Telecom to get a value boost by acquisition of Eurotel

31-07-2001

Both Czech and international media have presented reports on the acquisition of the largest Czech mobile phone operator, Eurotel, by the dominant fixed-line operator, Czech Telecom. Telecom already owns 51 percent of Eurotel and will buy the remaining 49 percent stake from US-based Verizon Telecommunications and AT&T for around 1.5 billion USD. Czech Telecom representatives said the company was seeking a syndicated loan to finance the deal which will enable it to take full control over Eurotel, including management rights.

Eurotel is the largest of the three Czech mobile phone operators. It had more than 2.6 million users at the end of June, controlling half of the Czech market, the most dynamically developing mobile market in Central and Eastern Europe.

The acquisition of Eurotel is expected to give Czech Telecom a significant value boost before its privatisation, slated for the end of this year. The Czech government would thus be able to get more than it hoped for its majority stake. The Czech National Property Fund expected to sell Czech Telecom for 2 billion USD. Now, after the acquisition of Eurotel, the Czech ministry of transport and communications believes that Czech Telecom could sell for around 2.5 billion.

However, considering the current low investment enthusiasm in the telecommunications sector, there are not many likely bidders. Experts see Deutsche Telekom as one of the hottest candidates. The only problem is that Deutsche Telekom already controls the second largest Czech mobile operator, RadioMobil, and would have to sell-off either RadioMobil or Eurotel so as not to infringe anti-monopoly regulations.

Czech Telecom is becoming a juicy bait for foreign investors and higher proceeds from its privatisation will definitely be welcomed by a government struggling to patch the holes in public finances. However, ordinary Czechs must ask whether the former monopolist will use its dominance of both the fixed-line and mobile markets to the benefit of the consumer.

31-07-2001