The supervisory board of O2 Czech Republic has approved the separation of its fixed and mobile infrastructure into a new joint-stock company and consequently halted talks to provide financial assistance to majority shareholder PPF.
The new company will…
The supervisory board of O2 Czech Republic has approved the separation of its fixed and mobile infrastructure into a new joint-stock company and consequently halted talks to provide financial assistance to majority shareholder PPF.
The new company will have its registered office in Prague and be called Ceska Telekomunikacni Infrastruktura, the telco said in a statement.
O2 CR will transfer assets to the new company which Deloitte has valued at Kc46.9bn (US$1.91bn). These include the fixed network, the physical infrastructure of the mobile network, data centres and associated contracts. Shareholdings in two subsidiaries, Czech Telecom Germany and Czech Telecom Austria, will also transfer to the new company, along with 1,241 employees.
The Prague-listed telco, in which Czech billionaire Petr Kellner’s investment firm PPF has built an 83% stake, will continue to sell phone and internet services to retail customers.
While the transaction is subject to approval at a shareholder meeting, PPF’s majority stake means this is only a formality.
Capital reduction
As part of the spin-off, O2 CR will reduce its registered capital by 89%, from its current Kc27.46bn (US$1.12bn) to Kc3.1bn (US$126.11m).
The telco said the capital reduction will ensure it has sufficient freely-redistributable funds to use at its discretion in future.
Shareholders in O2 CR will own a proportionate number of shares in the new company, which will not be publicly traded. Those who vote against the spinoff at a shareholder meeting will be eligible for a buyout of their holdings in the infrastructure unit.
O2 CR confirmed last August that it was considering the split, which will see the new company provide wholesale services to other local telcos.
The operator’s supervisory board chairman Martin Stefunko was quoted in a local newspaper as saying the spinoff will help to cut costs and ease regulatory issues.
Miroslav Frayer, an analyst with Komercni bank in Prague, told TelecomFinance that the separation should make the operator more efficient.
“Both businesses [O2 CR and the new company] have different investment horizons and regulation, so their split should ensure business is made easier. This makes sense and could be profitable for PPF.”
However, Frayer said the move is not good news for minority shareholders, adding that there is no good reason for them to hold onto their shares.
“Moreover, shares of O2 CR were usually held by investors thanks to their attractive dividend yield, however the dividend policy is not clear now and this decision significantly reduces the probability that a high dividend will be paid out from last year’s profit.”
Frayer expects PPF to gradually increase its stakes in O2 CR and the new company, saying that O2 CR shares may eventually disappear from the stock exchange altogether.
As such, he expects the telco’s stock price to come under further pressure.
Talks to provide financial aid to PPF suspended
Following the approval of the spinoff, O2 CR said talks to provide PPF with the financial assistance it requested last October have been terminated.
The telco said the investment firm has agreed to this and said it assumes assistance of a similar amount will be provided after the spinoff is complete.
Last December, O2 CR shareholders approved a seven-year loan of up to Kc24.8bn (US$1.1bn) to PPF, which closed its acquisition of a 65.9% stake from Spain’s Telefonica in January 2014 and subsequently bought more shares. PPF had asked for the loan to repay the bank debt it took on to acquire the Telefonica stake.
As O2 CR was unable to provide the loan itself, it sought to obtain a syndicated loan of up to Kc31.8bn (US$1.4bn) with a maximum six-year maturity, planning to use the remaining proceeds to consolidate its own debt and fund business operations.
