Latvia May Merge Biggest Fixed-Line, Mobile Operators

(Corrects last paragraph of Aug. 8 story to show TeliaSonera owns 60.3 percent of LMT.)

Latvia’s government is considering merging the country’s largest fixed-line and mobile phone companies or taking other steps to boost their value and cut costs, the Economy Ministry said today.

Following a report in magazine Ir that it had proposed combining partly state-owned fixed-line operator SIA Lattelecom and mobile company Latvijas Mobilais Telefons SIA by the end of 2014 before possibly selling them, the ministry said a group working on the issue is not recommending an immediate sale.

Latvia’s government rejected a bid in 2007 by TeliaSonera AB (TLSN), Sweden’s biggest telephone company, to buy the stakes it doesn’t own in the companies for 6.7 billion Swedish kronor ($1 billion). It also rejected a separate offer by the Blackstone Group LP (BX) for Lattelecom a year later, a move that drew criticism from former President Vaira Vike-Freiberga that Riga was damaging its reputation for foreign investors.

“At the moment the privatization of the businesses is not being discussed,” the Economy Ministry said in a statement on its website today. It said a group comprised by officials from the economy, finance and transport ministries was “evaluating a number of future management models” that would ensure growth in value, improve customer service and cut costs. It said one possibility was a merger with the state retaining control.

Raising Value

The group of officials has sent a report to other ministries, with the government making a final decision on how to proceed, the Economy Ministry said. It did not give more details on the report.

Ir said that the valuation of the two companies would rise by 45 million lati ($85.6 million) after a merger, citing the report. After the merger the government would consider selling its stake to TeliaSonera, issue shares on the stock market, or offloading a stake to an investment fund, Ir said.

TeliaSonera says it already owns 49 percent of Lattelecom and through direct and indirect shareholdings has 60.3 percent of LMT. It owns all of Estonia’s biggest fixed-line operator, Elion, and largest mobile company, EMT, and has an 88.2 percent stake in Lithuania’s AB TEO LT.

To contact the reporter on this story: Aaron Eglitis in Riga at aeglitis@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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