Monthly Archives: February 2008

Now the half-mother should worry


Nils Melngailis has resigned as CEO of 49 % TeliaSonera-owned Lattelecom effective April. TeliaSonera should be worried.
Whatever problems the half-mother may have had with Nils, he at least kept the company growing and profitable. Maybe they saw him as a bit of a loose cannon, pushing into the Eastern markets that half-mommy wanted for herself and into the outsourcing space. But every year, the cannon fired almost half a golden cannonball into the Swedes’ pockets.
OK — growing a fixed line business in the age of convergence would have hit a wall in any case, but Melngailis departure, leaving Lattelecom with no one at the helm, should accellerate and amplify the inevitable decline, or at best, stagnation. After all, the company added only around 2000 new fixed subscriber lines last year (while DSL subscribers rose to over 150 000 out of 620 000 customer lines). But the mobile market had more than 2 million users.
About the only ray of hope is that Melngailis is still sticking to his offer (now as a private investor?) to buy out TeliaSonera’s share together with the Blackstone Group and then run the company on an ironclad management sets policy deal with the Latvian (loonie-tunes) government keeping 51 % as hitherto.
If you ask me, the owl’s tail will blossom (pūcei aste ziedēs), as Latvians say, before the government goes for this deal, which means that Melngailis would come back as the top honcho at Lattelecom. His leadership and his team were the reason the giant US investor agreed to the original MBO and continued to hope for a stake in Lattelecom even after that was rejected on January 17.
So where does that leave the half mother? Holding a leaking bag, if you ask me. It has been told that it will never be allowed to buy the rest of Lattelecom, and now it cannot easily sell its current holding, since there are no realistic buyers. We might go back to the swap of 49 % of Lattelecom for the rest of Latvian Mobile Telephone (LMT). That deal could have been done in late 2006, but wasn’t.
Without Melngailis and given the rapid pace of change on the telecoms market, the value of Lattelecom will start to decline very rapidly. The Swedes could try to renegotiate a management agreement (there was one until 2004, with Sonera and later TeliaSonera executives running the company) to at least protect their interests, but it will be difficult to let their CEO invest in any significant new projects, since the half-mother’s position is one of hold until you can divest.
If a politicized CEO is appointed by the government (as is likely), Lattelecom could start losing significant business customers, creating an opportunity for LMT and others to jump in with an offering of nearly-full-spectrum services (mobile, fixed mobile, wireless broadband). That would put the half-mother in the bizarre position of luring away the fattest cats (you expected rats?) from its own sinking boat. This, of course, has been happening in the context of mobile for fixed substitution without anyone sinking.
The best outcome might be to go back to Plan B 1.0, swap the 49 % plus a big cash payment for the remaining LMT shares, and let the government amuse itself with 100 % ownership of Lattelecom. It would also make the case for finding a new CEO easier, since the mandate would be to run a state-owned company with politicians breathing down one’s neck. There are people who have done that in Europe and elsewhere.


TeliaSonera offers, yet again, to buy, split Lattelecom

TeliaSonera sent a letter to the Latvian government dated February 25 offering, yet again, to buy all remaining state shares in Lattelecom and mobile operator LMT for LVL 500 million, but promising to split the fixed network operator into a wholesale and a retail operation.

The wholesale operator would offer network services to all other operators, including LMT and the Lattelecom retailer, on equal terms under strict regulatory supervision. Telia, the Swedish unit of the group, earlier founded a seperate network wholesaler under the Skanova brand it used previously for selling such services.
The Swedish telecoms group apparently sweetened the deal in the letter by saying it would also base some of its research and development (R&D) operations in Latvia if the transaction went through. This blogger was allowed to read a copy of the letter by informed sources.

The letter, signed by Kenneth Karlberg, TeliaSonera’s head of Mobility who has been conducting negotiations with the Latvian government for several years, also states that “selling our stake in Lattelecom is not a solution we prefer and if it is the only way we would appreciate your detailed suggestion on how such a transaction would be structured.” This would be done in the context of getting 100 % control of Lattelecom, where TeliaSonera now directly or indirectly holds just over 60).

Karlberg also tries to sooth concerns by the Latvian government that ownership of both companies by TeliaSonera would dampen competition. “In all the markets where TeliaSonera is active, there is no evidence of lacking competition, ” he writes, adding that telecommunications services prices offered by the Swedish group’s subsidiaries were “among the lowest in Europe”.

could be considered a company in crisis since its CEO, Nils Melngailis resigned under what was, in effect, political pressure. If acquired quickly by TeliaSonera, Lattelecom would probably get a new top manager appointed from Stockholm.

