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Lithuanian: Telecom Saga Takes New Turn

Vilnius, 16 June 1998 (RFE/RL) -- The long-running story of Lithuania's efforts to privatize its telecom service has taken a new turn. For more than a year various aspects of the telecom saga have been making news in the Baltic republic. In the latest development, President Valdas Adamkus has been drawn into the controversy, amid threats from one of the country's political parties to go to the Constitutional Court.

Two foreign investors are competing to buy a 60 percent share of Lietuvos Telekomas. They are the Danish Teledenmark group and a consortium consisting of the Finnish Sonera and Swedish Telia companies. The Lithuanian privatization authorities are scheduled to open the envelopes with the bidders' proposals and offers next week (June 24).

But new uncertainty has arisen as a result of the reaction to a telecommunications law passed last week (June 9) by the Lithuanian Seimas (parliament). Under this law, the Lithuanian Telecom Corporation would be granted a monopoly until 2003.

This has led to an immediate outcry by the small opposition Social Democratic party (LSDP), and by telecommunications companies who want a share of the Lithuanian market. The Social Democrats have applied to President Adamkus, asking him not to sign the law. They say it should be returned to the Seimas for further consideration.

Leaders of that party say the monopoly contradicts the constitution, and they say they will lodge a complaint with the Constitutional Court if the law is allowed to come into force.

On the other side, authorities responsible for privatization say that removing the monopoly provision would mean that Lithuania might lose up to $150 million in the Telecom sale, because the investors would react to the loss of monopoly by reducing the size of their bids.

Eduardas Vilkas, the chief of Privatization Commission, said last week that he expects that the price offered for telecom will be not less than $600 million. He said investors are now being kept in a state of uncertainty for as long as the President hesitates to sign the law.

Telecom Corporation Director-General Gintautas Pangonis said the privatization process is still running to schedule despite the latest controversy. He said it's hard to imagine how service tariffs could be kept at a balanced and acceptable level except through a monopoly. He said that even Western European countries had until recently limited the liberalization of the telecom marketplace. And he noted that Greece, Ireland, Portugal and Spain will maintain the monopoly of their telecommunications markets until 2003.

According to Pangonis, the tariffs would be regulated by the state, not by Telecom itself. "If we liberate the market now, the prices of services would grow by two or three times. It will be shock for more that 800,000 people," he said.

But Lithuanian companies involved in telecommunications are much more skeptical about a monopoly. They say it is not clear how state institutions would regulate the prices of the service. They also say that the monopoly would inhibit the proper development of the telecommunication market, thereby stunting the benefits of competition on pricing and efficiency.

A successful conclusion to the Telecom affair is an important matter for Lithuania. The company is considered the "jewel" in the country's privatization process, and through it, the authorities hope to send a signal to international investors that Lithuania is serious about getting viable businesses into private hands.