The Cabinet canceled the Cesky Telecom privatization tender yesterday. The decision was largely expected; nevertheless, the stock lost 4.7%. In the coming period the stock price will be driven by news and by speculation related to the company’s restructuring. The most important issues are related to:
* the Eurotel equity stake (the status quo; acquisition of the remaining 49%; or a sale of CT’s 51% stake, that being the least likely, we believe);
* sub-optimal financial leverage, which could be solved by a EuroTel acquisition, a leveraged buy-back, and/or a dividend (the 2001 EPS is CZK 19);
* market liberalization and pressure from domestic cellular operators.
Since the company’s management seems to be fully committed to CT`s restructuring, it is mainly the majority owner who will decide on the timing and the strength of the restructuring steps. We believe the key restructuring proposals could be presented to shareholders at the AGM scheduled for June 14.
(Jiri Soustruznik)