Hats off to Latvia for staging one of the first major cable deals in Central and Eastern Europe in 2011.
While not entirely unexpected, involving as it did the leading cable operator Baltkom, it still came as something of a surprise as it had nothing to do with its closest cable competitor Izzi. The two had in fact agreed to merge as far back as last summer, and after receiving the qualified approval of the Competition Council had a deadline of until this Friday (April 15) to do so.
However, it recently became clear that a deal between the two was looking increasingly unlikely. Only last week Izzi’s chairman of the board Helmuts Kols said as much and added, perhaps surprisingly, that it might buy 100% of Baltkom. Baltkom CEO Peteris Smidre responded by saying that it would reveal the name of a new investor this week and was also looking to acquire other telcos, with Izzi a possible target.
Smidre kept to his word by then revealing that Baltkom had secured Axa Private Equity and Resource Partners as strategic investors. The funding they bring into the company will allow it to develop its network and the services it offers and at the same time embark on acquisitions.
Izzi already has four key investors – Argus Capital Group, Contaq, Syntaxis Capital and Tiroler Elektronik – and a deal between itself and Baltkom has still not been ruled out. Indeed, it has been reported that negotiations are currently taking place at board level. Should it happen, the implications for the Latvian market could be far reaching and perhaps even a game changer.
At present, both feel they are at a huge disadvantage in competing with the incumbent telco Lattelecom, which is backed by TeliaSonera, though still majority state owned, and operates both a DTT and an IPTV platform.
By joining forces, Baltkom and Izzi would undoubtedly be able to mount a much stronger challenge.