The Cabinet is scheduled to consider the future of the majority-owned state company at its regular meeting today. The finance and industry ministries expect a new privatization process to commence in 2005.
Separately, mobile-operator Eurotel, 51% owned by Cesky Telecom (CTel), should present its 2002 figures today at 11 a.m. CET. Eurotel strengthened its No. 1 domestic-market position when it registered 3.89 mil. customers in 2002 (net growth of 653,000 customers). We estimate that domestic mobile market penetration reached 83.4% at year-end 2002. Significant ARPU declines more than offset the 20% subscriber growth last year, therefore, we expect 5% decline in sales. However, in terms of profit, this should be more than compensated by an increasing EBITDA margin. Opex management will now come into management focus as revenues are in decline (similarly, capex is expected to decline substantially; the company generated CZK 5.4 bil. of FCF in 2002, according to our estimate).
IAS 2002e 2001 % change
Sales 28,545 30,063 -5.0%
EBITDA 13,967 13,250 5.4%
EBIT 9,308 9,056 2.6%
Pre-tax profit 9,231 8,775 5.2%
Net profit 6,369 6,068 5.0%
CTel’s acquisition of the remaining 49% of Eurotel is becoming more likely; we believe this is the best strategic option for Cesky Telecom, since it would increase the company’s hedge against traffic migration to mobile telephony, and eliminate the influence of the current minority shareholder, Atlantic West (AT&T Wireless/Verizon Communications; holds the 49% stake). Of course, there is a risk of CTel overpaying for the 49% stake; we would be comfortable with a maximum bid of CZK 29.2 bil. Acquisition negotiations with Atlantic West could be resumed in Q2 2003, we believe.