TEF O2 CR to launch IPTV in 3Q06

TEF O2 CR announced that they have launched a pilot test for their IPTV offering with their employees. The company plans to launch commercial service during 3Q06 via ADSL 2+, which it is gradually launching ahead of IPTV. TEF O2 CR's IPTV platform will be adopted from Telefonica's Imagineo offering in Spain, and hence eliminates much of the technical and provisioning testing requirements. The initiative aims to stem the decline in fixed core revenues, which we forecast will decline by another 3.8% in 2006.

Our view:
We do not expect material impact from the news as TEF O2 CR has already announced its push into IPTV as part of its innovation strategy earlier this year. We maintain our Hold recommendation and CZK 503 fair value.