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

KPMG Baltics, which was tasked with developing the Latvian government's strategy for actions with the state-held shares in Lattelecom and LMT, has concluded that the two companies need to expand their range of services and to invest in development of new services to maintain their positions as the industry leaders.

KPMG Baltics analyzed altogether eight possible scenarios and in the end recommended creating an integrated company with current shareholders - the Latvian state and the Scandinavian telecommunications group Telia - each holding an equal number of shares (30-40%) in the new company while 30% of shares are to be offered to private shareholders and pension funds on the stock exchange.

This scenario will enable the Latvian state to retain significant influence in the new company and will increase the value of the government's investments through the resulting synergies.

If Lattelecom and LMT are not merged, there is a major risk that other market players would create an integrated operator which might take away from Lattelecom and LMT their market share, KPMG Baltics warned.

As reported, 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. KPMG Baltics was then selected to help the government develop a strategy on state-owned shares in Lattelecom and 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.