State-owned asset management company Possessor received consultant invoices totaling 740,000 euros and made additional payments of 612,000 euros this week for preparations to acquire shares in Latvian telecommunications companies Tet and Latvijas Mobilais Telefons (LMT). By August’s close, consultants hired for the deal had consumed 4.4 million euros, while the transaction remains incomplete, lacking a buyer and operating past the expiration date of its memorandum of understanding with Swedish telecom firm Telia.
Consultant Costs and Payment Structures for Tet and LMT
Investment bank J.P. Morgan is entitled to receive 300,000 euros per month for preparing the acquisition until a purchase agreement is signed, according to TV3’s investigative programme Nekā personīga. The programme reported that the bank is entitled to 900,000 euros for three work months this summer, with fixed fees for specific assignments adding another 1.1 million euros. The bank would receive its largest payout through bonuses for attracting an investor and securing financing only if the transaction succeeds.
Preparations for the transaction were split into two distinct phases. During the first stage, known as Sprint, consultants assessed potential transaction scenarios and received 1.44 million euros for their work. The second stage, called Milda, involved conducting due diligence on the companies and preparing the share acquisition. By the end of August, costs for the Milda stage reached 3.04 million euros. Information obtained by the programme indicates that financial, tax, legal, technical, and commercial due diligence on the companies has been completed.
Did You Know? The memorandum of understanding between the Latvian side and Swedish telecommunications company Telia expired in July, leaving the future of the multi-year acquisition negotiations uncertain.
Political Clash Over Consultant Spending and Transaction Structure
Following the announcement, consultant work and payments were suspended on October 1. Economy Minister Viktors Valainis countered that the prime minister was incorrectly informed and defended the consultants’ work, arguing that due diligence and valuations remain necessary regardless of the final transaction structure.
Expert Insight: The sharp divide between the prime minister and the economy minister over consultant utility underscores the high political and financial stakes involved in restructuring Latvia’s telecommunications assets.
Meanwhile, the prime minister’s adviser Valters Bolevics described the existing transaction structure as flawed. As part of the current strategy, Latvia plans to buy out Telia’s holdings, then float a portion of those equities on the stock market while offloading the rest to a private buyer. Bolevics also argued that the Latvian side should seek a lower acquisition price because Telia wants to leave the Latvian market.
Ministry faces reporting deadline after working group meetings stall
The transaction’s supervisory working group has not held any meetings since the summer, despite previously gathering every two weeks. The Ministry of Economics reportedly failed to provide the government with regular updates on progress. Bolevics stated that the Ministry of Economics must present a report to the government next week detailing the funds spent on consultants and the work completed, after which the government will decide on next steps.
Latvia has negotiated with Telia for several years regarding the acquisition of the Swedish company’s shares in Tet and LMT. Currently, the Latvian state owns 51% of Tet through Possessor, while Telia’s subsidiary Tilts Communications holds the remaining 49%. In LMT, Telia and its subsidiary Sonera Holding jointly own 49%, while the Latvian side holds the remaining shares across multiple entities: LVRTC owns 23%, Tet holds 23%, and Possessor owns 5%. Once Telia’s equity is secured and a strategic partner comes on board, the envisioned ownership framework could split the stakes evenly at roughly 25% for each of the four entities—Latvenergo, LVRTC, Possessor, and the strategic investor—across both enterprises.
Frequently Asked Questions
How much is J.P. Morgan entitled to receive per month?
J.P. Morgan is entitled to receive 300,000 euros per month for preparing the acquisition of shares in Tet and LMT until the purchase agreement is signed.
What were the two stages of transaction preparation called?
Preparations were divided into two stages: the first stage was known as Sprint, and the second stage was called Milda.
What is the current state ownership breakdown for Tet and LMT?
Through Possessor, the Latvian state currently owns 51% of Tet, with Telia’s subsidiary Tilts Communications holding the remaining 49%. In LMT, Telia and Sonera Holding jointly own 49%, while the Latvian side holds the rest through LVRTC (23%), Tet (23%), and Possessor (5%).
How should the Latvian government restructure its telecommunications acquisition strategy following the suspension of consultant payments?
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