PPF reportedly planning to split 02 into two companies

With 02’s revenues falling, its owner PPF is planning a surprise move – splitting the Czech Republic’s largest telecommunications company into two parts, Hospodářské noviny reported on Wednesday.

Photo: Czech TV

The move would see a newly established firm responsible for fixed-line telephony and infrastructure, the business daily said.

However, it would not provide services directly to customers but rather resell them in bulk to other operators, including 02 itself; 02 would hang on to mobile services, other services and sales. Competitors T-Mobile and Vodafone already operate on this model.

The division would help 02 – which currently operates nearly eight million fixed-line and mobile connections in total – escape from regulation arising from its monopoly position in the local fixed-line telephony market. That regulation would in future only apply to the newly created company.

Photo: Tomáš Adamec, Czech Radio

If PPF goes ahead with the plan, the Czech Telecommunications Authority will have to redraft its market analyses and put them forward for approval by the European Commission.

PPF complains about a recently imposed obligation on 02 to allow its competitors to use its fixed-line network. This has pushed internet connection prices down and led to lower returns on investment than it envisaged when it bought the company, which trades under the name Telefónica Czech Republic, from Telefónica Europe last year. (PPF has the right to use the O2 brand for up to four years).

Martin Žabka, photo: 02

Neither PPF nor O2 would comment on the information about the proposed move reported by Hospodářské noviny. A spokesperson for O2, Martin Žabka, said any comment could negatively impact the company’s share price, while PPF executive and O2 board member Vladimír Mlynář would only say that no decisions had yet been taken.

Mlynář was IT minister back in 2003 when then semi-state fixed-line telephony firm Český Telecom bought the mobile operator Eurotel, which had been established 12 years earlier.

The Czech state later sold Český Telecom to Spain’s Telefónica, which merged the two firms in 2005. Mlynář discussed the privatisation at that time with PPF’s Petr Kellner, who is now his boss; Kellner, the Czech Republic’s richest man, reportedly planned to jettison the fixed-line business.

Photo: Filip Jandourek

Last year Telefónica, before it sold the firm to PPF, also considered dividing O2’s network from its services. And such a move would pay off for PPF, even if wanted to sell the operator or part of it, Hospodářské noviny said.

Revenues from mobile services have been falling long-term and O2 has to put more than CZK 5 billion into building a 4G network with superfast internet; however, thanks to a deal with T-Mobile on the joint construction and operation of the network, O2 will enjoy the highest rate of return of all the operators.