Sale of Cesky Telecom to Spain's Telefonica good news for customers, says analyst


On Wednesday the Czech government confirmed that it is selling its 51-percent stake in Cesky Telecom to Spain's Telefonica. The price - 82.6 billion crowns, or around 3.5 billion US dollars - was considerably higher than expected, and the sell-off is the last major privatisation of the post-communist era. But who are Telefonica? And what impact will this huge investment have on the Czech telecoms market? I discussed the sell-off with Emir Halilovic, senior analyst at communications group IDC CEMA.

"This reflects the confidence of the buyer that the Czech Republic and the telecoms market in the Czech Republic and central Europe is going to prove to be profitable enough for this quite high price to be justified."

The buyer is Spain's Telefonica. What kind of a company is it? Is it a major player in the telecoms world?

"Yeah, definitely a major player, but interestingly enough it's not a major player in Europe that much - it's the Spanish former monopoly, Spanish incumbent let's say, but it is also a very large provider of telecommunications services in Latin America: Brazil, Argentina, Mexico.

"It does not have a foothold in Europe and this is actually a very new development for Telefonica, moving into central and eastern Europe."

Cesky Telecom owns Eurotel, one of the three mobile phone operators in this country. Do you think they will hold on to Eurotel or will they break up Cesky Telecom?

"Since Telefonica operates in three arms - fixed line, mobile and internet - my opinion is that they will not go for a breakup, this is a true strategic investment. That is a possibility, but it's not the most likely scenario."

This deal follows soon after the sale of Oskar, one of the other two mobile operators, to Vodafone, in a huge deal - what impact will these two deals have on the Czech mobiles market?

"When taken together from the standpoint of a customer both these deals are good news because customers are likely to get more diverse services, probably higher subsidies on handsets; they're also likely to get a wider choice of handsets from these two large players.

"As we all know large players in the mobiles market have more leverage over the equipment vendors, the mobile phone vendors. So it's good news for the customer.

"The competition will go up again. Will it be in slashing prices? I'm frankly not so sure about that because the prices are quite low as they are for per-minute calls etc. Probably the prices of data services are going to go down.

"And also we will see conditions for the deployment of 3G before 2007, which is the date when the first two players should actually deploy. We think that it should happen earlier; with a lot of countries in the region deploying 3G as we speak it would be a pity for the Czech Republic to lag behind."