The re-purchase of shares of telecommunication companies “Tet” and “Latvijas mobilais telefons” (LMT) from Swedish company “Telia” will not use state budget funds, said Latvian Prime Minister Evika Siliņa in an interview to TV3 programme “900 seconds”.
The Latvian state and “Telia” are currently in the middle of negotiations. Prices and conditions are on the table. “In any case, we want to preserve and gain a greater say over “Tet” and “LMT”,” said the PM.
She explained that if companies compete with one another at the moment, it is in the interests of the state for companies to gain greater profits not by means of mutual competition, but by providing better services and gaining a larger market share.
The PM stressed that there are a number of options – not just paying – when a deal is agreed. On the other hand, if there is a charge, then it will not come from the state budget. “There are different options,” Siliņa said when asked about the source of funding. She did not specify where the money could come from and how payment would be conducted.
“Telia” refrains from commenting on the offer extended to the Latvian government in regards to the telecommunication companies “Tet” and “Latvijas mobilais telefons”, as LETA was told by “Telia” representative Tobias Gyhlénius.
He confirmed that “Telia” has received the offer from the Latvian government to sell the company’s owned shares in “Tet” and “LMT” to the state.
“We have carefully assessed this offer and have informed the Latvian state of our position, but these negotiations are confidential. We will not be providing any additional comments,” said Gyhlénius.
At the end of December 2024, Minister of Economics Viktors Valainis mentioned on X (formerly Twitter) that “Telia” was given the offer from the Latvian state to re-purchase “Tet” and “LMT” shares owned by “Telia”, adding that the company later submitted their own vision and a counter-offer with multiple solutions.
He said the Ministry of Economics plans to inform the government of the counter-offer from “Telia” in order to decide on future actions. The minister refrained from providing more detailed comments, adding that the response from “Telia” contains commercial secrets.
On the 18th of December 2024, the government authorised the Ministry of Economics to offer “Telia” to purchase all of the shares this company owns in “Tet” and “LMT”.
The offered price, according to Valainis, is a commercial secret and will be revealed only of “Telia” officially agrees to the offer from the Latvian state.
When asked if the government has other scenarios in mind in “Telia” refuses the offer, Valainis said there are, but he didn’t say more.
According to unofficial information available to LETA, during the negotiations between the Latvian state and Telia, several possible options were discussed – from the merger of Tet and LMT to the preservation of the existing situation. The possibility of repurchasing both companies from Telia in whole or in part, as well as the separation of separate assets, has also been considered.
Publisko aktīvu pārvaldītājs (Possessor) LLC holds 51% of Tet shares on behalf of the Latvian state. Telia subsidiary Tilts Communications owns 49% of Tet shares. 49% of LMT capital is owned by Telia and its subsidiary Sonera Holding, 28% is owned by the Latvian state through Latvian State Radio and Television Centre and Possessor. Another 23% of LMT shares are owned by Tet.
This theoretically means that currently, through Tet, the share of Telia in the capital of LMT is 60.3%, and the share of the Latvian state is 39.7%. However, in practice this does not happen and in fact the state also has decisive control over LMT, as it has the majority in Tet. At the same time, it has slowed down a number of strategic decisions that require consensus.
Telia initially proposed a scenario in which LMT would acquire the telecommunications business of Tet for money, which would be distributed to a separate company (conditional Tet Telco), both existing Tet shareholders would be paid special dividends and Telia would sell its 49% Tet share to the state, while Tet would acquire the missing 1% LMT share, as a result of which the two main shareholders – the state and Telia – would each own 50% LMT. Later, an initial public offering (IPO) of the shares and 20% or more of the shares of LMT would be quoted on the stock exchange. In the public offering, both shareholders would sell a portion of their shares. As a result of the transaction, the top management of the companies would also be replaced.
Government officials have not formally commented on the offer, but have ruled out the possibility of the state selling its shares.
The readiness to financially engage in the redemption of the Tet or its assets – the optical network infrastructure – has been expressed by LVRTC, which currently manages the state-owned 23% stake in the LMT. This option was also supported by the President of the LMT, indicating that in turn, the LMT could purchase the Tet customer portfolio.
In turn, Uldis Tatarčuks, Chairman of the Board of Tet, said that Tet could acquire the shares of LMT. In such a scenario, if the shareholder structure of Tet does not change, 51% of the merged company would be owned by the Latvian state and 49% by Telia.
At the same time, Maris Vainovskis, Member of the Board of the Foreign Investors Council in Latvia and senior partner of the law firm “Eversheds Sutherland”, previously said in an interview with TV3’s “900 seconds” that there are signals about the interest of John Tallis, co-owner and chairman of the board of the computer network equipment manufacturer Mikrotīkls LLC, to invest in Tet and LMT.
In a statement sent to BNN, Tobias Gyhlénius, Head of Group Communications at Telia stated the following: “At present, Telia has not received any information from the Latvian government regarding a potential offer for Telia to sell its shares in Tet and LMT to the Latvian state. To find a structural solution around the ownership in LMT and Tet is long overdue and Telia has been clear that it either sees a scenario where the companies are merged and Telia would be a co-owner and equal partner with the Latvian government or, if the terms and conditions are right, Telia divest its shares to the Latvian state.”
If any potential offer does not represent the fair value of Tet and LMT, Telia would be open to discuss an acquisition of the shares of the Latvian state. A scenario where status quo is maintained is the worst scenario and poses a real risk of eroding value for both shareholders.”
Last year, Tet Group operated with a turnover of EUR 295.753 million, which was 9.5% less than a year earlier, but the Group’s profit decreased by 40.1% – to EUR 15.226 million. At the same time, the turnover of Tet itself in 2023 was EUR 187.204 million, which is 19.1% less than in 2022, but the company’s profit decreased by 21.1% and was EUR 18.987 million.
Meanwhile, the LMT Group last year worked with a turnover of EUR 310.269 million, which was 6.7% more than the year before, while the Group’s profit increased by 0.6% and was EUR 32.069 million. In 2023, the turnover of the Group’s parent company was EUR 175.062 million, which is 5.9% more than a year earlier, but the company’s profit increased by 20.6% and was EUR 34.864 million.