On the 12th of March the representatives of the largest companies in Latvia and industry experts were gathered for Latvia’s TOP 101 most valuable enterprises morning debates, where the center of debates was the perspective of telecommunication industry in the context of the merger between LMT and Lattelecom.
The discussion was attended by the Managing partner of Prudentia Kārlis Krastiņš and board member Ģirts Rungainis, Nasdaq Riga Chairman of the Management Board Daiga Auziņa-Melalksne, Partner of Porta Finance Mikus Janvars as well as Rotschild representative William Welss and many other experts of the industry.
The participants outlined three potential scenarios of further development for LMT and Lattelecom. One of the potential scenarios, which has been discussed in Latvia for a while now, is where both companies would merge. Although this scenario is subject to certain risks, which mainly affect the corporate governance structure and potential distortions of competition, according to various estimates the merger of both companies could create up to 70 million euros of positive synergies.
In contrast to the merger of both companies a scenario, in which the structure of both companies stays the same was offered, however it is based on the calculations of the significant risks that would impede the development, competitiveness of both companies and, most likely, is not a sustainable long-term development solution.
“The merger of both companies could create significant positive synergies. It would be a sin not to discuss and evaluate them. The question regarding the future of Latvia’s telecommunication industry is a typical example of the indecisiveness of the Latvian government,” Kārlis Krastiņš acknowledged during the discussion.
“The larger the company the more appealing it is to investors. The listing on a stock exchange of large state-owned companies, such as Lattelecom, has given a strong impetus to the development of the capital markets in a number of Eastern European countries and plays a crucial role in the development of exchanges as a source of capital, because local and foreign investors are interested in large, growing companies. Large state-owned company listing on the stock exchange creates a favorable ecosystem, which is a prerequisite for smaller companies to be able to exploit listing in a stock exchange as a source of financing for further development. It would create favorable circumstances for the venture capital funds to exit their investments in companies, give opportunities for the investments of 2nd tier pension plans in the real economy, develop investments of individuals and promote a healthy investment environment within the country in general,” Daiga Auziņa-Melalksne emphasized.
Partner of Porta Finance Mikus Janvars noted that there is a trend of consolidation within the telecommunication industry at the European level. More and more countries can be seen where the number of telecommunication operators has decreased from four to three providers in the industry.
Furthermore, the representative of Rotschild Group presented the telecommunication development trends in Europe: “The opportunity to call is no longer a privilege, it is a right, and the same applies to data transmission. The industry has rapidly developed, however it cannot earn enough money. The trends in Europe are mainly triggered by the desire to merge fixed and mobile operators.
During the discussion, topics like, the factors influencing company’s enterprise value, M&A trends in the Baltics, the opportunities of attracting investors in the capital markets to increase growth potential for companies that are ready for an IPO, were discussed.
Top 101 of Latvia’s most valuable enterprises is a socially significant initiative realized by Prudentia and Nasdaq Riga since 2005. The initiative is based on the desire to encourage public debate about the value of enterprises – how to recognize good corporate governance and other factors that affect value. The purpose of the project is to strengthen the understanding of company value as an important starting point for future development. Information regarding current and historical results of Latvia’s Top 101 most valuable enterprises can be obtained on the website www.top101.lv.