Telefonica sells off its Czech unit for €2.5bn

TELEFONICA has agreed to sell its Czech business for €2.47bn (£2.07bn), it said yesterday, the latest disposal for the Spanish group aimed at cutting debt and leaving it to focus on its Italian and Brazilian interests.

Telefonica is selling a 65.9 per cent stake in Telefonica Czech Republic at 305.60 crowns a share to investment group PPF, owned by Petr Kellner, the Czech Republic’s richest man and ranked at 106 in Forbes’ list of the world’s wealthiest people.

Telefonica said it will remain a commercial partner in the Czech business for four years and still holds a 4.9 per cent stake.

It will receive €2.06bn in cash when the transaction is closed and the remaining €404m will be paid over the next four years. A €260m dividend will also be paid to Telefonica by the Czech unit on 11 November.

The Spanish group said the deal will help it cut its debt by €2.69bn but it will require a €56m charge to earnings in the third quarter.

Telefonica aims to reduce its debts to under €47bn by year-end from €49.8bn at mid-year, and has sold a number of assets this year, including its Irish unit O2 for over $1bn.

Analysts have said that Telefonica’s sales of non-core assets will also free up capital for other deals, such as its proposed takeover of Telecom Italia investment vehicle Telco, that holds a controlling stake in the Italian group. This in turn could lead to an eventual break-up of the Italian company’s Brazilian business, Tim Participacoes, which is a rival to Telefonica Brasil.

Telecom Italia’s management board is due to meet tomorrow for the first time since Telefonica agreed in September to gradually take over Telco, which is currently owned by Telefonica and a consortium of Italian banking and insurance firms.

“This (Czech) transaction reduces Telefonica’s debt and leaves them flexible to participate in Brazilian consolidation and further investments in Europe,” said Bernstein analyst Robin Bienenstock in a note to clients.