Cesky Telecom: Three binding bids were submitted by yesterday’s tender deadline

The National Property Fund said that three binding bids for Cesky Telecom were submitted by yesterday’s tender deadline, and that the Cabinet should discuss the bids on April 10. According to the Czech MFDnes newspaper, Deutsche Telekom has pulled out of the tender. Based on earlier reports, this would seem to leave Orange, Swisscom and OTE as the only “strategic” bidders left (each likely having financial investors in their respective consortia). MFDnes also writes that the bids by Swisscom and OTE are unlikely to match the government’s price expectations (of at least CZK 80 bil. for the 51% stake, i.e., CZK 485 per share) and that, according to privatization committee members, the chances of the tender succeeding or failing are evenly split. This contrasts with a rather optimistic statement by the Czech finance minister from Thursday morning regarding the completion of the Telecom sale. Czech HN newspaper reports that OTE of Greece pulled out. Today’s reports are negative news for the stock.

Cesky Telecom’s audited IAS results, released yesterday, corresponded to the preliminary results released in February (CZK 6.07 bil. net income, etc.). Reductions in staff costs and Energy, repair and maintenance costs, and lower-than-expected Interest costs were the main drivers of the excellent Q4 2001 performance, which took us and the market by surprise in February. Some of these achievements are sustainable in the future, in our view. Encouraging is the prospect of the company’s capital expenditure gradually declining. Our assessment is that Cesky Telecom‘s fundamental outlook for 2002 (particularly for that of the fixed-line business) and beyond does not look as bleak as it did before the full-year 2001 results came out.

Separately, the company’s CEO, Premysl Klima, said yesterday that there is room for Cesky Telecom paying a dividend out of 2001 profit, but he suggested that the company’s management will let shareholders propose any dividend payment (an AGM will be held in June). These statements are not conclusive enough to make the stock move, in our view.

(Ondrej Datka)