PPF group is set to buy the largest Czech mobile phone operator

The investment group PPF has agreed to buy the Czech unit of the Spanish telecommunications firm Telefónica. The Czech PPF group will pay 63.6 billion crowns for the controlling stake in the country’s largest mobile operator. The transaction, which is one of the biggest telecommunications deals in the past few years, is yet to be approved by the European Commission.

Photo: Kristýna Maková

After months of speculation, the Czech Republic’s biggest mobile phone operator is to change hands. On Tuesday, the PPF investment group announced it had reached a deal with Spain’s Telefónica on the sale of 65.9 percent share in its Czech unit.

The price – 63.6 billion crowns, or 3.33 billion US dollars – is around 45 billion crowns less than what Telefónica paid for the stake in 2005; that, however, comes as no surprise as the company’s revenues have been falling every quarter since early 2009.

The future owner will be taking over almost 8 million mobile and land-line customers in the Czech Republic and 1.4 million in Slovakia, as well as some 52.5 billion crowns worth of property.

Telecommunications consultant Jiří Peterka says that PPF’s acquisition of the company could bring greater flexibility and innovation.

Jiří Peterka, photo: Hynek Bulíř

“Being a part of an international brand you can rely on your background, but on the other hand, you cannot behave really independently, you have to respect the strategies of the owner. And now one of the operators is returning into Czech hands and so it can be very pro-active. I hope that the new owner will be financially sound in order to enhance its new acquisition, and build up the operator to innovate technically and in the business sense.”

Most analysts expect that PPF, which belongs to the richest Czech Petr Kellner, will offer to buy out minority shareholders and eventually take it off the market. At Prague Stock Exchnage, Telefonica Czech’s shares dropped slightly after the deal was announced.

Miroslav Motejlek, who runs the business news website motejlek.com, says the deal fits PPF’s long-term investment strategy.

“The group has very large financial resources at their disposal, so it has to use them somewhere. From the regional perspective, it is hard to find another asset of this size, which it could buy.”

Photo: Barbora Kmentová

An important factor behind the deal seems to be the Czech mobile regulator’s re-run auction of 4G mobile frequencies, which is to start on November 11. PPF was a major bidder in the first unsuccessful auction, and was planning to launch a new mobile operator. Jiří Peterka says the deal will give the group a much stronger position for the upcoming bid.

“Telefónica wants to lower their debt so they want to sell their stake in the Czech Telefónica as soon as possible; and the new owner, the PPF group, wants to buy the stake as soon as possible, because bidding is starting in a few days. And of course, the group that takes part in the auction needs a new strategy. They have to know how much money they can spend, how they can behave. I think they had to make this deal before the bidding began.”