Riga, July 14 (LETA) - The telecommunications and technology company Tet should be split up and its telecommunications business should be sold to the mobile communications company Latvijas Mobilais Telefons (LMT), which would be owned equally by the Latvian state and the Swedish Telia Company, while the state would fully retain the construction company Citrus Solutions and the electricity trading business of the Tet group.

The next step would be an IPO and stock exchange listing of at least 20 percent of LMT shares.

This follows from the proposal prepared by Swedish Telia. Considering the fact that the document is confidential, the Economics Ministry does not reveal how much the proposal has been analyzed in the ministry's informative report on the future development scenarios and the desired level of the Latvian government participation in LMT and the Tet group.

The responsible officials and politicians, under the pretext of confidentiality, did not comment further on the content of the restricted informative report, but Economics Minister Viktors Valainis (Greens/Farmers) told LETA that the working document was based on a market research carried out by consultants attracted by Public Asset Manager Possessor.

According to Valainis, the result of the market research and the consultants' opinion will be submitted to the Cabinet of Ministers for further work and consideration in order to arrive at a constructive government decision and the most appropriate solution for the interests of the Latvian state and the information and communication technologies (ICT) sector, involving companies and the industry.

A complex management scheme for Tet and LMT has been set up in the past, which the two shareholders - the Latvian government and the Swedish company Telia - have so far been unable to agree on changing.

The state, through Possessor, owns 51 percent of Tet, while Telia's subsidiary Tilts Communications owns 49 percent of Tet. In LMT, on the other hand, Telia and its subsidiary Sonera Holding own a total of 49 percent, the Latvian state owns a total of 28 percent through the Latvian State Radio and Television Centre (23 percent) and Possessor (5 percent), while Tet holds another 23 percent.

This theoretically means that 11.73 percent of LMT is controlled by the state through Tet and 11.27 percent by Telia, which in turn means that Telia has a 60.3 percent stake in LMT and the Latvian state has a 39.7 percent stake. However, in practice this is not the case and in fact the state also has decisive control over LMT, as it has a majority in Tet. At the same time, this has hampered a number of strategic decisions that require consensus.

The report says that LMT is worth an estimated EUR 586 million according to Nasdaq, Tet - EUR 453 million, Citrus Solutions - around EUR 50 million and the Tet group's electricity business is worthless.

Valainis told LETA in January that a clearer vision of the future of these companies should be obtained in the next six months.

"Ever since I remember myself in politics, everyone has always had an opinion on what should be done with Tet and LMT and what should be done with their foreign shareholders. That is why I want to refrain from any comments at this point and wait for a professional assessment of the best way forward for us as a country," the minister said earlier.

He also pointed out that this is not easy, because "something very difficult to explain was created in the 1990s and we have to put it into an understandable model that could work in the future".

As reported, in November 2017, the Cabinet of Ministers decided that Tet and LMT would not be merged. However, in July 2018, then Prime Minister Maris Kucinskis (Greens/Farmers) and Telia President Johan Dennelind, signed a memorandum of understanding on the further development of Tet and LMT.

The signatories undertook to develop a common strategy for achieving synergies between Tet and LMT, including the development and implementation of a strategy for next-generation communication systems, the creation of innovative excellence, and active cooperation with science in this process.

It is also reported that on August 23, 2018, Kucinskis issued a decree establishing a working group to ensure that the interests of Latvia are represented in the development and implementation of a common corporate strategy for Tet and LMT, as well as in its financing.

However, at the end of 2019, the coalition forming the government decided not to address the future of Tet and LMT at the time.