Telefonica eyes move for Czech telecoms giant

7th April 2005, Comments 0 comments

7 April 2005, MADRID-Spanish telecoms giant Telefonica is seeking to widen its geographical impact with the acquisition of the Czech Republic's Cesky Telecom.

7 April 2005

MADRID-Spanish telecoms giant Telefonica is seeking to widen its geographical impact with the acquisition of the Czech Republic's Cesky Telecom.

But the initiative has drawn mixed reviews from market analysts.

The Czech government has approved the sale of 51.1 percent of Cesky Telecom to Telefonica in a deal worth EUR 2.8 billion that is expected to be concluded within the next two months.

The Spanish group in a second phase of the operation will seek to take over the remaining stake, with the total cost exceeding five billion euros, according to press reports here.

It will be the largest Spanish investment in eastern Europe.

Telefonica until now has focused its development activities in Latin America, where it is the leading fixed and mobile phone operator.

In turning its sights on Europe, the group is following the example of similar moves in the banking sector, notably Santander Central Hispano in Britain and a possible venture in Italy by Banco Bilbao Vizcaya Argentaria.

But industry analysts have raised questions about Telefonica's overture in the Czech Republic.

The ratings agency Standard and Poor's said the price agreed upon for Cesky Telecom was high in light of the latter's limited growth prospects and the absence of major cost advantages.

The agency said it was considering lowering its ratings on Telefonica in a statement that followed the announcement that the Czech privatization commission had backed the sale of Cesky Telecom to the Spanish enterprise.

Naum Sanchez, a financial analyst with the Caja Madrid group, shared the
concerns voiced by Standard and Poor's.

"It's a strategic shift that is difficult to understand ... and a deal that is not going to create value for shareholders," he said.
But Juan Alberto Tuesta of the Banesto Bank said the acquisition attested to "the growth ambitions" of Telefonica, notably as the Spanish-speaking telecoms market is saturated.

”All growth strategies are good and there were not a lot of opportunities in (western) Europe," he said, nonetheless agreeing that the price was high.

Sources close to Telefonica insisted on Thursday that the buying Cesky Telecom
does not constitute a change in strategy, describing it as part of a "profitable growth" campaign.

Telefonica head Cesar Alierta last November expressed a desire "to create the world's largest and best integrated company" in the telecommunications sector, setting a target of 165 million customers by 2008.

Cesky Telecom will provide eight million new customers, bringing Telefonica's total to 130 million.

Telefonica sources also insisted that acquiring Cesky Telecom should pose no financial problem for a group that is looking at cash flow of EUR 27 billion between now and the end of 2006.

[Copyright EFE with Expatica]

Subject: Spanish news

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