Telia offers network split in Latvia selloff talks

Nordic group TeliaSonera, trying to overcome stalled talks with Latvia to buy a telecoms business, has proposed splitting off the fixed-line network to ensure competition, an offer document showed on Thursday.

TeliaSonera has bid to buy Latvian fixed line operator Lattelecom and mobile operator LMT for 500 million Latvian lats ($1.08 billion). Latvia has rejected the offer, saying it would make TeliaSonera too dominant and wants only to sell it LMT.

“TeliaSonera is prepared to offer a network separation in Latvia in line with our separation in Sweden as part of a deal if TeliaSonera acquires 100 percent in both LMT and Lattelecom,” said an offer read by Reuters and signed by Kenneth Karlbergh, TeliaSonera’s head of Nordic and Baltic operations.

The offer of 500 million lats still stood, it added.

Such a separation of the network would mean that a third party company would be established and become the owner of the fixed line network, the document said.

Operators interested in supplying fixed line services or Internet broadband would then have to lease the network from the new company, it added.

In line with the offer, the price setting by the new company would be equal for all clients, including Lattelecom, which currently owns the network, and be transparent.

“Details of the separation would have to be further discussed, but in principal Lattelecom’s retail business would be clearly separated from the network business,” Karlbergh wrote. The new company would offer equal prices and treatment to all operators including Lattelecom, he added.

Telia’s offer has been sent to the Latvian government, but Prime Minister Ivars Godmanis is on vacation.

“We can confirm that we have received this proposal from TeliaSonera, but we cannot comment before the government meets next Tuesday,” said Edgars Vaikulis, a government spokesman.

The government has previously said it will let TeliaSonera buy mobile group LMT, but in return Telia must agree to sell its 49 percent in Lattelecom to another investor, with the government keeping its 51 percent. The government would later sell this 51 percent in an international auction, it has said.

TeliaSonera has direct ownership of 49 percent of LMT, Lattelecom 28 percent and the state 23 percent.

Private equity fund Blackstone, whose bid to lead a buyout of Lattelecom was rejected by the government, has expressed an interest in buying Telia’s stake in Lattelecom.

“Novarra”, or “Surf Closed” or “How to put ads on all websites”

Swedish telecom operator TeliaSonera has introduced a mobile data service where you agree to view ads on every web site visited. This service is provided by a company called Novarra. The ads are part of the deal, so the customer get what they pay (or rather don’t pay) for. It also seems that they filter other ads! The interesting thing is that major websites, primarily newspapers, don’t like to have their content modified or ads removed so they redirect Novarra-processed requests to The Norweigian Mobiletech site has more information and screenshots in the article Transcoding issues introduced by Novarra. Their article was offline for a while, but now it’s back with a small addenum saying “We are experiencing a constructive dialogue with TeliaSonera.”

Lattelecom honcho quits — it’s official

Nils Melngailis, the Latvian-American CEO of Lattelecom, has resigned his position effective April 1.

The resignation comes on the heels of a drawn-out attempt to organize a management buy-out of Lattelecom that was rejected by the government in January. 
His departure also puts and end to a “Plan B” under which The Blackstone Group, one of the major investors in the proposed and rejected MBO, offered to buy out TeliaSonera’s 49 % holding in Lattelecom.
The Latvian government has also rejected a bid by TeliaSonera valued at more than USD 1 billion to gain control of both Lattelecom and mobile operator LMT (said to be the true jewel in the crown, the most profitable of all of the Swedish group’s mobile holdings with over 1 million subscribers).
The Latvian government has been signaling Melngailis that he was not wanted since failing to support his re-election as chairman of the board of Lattelecom last December. Melngailis was also an uncomfortable figure for TeliaSonera because of his plans to independently develop Lattelecom as a regional player in both telecommunications and related services, such as outsourcing and IT systems integration. However, the Swedes had no grounds to criticize the financial performance of the company and approved the first MBO proposal that would have seen Lattelecom purchased by its management and staff  with financing from a consortium that included  Blackstone and four banks.

TeliaSonera had already been told in 2006 that it would not be permitted to acquire all of Lattelecom and, although it has persisted in making offers for both companies, it was apparently resigned to getting only LMT.  The MBO offered it a way to get out of its ownership of Lattelecom and get 49%  of around LVL 290 million in the process.

