Czech Telecom gets fully privatised after eight years

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Talking about telecommunications, the new Czech government of Prime Minister Vladimir Spidla last Thursday decided to fully privatise the dominant fixed-line telephone operator, Czech Telecom, completing a process that took almost eight years. The state's 51-percent stake in the national carrier has been sold to the consortium of Deutsche Bank and Danish TDC for 1.82 billion euros.

The members of the consortium have agreed that TDC will initially not own any Telecom shares but will manage the company, whereas investors led by Deutsche Bank will pay for the stake in Czech Telecom and will hold the post of CFO. TDC should eventually acquire up to 34 percent as the financial investors sell out their stake.

Currently, 27 percent in Telecom is owned by the Dutch-Swiss consortium TelSource. It is considering selling its stake together with the government's 51 percent. The Czech Press Agency CTK quoted a well-informed source as saying Deutsche Bank and TDC had already expressed interest in acquiring TelSource's stake.

As one of the conditions of the transaction, the Czech government insists on having its representative on the supervisory board for several years. The new owner will also have to fulfil obligations ensuing from the operation of the nation-wide telecommunications infrastructure.

Czech Telecom's new owners have immediately promised that customers will see services improve and prices go down. A TDC representative told a Czech newspaper that within the next two to five years, Czechs will experience a revolution in telecommunications, especially in the use of the Internet and data transmission.

Analysts expect the consortium of Deutsche Bank and TDC to support the payment of hefty dividends. They say Telecom ha been over-capitalised in the long run, and a payment of dividends seems to be the most probable method of cutting its share capital.

Meanwhile, media are speculating that Czech Telecom will have to lay off up to 2,000 employees to reach the European standard of employment in telecommunications, that is 300 phone lines per one employee. At the moment, Telecom has some 260 lines per employee. Telecom spokesman told the business daily Hospodarske Noviny that redundancies and cost-cutting measures would occur even without privatisation. The number of Telecom phone lines has been decreasing lately and the ratio of lines per employee is constantly worsening. Analysts expected that the company might even eliminate some of its least profitable services