TEF O2 CR: TEF bids for 3rd mobile license in Slovakia

The Slovak Telecommunications Office has confirmed that Telefonica has bid for the country's third license, which covers both GSM and UMTS standards. Telekom Austria and a financial consortium including Ceske Radiokomunikace have also bid for the license. The minimum bid for the 20-year license was set at SKK 100m (US$3.42m), and the criteria includes ability to strengthen competition, timetable for network build-out and operations, and price offered. Current players in the 84.5% penetrated market are Orange, the market leader, and T-Mobile.

Our view:
We do not expect any trading impact on TEF O2 CR in the near-term. However, we believe TEF has a very good chance of winning as it could provide significant competition to the two other existing global brands in the Slovak market. A potential network build-out will require significant capital, and hence we could expect more cash repatriation from TEF O2 CR to TEF de Espana via inter-company loans. We maintain our Hold recommendation and CZK 503 fair value for TEF O2 CR.