Spain’s Telefonica may find it difficult to sell its Czech subsidiary to PPF Group for a satisfactory price, according to Bloomberg.
The operator this week revealed it was in discussions with the investment group, owned by Czech billionaire Petr Kellner, as it considers “strategic alternatives” for Telefonica Czech Republic, in which it currently holds a stake of about 70%.
However, analysts cited by the newswire note the Czech subsidiary’s ongoing revenue decline, and the tough market conditions in which it operates, in downplaying expectations regarding a potential sale.
Telefonica (Madrid, Spain) has been angered at regulatory moves to reserve spectrum in a forthcoming auction for a new entrant.
Besides driving up the price incumbents will have to pay for new 4G airwaves, the decision will increase the competitive pressure in what is already a fiercely contested market.
PPF Group had been seen as a likely beneficiary of the regulatory scheme, but the investment group has decided not to bid in the auction because of rules that would prevent it from merging with another license winner for at least 15 years.
Although Kellner might see the acquisition of Telefonica’s Czech interests as an alternative means of entering the country’s telecoms market, he may be unwilling to pay the current market price of $3.9 billion for the business.
Even if Telefonica were able to offload the asset for that fee, the sale would generate significantly less than the $4.7 billion Telefonica originally paid for the stake.
Nevertheless, the group remains keen on selling non-core assets to reduce its substantial debts and has already sold interests in central America and the Republic of Ireland this year.
Telefonica is not the only operator considering its future in the Czech Republic.
Germany’s Deutsche Telekom was recently reported to be weighing its options in the country, where it owns 61% of T-Mobile Czech Republic.
Like Telefonica, Deutsche Telekom (Bonn, Germany) has lashed out at the regulator’s decision to reserve airwaves for a new entrant in the forthcoming auction.
The company also feels it is held back by its lack of substantial fixed-line assets, and so the acquisition of a fixed-line business could represent an alternative to quitting the mobile market.