Reuters cited unnamed government official yesterday, who said Deutsche Bank/TDC consortium (privatization tender winner, it bid EUR 1.81 for the 51% stake, CZK 335 per share) want a 10% price reduction should an adverse information be revealed from Cesky Telecom accounting books after it is privatized. Also, the consortium wants unspecified guarantees with relation to the Anti-Monopoly Office and the sector regulator (the Anti-Monopoly Office could be a problem due to TDC/Deutsche Bank`s ownership of Ceske radiokomunikace).
It seems the Cabinet, which should discuss the privatization contract draft next week on Wednesday, could be opposed to any possibility of price reductions and additional guarantees; two ministers opposed the contract draft so far. This could complicate the privatization completion, nevertheless it is too early to draw conclusions from the situation at the moment.
CTK informed that, according to the privatization contract draft, TDC/Deutsche Bank wants to acquire remaining 49% stake in Eurotel (51% is already held by Cesky Telecom).
We see this scenario as the best from available options (the others are status quo with respect to Eurotel + increased leverage of Cesky Telecom, and divestiture of the 51% stake in Eurotel). Although Cesky Telecom is significantly under-leveraged, Eurotel acquisition would probably not be feasible together with a merger of Cesky Telecom and C-Tel, the privatization vehicle to be owned by Deutsche Bank and financed partially by a syndicated loan. Accomplishing both would probably leave Cesky Telecom over-indebted, therefore, the above indicates the merger (which would probably imply a buy-out) is less likely than some media reports indicated.
Cesky Telecom holds a Conference Call on its 9M results today at 3 p.m. CET.