The Slovak Telecommunication Office announced yesterday on its web page that the 3rd Slovak mobile license granted to TEF 02 S lovakia (wholly owned by TEF 02 CR) is officially valid as of 7 September 2006. TEF O2 CR committed to launching its own GSM network in 6 months and a UMTS network over a one year period following receipt of the license. TEF O2 CR is obliged to reach 12% coverage in one year and 45% coverage within two years.
Our view:
We do not expect material trading impact from the news today. We believe that the current main driver of TEF O2's share price is the CZK 45/share dividend due to be paid at the end of the month. We believe the market would wait for details on the cost of the build-out and the expected returns from the investment. We continue to believe that the network build-up cost, in addition to start-up losses from launching in a highly-penetrated market and purchasing capacity from the existing operators, will outweigh the long-term viability of the Slovak operation. We maintain our Hold recommendation and CZK 507 fair value estimate.