EU – Baltic States, Latvia, Legislation, Markets and Companies, Technology, Telecomunications

Kucinskis avoided giving a straight answer to the question whether the government could approve a merger of Lattelecom and LMT but said that KPMG audit company had proposed eight different scenarios about the future of both companies.

The government should not rush to approve the merger, the prime minister said, stressing that Latvia should retain the control over both telecommunications companies therefore the ministers would approach the matter with "extra caution".

But he promised that the government would make the decision about the future of Lattelecom and LMT because the Scandinavian telecommunications group TeliaSonera which also holds shares in both Latvian companies had long been waiting for the government's answer.

As reported, the government on August 8 reviewed a KPMG study on further action regarding the two companies. The study analyzes eight different scenarios, but the one recommended by KPMG is that the government should create a technological champion by merging LMT and Lattelecom, and at the same time retaining controlling interest in the merged company.

Economics Minister Arvils Aseradens (Unity) said that TeliaSonera had been suggesting the merger for a long time, believing that this would open up new technological development and cost optimization opportunities. The tricky part is that TeliaSonera wants a controlling stake in the merged company.

The combined worth of LMT and Lattelecom is almost EUR 1 billion, therefore any further actions have to be well thought out. The Economics Ministry and Transport Ministry will by October 5 present their proposals to the government, Aseradens said.

TeliaSonera, which also holds shares in Lattelecom and LMT, proposed on November 20, 2015 that both companies should be merged. However, the Latvian government decided in April 2016 that LMT and Lattelecom would continue operations as two separate entities.

The government also decided to hire an independent consultant to perform macroeconomic, microeconomic and socioeconomic analysis of further actions concerning state-owned shares in Lattelecom and LMT. KMPG Baltics was then selected to help the government develop a strategy on state-owned shares in Lattelecomand LMT.

According to Firmas.lv business information website, the Netherlands-registered Sonera Holding B.V. owns 24.5% of LMT shares, Telia Company AB - 24.5%, Lattelecom - 23%, state-owned company Latvijas Radio un Televizijas Centrs - 23%, and Latvian Privatization Agency - 5%.

At the same time, 51% of Lattelecom shares belong to the Privatization Agency and the other 49% to TeliaSonera's Danish subsidiary, Tilts Communications.