Cesky Telecom: another privatisation plan fails

The government announced this week that the sale of Cesky Telecom, the Czech Republic's largest telecom operator, had collapsed, due to a dispute over the sale price. The failure of the deal marks the second time this week that a Czech government privatisation scheme has come to nothing.

Cesky Telecom: another privatisation plan fails

The privatisation plan called for a consortium of Deutsche Bank and Tele Denmark to pay 55 billion Czech crowns - or 1.83 Billion US dollars - for the government's controlling share in Cesky Telecom. The sale would have included the government's stake in both the country's largest fixed line operator and Eurotel - the largest mobile operator in the country. The consortium also wanted to purchase the minority stake in Cesky Telecom, which is owned by the Dutch company Royal KPN and the TelSource consortium which includes Switzerland's Swisscom.

J.P. Morgan, the Czech government's tender advisor, blames the collapse of the sale on the fact that the potential buyer and the minority stakeholders failed to agree on prices. Consequentially, J.P. Morgan has made an offer to take over the management of the state's majority share in Cesky Telecom. A spokesperson from the Ministry of Information Technology said the offer included managerial control of Cesky Telecom for three years and the rights to sell the telecom operator to a strategic partner in the future for a price of 55 billion Czech crowns. However, the government has indicated that this is highly unlikely.

The fact that the Czech government tender advisor is interested in purchasing the government's stake in Cesky Telecom after the privatisation scheme collapsed raises some important questions. The minister of information technology was quoted in this morning's Dow Jones Business News as saying that the offer raises questions as to whether J.P. Morgan had done proper work as the privatisation adviser.

The planned sale of Cesky Telecom was included in the government budget for next year. This means that the budget will lose about 55 billion crowns which it was expecting from the sale. The main losers will be the transport fund for road and rail construction and the housing fund unless funds are found elsewhere.

The failure of the Cesky Telecom scheme comes days after the government announced that the planed privatisation of Unipetrol, one of this country's largest chemical consortiums, also failed. Finance Minister Bohuslav Sobotka announced that a new tender for both companies would be launched within two months.