Treatment of O2 minority shareholders sparks criticism

The Czech Republic does not have a rosy reputation for its past treatment of small or minority shareholders. Many have been treated poorly when ‘squeezed out’ by the majority owners. And the moves by PPF, the majority owner of telecoms giant O2, has raised suspicions they are getting a raw deal again.

Photo: Tomáš Adamec, Czech Radio

It’s not usual that the long term head of a national stock exchange launches an open attack on one of the country’s biggest companies, owned by the country’s wealthiest man. But the general director of the Prague Stock Exchange, Petr Koblic, has done just that with regard to local telecom giant O2 and its majority owner Petr Kellner.

Actually, O2 is a short of journalistic shorthand which no longer reflects reality. Since buying out Spanish Telefonica’s stake last year, Kellner’s PPF company has pushed through the division of the former 02 into two parts. Most of the valuable infrastructure for fixed and mobile teleocoms and data services have been lumped together in the new creation CETIN.

The customer services have been left with 02. The division took place from June 1 with around two thirds of O2’s former value being passed over to CETIN. PPF and Kellner’s radical steps have and are being taken with minority shareholders still on board the old and new entities. And it is their treatment and the lack of clarity over PPF’s past and future steps that has angered Koblic.

He protested in Friday’s Hospodářské Noviny that PPF’s buyout bid to remaining O2 shareholders last year was so administratively complicated that many could not take it up. Since then, under PPF management and ongoing complaints about the company’s disclosure of information about future dividends and the division of past debt burdens, the shares have dropped sharply. Suspicion has soared that PPF has been fostering the conditions for smaller shareholders to cut their losses and ship out or for it to launch a cut price buyout.

In fact, PPF’s strategy looks more sophisticated. It has launched what some analysts regard as a generous new offer for CETIN shares and a not very attractive offer for the O2 shares. The clear aim being to get full control of the more attractive infrastructure assets. Koblic complains that his arms have largely been tied with regard to the machinations around O2. He describes many of the steps as ‘non-standard’ and adds that the Czech exchange’s reputation has been tarnished in the eyes of small investors.

Some minority investors though through are fighting back through the courts. One group led by Tomáš Hájek has already lodged a court complaint that they been unfairly hurt by PPF’s steps. These include the share split and fact that CETIN shares are now being traded on a less attractive market on the Prague exchange. Hájek maintains that the latest PPF buyout offers for O2 and CETIN shares of 78 and 176 crowns respectively should be nearer 100 and 200 crowns to be anything like adequate.