Telefónica confirms talks to offload Czech operation

Spain’s Telefónica has confirmed that it is in discussions with Czech investment group PPF surrounding the sale of its Czech operation O2. In a stock market announcement following speculation in the financial press, Telefónica said that it is “exploring strategic options in relation to its stake in Telefónica Czech Republic, including conversations with investor group PPF, with nothing certain whether an agreement will be reached, or final terms and conditions.”

The Spanish incumbent holds 69.4 per cent of the Czech operation, with the remainder held by private and institutional investors.

Telefónica, which built a substantial debt pile investing in Latin America, has pledged to cut debt to below €47bn by the end of 2013, partly through disposal of non core assets. Earlier this year it announced that it had slashed debt by €10bn in the twelve months to the end of June, following disposals in Central America and Inversis and its exit from the Irish market through the sale of its assets there to Hutchison’s 3.

Meanwhile its purchase of Dutch incumbent KPN’s German operation E-Plus was approved earlier this month by KPN shareholders at an extraordinary general meeting. In a deal sweetened to win their backing, Telefónica is paying €5bn in cash and a 20.5 per cent stake in Telefónica Deutschland post transaction. The total value of the deal is €8.55bn.

The sale of its Czech operation will realise substantially less than this sum, if successful, with reports suggesting a value in the region of €2.67bn for the stake. O2 Czech Republic holds second place in the market, with 5.1 million subscriptions, according to estimates from Informa’s WCIS+. T-Mobile leads the market with 5.8 million while Vodafone is in third place with 3.3 million.

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