The government has not yet adopted a final position for negotiations with Telia regarding the future of Tet and LMT

The government spent more than four hours in the closed negotiation hall on Tuesday, announcing after the session that the usual press conference will not take place to explain the government’s decisions, asking questions to be sent to line ministry.

Economy Minister Viktors Valainis (ZZS), who is responsible for taking the matter forward, told the LETA group that the detailed protocol is intended to include a clear mandate from the government to further EM discussions with “Telia” and what position the EM will represent in the other discussions.

The politician promised such clarity in three weeks, so that it would be possible to communicate with the public as well.

In the closed meeting of the government, dozens of different directions regarding other development scenarios of LMT and “Tet” were discussed.

In total, it is said that they were more than 30 different directions.

The Minister of Economy said that there is basically a consensus in the government on this matter, but that three weeks are needed to prepare clarification and then the government will decide on “a specific road map and a specific offer” .

He said that the time spent in the negotiations was not spent in arguing but in detailing the circumstances.

“We have arrived at two options, which are evaluated in more detail,” said Valainis. After reaching a final offer, the Ministry of Finance will try to negotiate with the other co-owner of LMT and Tet – Telia – about what the fate of companies.

“If those talks don’t take place, we will also have scenarios B and C, which we will do in case we agree something with the other owner, but right now, after today’s meeting, I will take a look on this process. very optimistic,” Valainis said.

The Minister of Economy explained that there were deep discussions in the government today both about the financial situation of companies and about future perspectives, about the situation in Europe and in the world with such companies.

“We studied several dozen different positions, where the state also has strategic interests in these companies, and we were tasked with preparing a vision for the way in which we could develop these activities to companies under one condition or another,” Valainis said.

In the scenarios discussed, different aspects are explored, for example, “how we see these companies and their other activities in the data center industry”.

Valainis confirmed that the government has looked at various situations in detail, also evaluating, for example, business development outside of Latvia.

“Opportunities, threats, successes, failures, potential for a situation or other situation” are also assessed.

“None of the scenarios that are currently on the government’s table are without doubt, 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 situations that may arise in one case or another,” Valainis said.

The Minister of Economy confirmed that the final decision will be the intention 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, it’s your decision what to do with that particular company, not the manager’s decision,” Valainis said.

He confirmed that he will also engage in discussions with the companies themselves, however, it is too early at the moment.

Speaking about the confidentiality of the negotiation process, Valainis said that the Latvian side, as well as the other owner, have their own interests, and “if we reveal our future development conditions now, it will clearly affect the value of these companies in one situation. or another.”

“If one shareholder says something, it is binding in the negotiations, and it could create an unfair 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 and prepare for these decisions, to understand it is possible and impossible.

Among them, a much more detailed discussion would be needed both with the companies themselves and with the participation of various experts in order to make all the necessary assessments.

Valainis previously did not answer the question of the group LETA, which options he himself supports – to merge LMT with “Tet” and pay​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ the other shareholder, the Swedish company “Telia” , several hundred million euros for impact reduction, or to buy both companies completely from “Telia” and attract a new strategic investor.

The minister confirmed that he is not ready to comment on the unofficial drafts.

Valainis previously told the LETA group that after reviewing the report on the results of the shareholders’ negotiations, the government will explain to the public why additional special development conditions were chosen and why alternatives were rejected.

Unofficially, the LETA group knows that several options were discussed in the negotiations between the Latvian state and “Telia”, from merging “Tet” and LMT to maintaining the current situation .

The possibility of buying the two companies from Telia in whole or in part, as well as the separation of some assets, was also considered.

It was already reported that on July 16 this year, in a closed meeting, the government agreed on the other conditions in the negotiations with “Telia” and that they instructed the Ministry of the Interior to negotiate to do that.

At one time, a complex management scheme of “Tet” and LMT was created, and the change on which the two shareholders – the Latvian state and “Telia” – have not been able to agree so far.

The state owns 51% of Tet shares in the person “Possessor” SIA “Public asset manager” (“Possessor”), and the subsidiary “Telia” “Tilts Communications” owns 49% of the “Tet’s” sections.

On the other hand, 49% of the capital of LMT 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%) , and another 23% of LMT shares belong to “This”.

This theoretically means that currently, through “Tet”, the share of “Telia” in the capital LMT is 60.3%, and the Latvian state – 39.7%.

However, in practice this does not happen and in fact the state has definite control over the LMT as well, as it has a majority in “Tet”. At the same time, he has delayed several strategic decisions that require consensus.

“Telia” first proposed a scenario where LMT would buy the telecommunications business “Tet” for cash, which would be spun off into a separate company (conditionally “Tet Telco”), would receive the​​​​ two existing shareholders of “Tet” special shares. and “Telia” would sell its 49% to the state Tet division, and the required 1% LMT share would be obtained from Tet, and as a result the two main shareholders – the state and Telia – would own 50% of LMT each. .

It has been proposed that an initial public offering (IPO) of shares be held later and a listing of 20% or more of LMT’s shares on the stock exchange. Both shareholders would sell part of their shares in the public offering. The senior 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 that the state could sell its shares. Instead, the possibility of buying back LMT and Tet shares from Telia is being considered.

VAS “Latvijas Valsts radio un televisije centrs” (LVRTC), which currently manages a 23% share of state-owned LMT, has indicated its willingness to participate financially in the purchase of “Tet ” or its assets – optical network infrastructure.

LMT president Juris Binde also supported this option, saying that LMT could, in turn, acquire the “Tet” client portfolio.

On the other hand, the chairman of the board “Tet” Uldis Tatarčuks said that “Tet” could buy shares of LMT. In such a situation, if the shareholder structure of “Tet” does not change, 51% of the merged company will belong to the Latvian state and 49% to “Telia”.

Last year, the concern “Tet” worked with a turnover of 295.753 million euros, which was 9.5% less than the previous year, 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.

At the same time, the LMT concern worked with a turnover of 310.269 million euros last year, which was 6.7% more than the previous year, 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 before, while the company’s profit increased by 20.6% and was 34.864 million euros.