The Cabinet selected a so-called ‘dual approach’ method, i.e. the state’s 51% stake will first be offered to strategic investors. The Cabinet should open a shortened tender before the end of the year, which should then end by March 31. If no buyer is found, the state’s stake would be floated on the markets. The timing and criteria for the sale are to be decided by the government next week, said MinFin B. Sobotka.
We believe that CT’s shares may react positively at today’s opening as investors may speculate on a potential buy-out (the minimum price should be 85% of the acquisition price but no lower than 6M weighted average). Nevertheless its further development will depend on the course of the tender, i.e. information regarding investor interest and tender conditions. The selected method in fact only extends the current uncertainty regarding the final sale method, we believe. It also increases the risk that there may not be sufficient interest, that the offered price would be too low or associated conditions unacceptable. This would put CT shares under pressure and the consequent capital markets sale would be realized at a lower price compared with the current market value.
The Cabinet plans to approach approximately the same number of telecommunication operators as did its advisor, CSFB/CS. However, according to earlier information, only six operators showed an interest, i.e. Swisscom, TDC, France Telecom, Telekom Austria, Telenor and TeliaSonera. Nevertheless, France Telecom, Telekom Austria and Telenor have told us that the Czech Republic is not their primary focus. TeliaSonera is primarily interested in the Baltic States and northern Europe while an acquisition of the size of CT is too big for TDC, we estimate. Hence only Swisscom is left. Swisscom has the balance sheet for the acquisition, failed to buy Telekom Austria and has confirmed its interest in CEE incumbent operators. However, the company sold its 13% stake in CT back in December 2003 (in consortium with KPN) at CZK 255. Other investors are financial institutions, which are likely to be aggressive in their bids, creating a risk that the eventual offered price would be too low or associated conditions unacceptable.
Emilia Zampieri, Patria Finance