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Cablegate: Government of Latvia to Sell Final Stakes in Lattelecom And

VZCZCXRO0720
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHRA #0588 2151420
ZNR UUUUU ZZH
R 031420Z AUG 07
FM AMEMBASSY RIGA
TO RUEHC/SECSTATE WASHDC 4247
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS RIGA 000588

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECPS ECON ETRD LG
SUBJECT: GOVERNMENT OF LATVIA TO SELL FINAL STAKES IN LATTELECOM AND
LMT

REF: 06 RIGA 855

1. On June 12, the GOL approved the sale of its shares in fixed
line telecommunications operator Lattelecom and mobile operator LMT.
Currently the Latvian state owns 51 percent of Lattelecom, while 49
percent is owned by Nordic telecommunications group TeliaSonera.
The GOL agreed to buy back the 49 percent stake owned by TeliaSonera
and then sell 100 percent of Lattelecom to the company's current
management. Lattelecom's management aims to raise at least 25
percent of the purchase price from private equity funds, and the
reminder from banks.

2. As part of the Lattelecom transaction, TeliaSonera will then take
100 percent ownership of LMT, the largest domestic mobile operator
in Latvia, by acquiring the government's and Lattelcom's stakes in
that company. Last year the GOL refused to allow TeliaSonera to
take control of both Lattelecom and LMT, asserting that one firm
should not own both the dominant fixed and mobile line companies.
There was also some informal discussion that both Lattelecom and LMT
are strategic assets that should not both be owned by the same
foreign buyer. The GOL will earn approximately USD 825 million
through these deals.

3. Comment: The sale of LMT and Lattelecom is likely one of the last
major privatizations in Latvia. The GOL sold its stake in oil
transit firm Ventspils Nafta in October of 2006 (reftel). Few major
companies remain in state hands, with the exception of energy
monopoly Latvenergo. There is no serious discussion of privatizing
Latvenergo at this time.

BAILEY

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