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Latvia - Market Intelligence Report
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Market Intelligence Reports provide an invaluable mix of vital market data and background information, including telecoms regulation. Lattelekom is the incumbent operator in Latvia, in which the TILTS Communications consortium of Cable & Wireless (C&W) and Sonera Corporation acquired a 49% stake in January 1994. TILTS is now wholly-owned by TeliaSonera AB. In March 2004, a long-running dispute between TILTS and the Latvian government came to an end, with TILTS agreeing to pay LVL1 million to the Latvian state. The parties had contested the issue of compensation for the foreshortening of Lattelekom's monopoly operating concession by 10 years in order that Latvia might liberalise the telecommunications market ahead of its accession to the European Union (EU) in May 2004. Commitments to the World Trade Organisation (WTO) were also bound up in the dispute. The dispute also delayed plans to reduce the state's ownership of Lattelekom to below 50%, another requirement (though less stringent) for EU membership. At the time of writing, no plans had been put forward to restart the privatisation process. TeliaSonera has attempted to increase its presence in neighbouring Estonia and Lithuania, and it is likely that it would use any further privatisation opportunity to increase its stake in Lattelekom and possibly also raise the company's direct 49% ownership of mobile operator Latvijas Mobilais Telefons (LMT), in which Lattelekom also owns a 23% stake. Although Latvia's telecommunications market has technically been fully liberalised since January 1, 2003, in practice delays in implementation of the necessary legislation and the uncertain regulatory regime means there is little effective competition to incumbent operator Lattelekom. The operator is facing competition from a number of companies providing leased lines, Internet services, and international calls on the basis of carrier selection, but still has a dominant position in all markets. The approval of a new Electronic Communications Law (ECL) in April 2004, shortly before Latvia became a full member of the European Union (EU) on May 1, did little to improve the situation as it was still in draft form. The ECL, which aims to fully transpose the EU's 2002 directives on full liberalisation of member telecommunications markets, took effect from May 1 but it was not until October 28, 2004 that the final act was adopted by Parliament, taking effect from December 1, 2004. The ECL replaces the Law on Telecommunications and required the PUC to develop nearly 40 new secondary legislation acts by June 1, 2005. Each draft regulation is subject to public hearing to give participants in the market the opportunity to participate in the discussion. It is thought that some, if not the majority, of these regulations have yet to be finalised. Some PUC decisions have been challenged by operators, notably that regarding the price cap on Lattelekom's interconnection service tariff. The decision, originally issued in December 2004, has been suspended by the Administrative district council pending a final verdict. Nothing further had been reported at the time of writing. LMT was the first operator on the mobile market, launching analogue services in October 1992. The company received a GSM licence in 1993 and launched digital services in January 1995. Shortly afterwards, the sector was opened to competition when Baltkom was awarded a GSM 900 licence in April 1996. Services were introduced in March 1997. Baltkom is now owned by Sweden's Tele2. In July 1999, both mobile operators received GSM 1800 licences, launching dual-band GSM 900/1800 services in early 2000. In July 2002, the Ministry of Transport and Communications opened a tender for three 3G UMTS licences, one of which was to be offered to a new operator in conjunction with a GSM 1800 licence for a minimum of LVL7.6 million. The other two were offered to the existing operators for a fixed fee of LVL5.8 million each. If either company decided not to buy a licence, it would be offered by auction for a minimum fee of LVL5.8 million. In the event, both existing operators took up the UMTS licences while the GSM/3G licence did not arouse much interest. Both operators launched test commercial UMTS networks in late-2004, as required by the terms of their licences. In November 2004, the ministry again invited expressions of interest for a combined GSM/3G cellular licence, with a deadline for expressions of interest of December 21. At that time, the ministry extended the deadline to February 2005. It is not known which, if any, other companies bid for the licence, but the successful applicant was announced in March 2005 as Lithuanian mobile operator Bité GSM, a wholly owned subsidiary of Denmark's TDC Mobile International.
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