Reports: Telefónica close to deal on Czech unit sale, faces Irish probe

Telefónica has made progress with talks on the sale of its Czech unit to billionaire Peter Kellner's PPF Group and is coming close to an agreement on a deal, Bloomberg reported.

Citing unnamed sources, Bloomberg said the Spanish group and PPF are negotiating final terms for the 69 per cent stake in Telefónica Czech Republic. Telefónica confirmed earlier this month that it was "considering strategic alternatives" for its stake and was in negotiations with investor group PPF.

Kellner's group is believed to be the only bidder so far and would face some challenges to reverse years of falling revenue at the Czech operator, which markets mobile and fixed services under the O2 brand.

Previous reports also suggested a sale of the Czech operator would generate little premium for the Spanish parent, which is seeking ways to reduce its debt. Because of the lack of premium, Bloomberg said the deal will probably include staggered payments based on future performance of the business. The stake has a market value of 68.2 billion koruna ($3.65 billion or €2.64 billion).

The Czech unit has long been seen as a potential sales target for Telefónica, which has already agreed to sell its Irish unit to Hutchison Whampoa as part of efforts to reduce debt to below €47 billion. Citing unnamed sources, Reuters has meanwhile reported that Hutchison Whampoa's €780-million ($1.07 billion) bid to buy O2 Ireland from Telefónica is likely to face a lengthy European Union antitrust investigation unless the Hong Kong group offers concessions by Nov. 6 to allay competition concerns.

At the same time as selling assets, Telefónica has also agreed to buy KPN's German unit, E-Plus, for €8.55 billion and is also planning to increase its holding in Telco, which owns a 22.4 per cent share of Telecom Italia.

The Madrid-based company reported net debt of €49.8 billion in mid-year results.

Meanwhile, the three Czech operators are planning to take part in the country's LTE spectrum auction next month, but have protested about the regulator's proposal to reserve spectrum for a fourth operator. PPF recently sold its mobile unit, PPF Mobile Services, to its CEO, Tomas Budnik. The subsidiary then changed its name to Revolution Mobile and is now one of two new entrants planning to take part in the spectrum auction, Bloomberg reported previously. The other newcomer is Tasciane.

For more:
- see this Bloomberg article
- see this Reuters article

Related Articles:
Telefónica in talks with PPF to possibly sell Czech unit
Czech regulator plans second auction attempt in November
Czech Telefónica's O2 sparks price war, drops phone subsidies
Czech regulator revamps spectrum auction, reserves 800 MHz block for newcomer
Private equity firm makes bid for Czech LTE spectrum

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