Residents in Mazsalaca, a town located near the Estonian border, were startled on Sunday evening by a streak of light that zoomed across the sky, followed by a loud crash, setting the ground on fire.
Emergency crews arrived on the scene to find a 10 metre-wide crater, still smoldering at the centre.
The scene led some officials to speculate the explosion had been caused by a meteorite, according to several media reports.
But experts soon cast doubt on the meteorite theory, citing the supposed meteorite's all-too-perfect characteristics.
"This is not a real crater. It is artificial," Uldis Nulle, a scientist at the Latvian Environment, Geology and Meteorology Centre, told the Associated Press.
On Monday, telecoms operator Tele2 confirmed its role in carrying out the stunt, which Latvian Interior Minister Linda Murniece called "cynical mockery", according to the AFP news agency.
According to Tele2's Sprogis, the stunt was a ploy to help direct the world's attention toward the troubled Baltic country as it struggles with a prolonged economic downturn.
"As we can see, with this Latvia made the news all over the world, everyone wants to know about Latvia, and this is not because of the crisis, the hard times and so, but because there is something creative and exciting happening here. It is a unique achievement and part of our communication," he said.
While Sprogis added that Tele2 will reimburse Latvian emergency services who responded to the fake meteorite, Latvian police have said they are launching a formal investigation which could lead to formal criminal charges.
But a spokesperson for the Latvian embassy in Stockholm attempted to play down the incident.
"The most important thing is that no one was hurt, no damage was done and Tele2 has promised to reimburse the government for all expenses incurred by the police and fire department personnel,” embassy press attaché Zane Malniece told The Local.
A YouTube clip recorded at scene of the bluff meteorite crash-site: