Telefonica SA (TEF) is nearing an agreement to sell its controlling stake in the Czech Republic’s biggest telephone company to billionaire Petr Kellner’s PPF Group NV, according to two people familiar with the matter.
Telefonica and PPF are negotiating final terms for the 69 percent holding in Telefonica Czech Republic AS, said the people, asking not to be identified because the deliberations are private. The deal will probably include staggered payments based on future performance of the business because the sale price is unlikely to include a premium on the value of the shares, they said.
The shares climbed 1.6 percent to close at 314 koruna in Prague, erasing earlier losses of as much as 1.7 percent. The stock was the biggest gainer of the benchmark PX index. Telefonica’s stake has a market value of 68.2 billion koruna ($3.7 billion).
PPF remains the only bidder and an agreement with Madrid-based Telefonica could be announced as early as next month, said the people. Representatives for Telefonica and PPF declined to comment on the negotiations and price.
Telefonica and PPF said this month they were in talks about a sale of the Czech business. A takeover by 49-year-old Kellner, the richest man in the Czech Republic with a net worth of $11.7 billion according to the Bloomberg Billionaires Index, would put the former phone monopoly back in Czech hands for the first time in eight years. Telefonica paid about $4.7 billion in two transactions in 2005 for the stake.
“It’s positive for Telefonica to exit markets such as Czech Republic and focus on the biggest ones in Europe ahead of further consolidation,” said Alberto Espelosin, who helps manage about 1.3 billion euros, including Telefonica shares, at Abante Asesores in Madrid.
The unit’s revenue has fallen every quarter since early 2009 as competition with Vodafone Group Plc (VOD) and Deutsche Telekom AG (DTE)’s local businesses intensified, and regulators are now trying to open the market to a new operator.
Telefonica Czech’s first-half operating income before depreciation and amortization declined 10 percent to 9.14 billion koruna from a year earlier. The Oibda margin shrank to 38.2 percent from 40.5 percent. The company had 5.1 million mobile-phone clients and 1.4 million fixed-access lines at the end of June. It also had 1.4 million wireless users in Slovakia.
PPF, one of eastern Europe’s largest investment companies, owns stakes in more than a dozen businesses including electronics retailer Eldorado, gold and silver miner Polymetal International Plc and finance company Home Credit Group. In January, PPF agreed to sell its stake in an insurance venture with Assicurazioni Generali SpA (G) for 2.5 billion euros ($3.4 billion).
For Telefonica, a sale will generate proceeds to help repay debt. This year, Telefonica also agreed to sell its Irish business to Hong Kong billionaire Li Ka-shing. Spain’s biggest carrier is increasing its indirect holding in Telecom Italia SpA (TIT) and working on completing the acquisition of a controlling stake in Royal KPN NV’s German mobile-phone business.
Telefonica slipped 1.3 percent to 12.71 euros in Madrid. The company is scheduled to report earnings Nov. 8. Telefonica Czech reports Nov. 5.