O2 Czech Republic to hive off infrastructure assets

By bne IntelliNews March 2, 2015

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The O2 Czech Republic board has approved a spin-off of its mobile and fixed-line infrastructure, the largest Czech telecom company announced on February 27.

The assets due to be allocated to the new company, Ceska Telekomunikacni Infrastruktura, are valued at CZK46.9bn (€1.7bn). Under the plan, which was also approved by the supervisory board but still needs the nod from shareholders, shares in the new company will be distributed on a ratio of 1:1 for O2 CR shares.

As part of the spin-off, the registered capital of O2 CR will be reduced from CZK27.6bn to CZK3.1bn. Shares with a nominal value CZK87 will cut to CZK10 and those with a nominal value of CZK870 will be reduced to CZK100. Following the separation, O2 CR will provide voice and data services as well as television. Shares in the new infrastructure company will not be listed.

The plan by the country's former telephone monopoly had been under consideration for some time. It will further anger minority shareholders who have already been complaining about their treatment since closely-held Czech financial group PPF bought the telecom. They protested in December when the mobile company approved a controversial CZK25bn loan to PPF - which is owned by the Czech Republic's richest man, Petr Kellner.

Ever since PPF bought a 65.9% stake in the mobile operator from Spanish Telefonica in early 2014, the market has been wary of its intentions. PPF is not in the habit of operating under shareholder scrutiny and analysts promptly began speculating that O2 CR would soon be delisted.

PPF has in the meantime raised its stake to over 83% through buybacks. On top of the worries over potential delisting and the large loan - which is likely to lead to a cut in dividends - O2 CR's spin-off plan has helped pile pressure on the company’s stock. The shares have lost around one third of their value since the start of 2014.

O2 CR shares fell 4.15% to close at CZK208 on February 27 ahead of the announcement. Reports last week had suggested that the new company would be majority owned directly by PPF, rather than O2. That raised fears that the infrastructure assets could be handed over on the cheap to the unlisted entity.

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