested that LMT should acquire “Tet’s” telecommunications segment for a defined amount, which would be spun off into a separate entity (provisionally termed “Tet Telco”). This would involve paying special dividends to the existing shareholders of “Tet,” and “Telia” would then divest its 49% stake in “Tet” to the state. Consequently, both primary shareholders would hold equal ownership of LMT at 50% each.
A subsequent plan posited that an initial public offering (IPO) could later be executed, potentially listing a substantial portion of LMT shares on the stock exchange. Both shareholders would retain the opportunity to sell a fraction of their shares during the public offering, and the management structures of the companies would undergo changes as a result.
While state officials have refrained from publicly commenting on this proposal, they have dismissed the possibility of selling state assets. Instead, they are considering options for repurchasing shares of LMT and “Tet” from “Telia.”
The publicly-owned Latvijas Valsts radio un televīzijas centrs (LVRTC)—currently managing the 23% stake it holds in LMT—has expressed its willingness to participate financially in acquiring either “Tet” or its core assets, specifically the optical network infrastructure.
The president of LMT, Juris Binde, expressed support for this acquisition strategy, suggesting LMT could inherit “Tet’s” client portfolio. Contrarily, Uldis Tatarčuks, the chairman of “Tet,” asserted that “Tet” could also procure shares of LMT. Should this transpires without altering “Tet’s” shareholder structure, 51% of the merged entity would remain under the Latvian state’s control, with “Telia” holding 49%.
Last year, “Tet” reported a turnover of 295.753 million euros, down 9.5% compared to the previous year, while its profits plummeted by 40.1% to 15.226 million euros. In 2023, “Tet’s” turnover stood at 187.204 million euros, reflecting a 19.1% decrease from 2022, with profits also diminished by 21.1%, totaling 18.987 million euros.
In contrast, LMT recorded a turnover of 310.269 million euros last year, displaying a 6.7% increase year-over-year, while its profit marginally rose by 0.6% to 32.069 million euros. The parent company achieved a turnover of 175.062 million euros in 2023, up 5.9% compared to the prior year, and profits surged by 20.6% to 34.864 million euros.
Company’s shares while still maintaining equal ownership. This scenario, while attractive for raising capital, carries its own risks related to market fluctuations and investor sentiment.
Ultimately, the paths ahead for LMT and Tet are fraught with both opportunity and complexity, as detailed by Minister Valainis. As the negotiations progress, stakeholders will have to weigh the benefits of potential mergers against the implications of changes in ownership structures. Each scenario under consideration promises a blend of strategic progression and management challenges, with long-term ramifications for Latvia’s telecommunications landscape.
It’s clear that whatever decision is made will not come without its share of controversy or public scrutiny—as such is the nature of political maneuvers in Latvia. The citizens will undoubtedly be left wondering how these choices will impact not only the companies involved but also the broader economic environment.
As we observe this intricate dance of diplomacy and strategy, one can only hope for transparency and thorough communication from those at the helm. After all, effective leadership should ultimately serve the people, ensuring that decisions lead towards a brighter and more sustainable technological future for Latvia. The anticipation continues to build as we await the Minister’s forthcoming updates, hopeful for clarity and direction in what seems to be a rather convoluted yet engaging saga.