What happens now is that the Latvian government, unless it changes its mind about TeliaSonera, has no buyer for the Swedish company’s stake in Lattelecom and few prospects of selling its own 51 % to anyone other than TeliaSonera. It has also lost a well-qualified, internationally experienced and connected CEO and will have a very hard time finding an equivalent replacement in view of the politicized climate in which Melngailis was driven to resign.
Another negative consequence is that the “gentle hounding” of Melngailis from his post also drives away one of the world’s largest international investors, the Blackstone Group, which was willing to risk buying 49 % of Lattelecom with Melngailis at the helm (and covenants ensuring management control). Privately, Blackstone officials will see Latvia as a banana republic unable to see its own best interests (unless they are some kind of special interests) and will probably advise the international investment community to steer clear. This may be the most serious consequence of Melngailis’ resignation.

TeliaSonera Strike Postponed

A threatened strike by the Union of Salaried Employees TU to protest job cuts by TeliaSonera has been delayed by a month, following talks Monday between the union and company representatives.

Earlier this month, the Swedish-Finnish telecommunications company announced measures aimed at nearly 500 million euros in savings. TeliaSonera is to cut 2,900 jobs by the end of next year. The company plans to eliminate nearly 1,000 jobs in Finland and 2,000 in Sweden, or about one-sixth of its workforce.

TeliaSonera says now that it will re-examine its plans with a view to finding savings without large job cuts.TU says that a strike by its members would shut down TeliaSonera’s customer services and maintenance.

The Union of Salaried Employees TU and TeliaSonera are to have talks again in four weeks’ time. Of the approximately 6000 TeliaSonera employees in Finland, nearly 4000 are members of TU. neveikia

Šiuo metu neveikia AB TEO LT interneto svetainė.
Gedimo priežastys dar nenustatytos.Šiuo metu nepasiekiama. Yra sutrikimas, kurį šalina. Kiek laiko svetainė neveikia ir priežasčių, kodėl neveikia, kol kas nežinome, bet aiškinamės. Interneto tinklo veikla nesutriko”, – sako Valdas Kaminskas, TEO LT korporatyvinės komunikacijos skyriaus direktorius.

Ponas Kaminskas sako, kad iki 12 valandos turėtų pradėti veikti.

TEO palėtintas internetas. Visiškai nemokamai.

Sausio mėnesį gavau laišką, kad TEO padidins interneto greitį nemokamai iki vasario pirmos dienos. Kad galėčiau išbandyti. Nemokamai. Juokingiausia, kad tas greitis nepadidėjo, tačiau nuo vasario pirmos dienos, atsisakius mokėti papildomai už nepagreitėjusį “greitesnį” internetą, TEO sumažino greitį iki minimumo. Negana to, kad praeitą savaitę prakalbėjau 20 miniučių su konsultantu, kuris “tipo tvarkė kažką”, nes neveikė išvis internetas. O dabar greitis toks, kad iš proto išvest gali.. Košmaras.

TeliaSonera in Sweden is using Novarra to transcode sites found through their search

To most web developers and those of us who care about our audiences enough to design mobile web sites specifically to cater to mobile usage, Stacey’s characterization of Novarra as a success is unfortunately very one-sided and very incorrect. While it perhaps did drive data usage for mobile phone companies, the damage it has done to the existing mobile web is not to be neglected. There is no mention of that in the article, and I find that very disturbing. As David above mentioned, I have documented extensively how Novarra is destroying existing sites that are designed for mobile.

There are numerous other examples that Novarra is trampling all over the mobile web without regard of existing standards and practices.TeliaSonera in Sweden is using Novarra to transcode sites found through their search. The questionable practice is not only they are transcoding third party sites without the site owner’s consent, they are running ads on those content. I am not sure if there are rev share agreements with the third party sites. But if they are running ads without the content owners consent or a rev share agreement, it would be a terrible mistake.

If you need a good illustration that there is no escaping of designing for specific mobile use instead of just throwing a transcoder in front of the desktop web, see Barbara Ballard’s excellent presentation about leveraging device characterisics:

Miss Higginbotham, I hope you can write another post and give equal voice to the other side of the debate — the fact that Novarra and their wireless carrier customers are destroying the usability of the mobile web, and in some case doing something questionable in deploying their technology.