As had been widely anticipated, Telefónica agreed to sell a 65.9 per cent stake in its Czech unit to PPF Group for €2.46 billion ($3.33 billion) including the operations in Slovakia, in a deal that will reduce the Spanish group's net debt and enable it to focus on markets where it is expanding its operations such as Italy and Germany.
Telefónica said it will maintain a stake of 4.9 per cent in Telefónica Czech Republic and will remain as an industrial and commercial partner for a period of four years, although it added that PPF, which is owned by Petr Kellner, the Czech Republic's richest man, is expected to launch a mandatory tender offer for the remaining capital.
An amount of €2.063 billion is payable upon completion of the transaction, which is subject to regulatory approval, and a deferred payment of €404 million will be paid over four years. Telefónica said it will also receive an additional payment of €260 million in November for the dividend declared.
Telefónica Czech Republic and Telefónica Slovakia are permitted to operate under the existing O2 brand for four years, after which they are expected to rebrand. The company will also join Telefónica's Partners Programme, an initiative offering other operators the opportunity to benefit from Telefónica's scale and cooperate on key business areas.
Telefónica said the transaction will reduce its group net debt by about €2.685 billion, which will enable it to meet its net financial debt guidance by the end of the year. Reuters noted that Telefónica aims to reduce its debts to under €47 billion by year-end from €49.8 billion at mid-year.
"Today's announcement follows the previous agreements reached in Ireland and Germany and builds on a series of initiatives that have allowed for a significant strategic shift in Telefónica Group," the company said a statement. "This has been a decisive year for Telefónica's transformation process, as it continues to successfully execute its strategy of increasing financial flexibility and strengthening the operations in its core markets."
Telefónica has already agreed to sell its Irish unit to Hutchison Whampoa for €780 million ($1.06 billion). It plans to buy the German E-Plus unit of Dutch operator KPN 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. This in turn could lead to an eventual breakup of the Italian company's Brazilian business, Tim Participacoes, which is a rival to Telefónica Brasil.
"This (Czech) transaction reduces Telefónica's debt and leaves them flexible to participate in Brazilian consolidation and further investments in Europe," said Bernstein analyst Robin Bienenstock in a note to clients, Reuters reported.
Reuters also reported that the German transaction has now been formally submitted to the European Union for antitrust approval.
PPF is buying the Czech unit just ahead of the country's auction of spectrum for LTE networks. The three Czech operators, also including Vodafone Czech Republic and T-Mobile Czech Republic, are planning to take part in the auction, 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.
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