Cesky Telecom CFO J. Sedivy, and Eurotel (51% owned by Cesky Telecom) CFO R. Bowker commented on Cesky Telecom’s consolidated results during a conference call for analysts on Friday.
The 2002 consolidated capex guidance was lowered from approx. CZK 12 bil. to CZK 11 bil.; it should be less than 20% of sales in 2003. Eurotel’s 2002 capex should reach approx. 15% of revenues.
It was confirmed that EBITDA margin at the 50% level is not sustainable, mainly due to pressure on tariffs, and limits to further cost cutting. The full effect of ongoing staff reductions (9% y-o-y in Q3 2002) will only be evident in 2003 due to current severance payments; staff reductions in 2003 should take place at the same pace as in 2002.
No details were provided on the possible unification of local and LD tariffs in 2003; if introduced, it should take place alongside changes to monthly charges.
The executives declined to comment on questions related to the possible merger of C-Tel (the Deutsche Bank/TDC privatization vehicle) and Cesky Telecom, specifically what majority would be required to approve the merger by a general meeting as per the company’s articles of association.
Cesky Telecom stock was driven late last week by speculation of a possible cancellation of CT’s privatization (due to the price reduction and guarantee claims from the TDC/Deutsche Bank consortium the government is negotiating the sale with). The transport minister, M. Simonovsky, said on Sunday that he is opposed to any price reduction for CT and thus joined the finance and industry ministers. We still think it is too early to draw any conclusions; the Cabinet is to discuss the draft privatization contract this week, on Wednesday.
Should the privatization be canceled and CT remain in state hands, a large dividend could follow since the Cabinet needs to boost the state’s fiscal revenues. Should the dividend exclude the purchase of the remaining 49% in Eurotel, we would see the dividend scenario as sub-optimal.
Jiri Soustruznik