Latvia Seeks Global Telecom Savvy for TET and LMT Privatization

Prime Minister Emphasizes Critical Infrastructure Needs and Market Expertise

Latvia is actively searching for a strategic investor with deep telecommunications market knowledge for its stakes in TET and Latvijas Mobilais Telefons (LMT), a move driven by the critical nature of these companies for national security.

A Strategic Imperative

Prime Minister Evika Siliņa highlighted the crucial importance of both LMT and TET for Latvia. She pointed out that previous administrations had struggled to advance the development of these entities, impacting their overall value. The current government aims to expedite decision-making in a highly competitive market.

Siliņa stressed that decisions regarding TET and LMT transcend financial considerations, extending into vital national security infrastructure. Both companies provide essential services that underpin the country’s security apparatus.

“It is important for the potential Latvenergo AS “Latvenergo” and SJSC “Latvian State Radio and Television Center” (LVRTC) in the offer that the company knows the telecommunications market as a strategic investor. “It is not just coming and demanding additional funding for the state, but comes with a large equity, an international brand, similar to that in the case of airBaltic, it was Lufthansa, which gives these companies even more international value,” the prime minister said, adding that the value of Latvian companies can reach a billion euros.”

—Evika Siliņa, Prime Minister

Driving the Initiative

The impetus for engaging with LMT and TET originated from LVRTC and Latvenergo themselves, according to Siliņa. She clarified that the government’s role is that of a shareholder, not an operator, and that the companies bear the responsibility for business operations.

Deal Progress and Future Outlook

In July, Swedish firm Telia Company entered into a Memorandum of Understanding with Latvia, Latvenergo, and LVRTC concerning the sale of its entire holdings in TET and LMT. The target is to finalize this agreement by the end of 2025, with the transaction anticipated to conclude in the first half of 2026.

Martins Čakste, Chairman of the Board of Latvenergo, indicated that more detailed information could emerge within six months, following in-depth due diligence and preparatory work by the involved parties.

This potential transaction aims to grant Latvenergo and LVRTC, alongside SIA “Public Active Manager Posessor” (“Posessor”), complete control over both telecommunications firms. This will be facilitated by attracting an international investor with substantial technological experience, selected through an open competition managed by an international consultant.

Previously, the Ministry of Economy led discussions with Telia; now, Latvenergo and LVRTC are authorized to represent the state in these redemption negotiations.

While unofficial reports suggested the deal could be valued between several hundred million and half a billion euros, the final figures are pending further analysis.

Investor Landscape

Economy Minister Viktors Valainis revealed that dozens of potential strategic investors for TET and LMT have been identified, emphasizing the need to recruit from the international arena. Some companies have proactively expressed their interest.

Valainis explained that these discussions were initiated due to a projected negative development trend for the companies under their existing model. He noted that over the past decade, the companies have forfeited hundreds of millions of euros in potential value.

Various scenarios were explored during negotiations with Telia, ranging from merging TET and LMT to maintaining the current structure. Options for acquiring the companies entirely or partially, or divesting specific assets, were also considered.

A complex management framework for TET and LMT was established previously, but it has not yet received full agreement from the Latvian state and Telia.

Currently, “Posessor” Ltd holds a 51% stake in TET, while Telia’s subsidiary “Tilts Communications” owns 49%. For LMT, Telia and its subsidiaries hold 49%, the Latvian state, through LVRTC and “Possessor,” controls 28%, and TET owns the remaining 23%.

Although Telia’s effective stake in LMT is 60.3% and the Latvian state’s is 39.7%, the state effectively wields decisive control due to its majority ownership in TET. However, this structure has impeded strategic decisions requiring unanimous consent.

Telia’s initial proposal involved LMT acquiring TET’s telecommunications business from both major shareholders, followed by a potential initial public offering (IPO) of 20% or more of LMT shares. Both shareholders were to divest a portion of their holdings through these public offers.

Public officials have refrained from official comments on this proposal, though they have indicated that the state does not intend to sell its shares.