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The issue of the further development of Tet and LMT and the ability to compete with other players


While the negotiations between the Latvian side and "Telia" are pending, "Delfi Bizness" asked "Prudentia" Managing partner Kārlis Krastiņš how he evaluates the activities of "Tet" and LMT so far, and what should be taken into account when thinking about their possible merger or other potential changes.


"The issue of the further development of Tet and LMT and the ability to compete with other players, such as in the Baltics with Tele2 or Bite, or global giants such as Google, Apple and others, is important. Wrong decisions or not making investments contains great risks, even such that after 5 years one of the companies may face a very bad situation," warns the expert. In parallel, companies must perform other duties, including providing dividends to shareholders, using credit wisely, being an attractive employer, which requires additional efforts, he enumerates.

"Prudentia" and "Nasdaq Baltics" form the TOP101 of the most valuable companies in the Baltics every year. It concludes that from 2019 to 2023, the value of "Tet" has fallen by 7% - to 429 million euros, while the value of LMT has grown by 6% - to 556 million euros. These data indicate stagnation, therefore, looking to the future, we should think about ways to increase the value of these companies, emphasizes Krastiņš.


At the same time, he points to the fact that the shareholder of both companies, Telia, whose shares are listed on the Stockholm Stock Exchange, has had an even harder time growing its value, as it has fallen by about 33% over the past five years. Therefore, in his opinion, the Latvian government has every right to critically ask "Telia" how it plans its further development.


"The Latvian government will have a difficult budgeting process for 2025, the next few years don't look rosy either, so it would be useful to evaluate all the options to get a better return on your capital in these companies, while reducing your risks of investing additional money," says Krastiņš.


Therefore, according to the expert, the published version of the merger of LMT and "Tet", by arranging the outdated legal structure and listing the minority package on the stock exchange, would be an optimal solution, because in this way the state could obtain funds from the partial sale of its shares, both companies would obtain new funds for investments and could realize synergies from the merger.


Concerns about the acquisition or loss of control by Telia or the Latvian state after listing on the stock exchange, according to the expert, can be resolved with a new shareholders' agreement, where both parties would undertake to maintain an agreed balance, for example, in a merged company, 51% would belong to a newly created holding, where the Latvian state and "Telia each would own 50%, and both would agree, for example, not to buy or sell "Tet"/LMT shares for five years without the other's consent.

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