On Tuesday the government rejected the proposed merger between Latvijas Mobilais Telefons (LMT) and Lattelecom, partly owned by the Latvian state, reported LSM's Latvian-language service.

The Economics Ministry will be sending an official reply to the second shareholder - Scandinavian TeliaSonera - that the latter's proposals over merging the telecoms have been rejected.

The government had considered two possible scenarios - merging the two companies or retaining the status quo. As it is, the Latvian state will keep a controlling stake in the two companies.

Economics Minister Arvils Ašeradens (Unity) told LETA that the Privatization Agency will be contracting an independent consultant to review the telecoms market and suggest future courses of action.

Previously the Competition Council voiced concerns over the merger, claiming it would influence service quality and the prices.

Scandinavian telecommunications group TeliaSonera submitted its proposal for the future of both companies to the government November last year.

TeliaSonera claimed the merger scenario would improve efficiency of operations and the quality of services provided to customers.

The Latvian government has been debating the possibility to sell off its stakes in LMT and Lattelecom for years, but no agreement has been reached on the issue so far.

Lattelecom is a leading Latvian telecommunications company. Its shareholders are the Latvian Privatization Agency which holds 51 percent on behalf of the Latvian state and Tilts Communications (49 percent), a subsidiary of TeliaSonera registered in Denmark.

Founded in 1992, LMT is the oldest mobile operator in Latvia. LMT shareholders are Scandinavia's TeliaSonera (49 percent), Lattelecom (23 percent), the state-owned Latvian State Radio and Television Center (23 percent), and the Latvian Transport Ministry (5 percent).