Business briefs

01-04-2005

Telefonica of Spain probable new owner of Cesky Telecom

The big news of the week: Telefonica of Spain is the probable new owner of the Czech fixed-line operator Cesky Telecom, however a final decision will not be announced until after the results of Friday's no-confidence vote in the Prime Minister Stanislav Gross, and there is still a remote possibility that the state could choose to sells its majority stake on the capital markets.

The Spanish telco was revealed to be the highest bidder in the privatisation tender for Cesky Telecom this week, with an unexpectedly high bid of 82.6 billion crowns, the equivalent to over 3.5 billion US dollars. The next highest bidder, Swisscom, had offered 79.2 billion crowns, followed by Belgacom and a consortium that included France Telecom, which each bid roughly 67 billion crowns.

The Czech Minister of Finance, Bohuslav Sobotka, has reportedly advised the Cabinet to approve the sale of the state's 51 percent stake in Cesky Telecom to Telefonica next week.

However, some members of the main opposition Civic Democrats are pushing have pointed out that although the Spanish bid was higher than anticipated, it is roughly the same amount — 3.5 billion US dollars — that Britain's Vodaphone recently paid for Oskar Mobil, the smallest of the three mobile operators on the Czech market. While Cesky Telecom, which is debt-free, is the 100-percent owner of the largest mobile operator, Eurotel.

National Property Fund to be wound down this year

In related news, the lower house of Parliament this week approved a law that would dismantle the Czech Republic's privatisation agency by the end of the year. If approved by the Senate and ratified by President Vaclav Klaus, the law would have the Finance Ministry take over the government's remaining privatization agenda as of 2006. The National Property Fund holds stakes in state-owned companies on behalf of the government and organizes privatization tenders, including Cesky Telecom.

Senate rejects Civic Democrats' 'squeeze out' proposal on minority shareholders

Meanwhile, the Senate has rejected the Civic Democrat's proposed "squeeze out" revision to the commercial code that would have allowed holders of 90 percent or more in a company to force minority shareholders to sell them their shares. The rejected proposal also contained provisions for speeding up company registration.

Social Democrats agree on 'Strasbourg friendly' draft plan for rent deregulation

Also this week, the ruling Social Democrats have agreed on a basic plan for rent deregulation which the Deputy Development Minister, Ivan Prikyl, said should be finalised within a year's time, and conform to the European Court of Justice's requirements, including landlord's right to make a profit. The decision comes on the heels of a ruling in favour of Poland's landlords by the Strasbourg-based European Court of Human Rights.

Czech central bank cuts key interest rate to 2.0 pct, in line with European Central Bank

Apart from the Cesky Telecom privatisation, the other major development of the week was the Czech central bank's move to cut a key interest rate by a quarter of a point on Thursday, to 2.0 percent, which is the same level as that of the European Central Bank, and brings the Czech Republic closer in line with eurozone practices. The cut had been widely expected, following a similar move earlier in the week by the Hungarian central bank, in reaction to forecasts of reduced growth throughout Central Europe. The Czech central bank already cut rates in January, lowering the two-week repo rate again by a quarter of a percentage point, to 2.25 per cent. President Vaclav Klaus appointed several new members to the Czech National Bank board this year, and the new central bank board is considered to be more "pro-business" than the last; and more concerned about the impact of a strong Czech crown on the domestic industry than over inflationary pressures. The Czech currency has adjusted slightly, with it trading at under 30 euros and over 23 US dollars for the first time in over half a year. Analysts say another rate cut is unlikely unless the crown drops to 29.50 to the euro.

01-04-2005