FT reports that Cesky Telecom intends to buy 49% of EuroTel for CZK 57 bil. We see this as a fair price and we expect the deal to increase Cesky Telecom’s attractiveness to investors. We expect CT to borrow most of the funds needed for the acquisition; its strong balance sheet will easily absorb the additional debt. The consolidation will decrease EBITDA margin, but sales, EBITDA and EBIT growth will be boosted substantially. Interest expense and goodwill amortization will eliminate the growth effect in the first years, however. The goodwill write-off will represent a strong negative but purely accounting impact on CT’s P&L (we estimate approximately CZK 45 bil. depreciated over 15 years).
(Ondřej Daťka)