Telefonica SA is preparing a sale of its stake in the Czech Republic’s biggest phone company to raise cash for further industry consolidation, according to three people familiar with the matter.
Goldman Sachs Group Inc. and Societe Generale SA are helping Telefonica to find a buyer for its 69 percent holding in Telefonica Czech Republic AS, the people said, asking not to be identified because the discussions are confidential. The stake had a market value of about $3.6 billion before today's increase. The stock rose as much as 6.9 percent, reversing earlier losses in Prague trading.
The asset could be attractive for private-equity firms or a new entrant as existing carriers such as Deutsche Telekom AG and Vodafone Group Plc are unlikely to win regulatory approval for a takeover, according to Andres Bolumburu, a Madrid-based analyst at Banco de Sabadell. Bolumburu estimates the stake could be sold for an enterprise value of 3 billion euros ($4.1 billion), which includes debt, based on a multiple of six times earnings before interest, taxes, depreciation and amortization.
Representatives for Telefonica, Goldman Sachs and Societe Generale declined to comment. Dana Dvorakova, a spokeswoman for Telefonica Czech Republic, also declined to comment, referring questions to parent company Telefonica.
Telefonica Czech Republic rose 6.6 percent to 323 koruna in Prague after rising as high as 323.90 koruna. Telefonica, with operations in Spain, Germany, the U.K. and in Latin America, climbed 0.4 percent on the Madrid exchange.
“It makes sense for Telefonica to sell the asset and focus on the main European countries,” said Borja Mijangos, an analyst at Interdin Bolsa in Madrid. “Telefonica could use the proceeds from the sale to further deleverage and get ready for the next purchase, which could well be in Brazil.”
Telefonica entered the Czech Republic in 2005, buying a controlling stake in former monopoly Cesky Telecom AS from the government for about $3.6 billion. Telefonica Czech Republic’s second-quarter operating income before depreciation and amortization fell 8.9 percent to 186 million euros as revenue declined 7.8 percent to 465 million euros.
At the end of June, the division had 5.1 million mobile-phone customers and 1.4 million fixed access lines in the Czech Republic. It had 1.4 million wireless users in Slovakia.
The Czech business was internally identified as a non-core asset to be sold, people familiar with the matter said earlier this year. In recent months, Telefonica has agreed to sell its Irish business for as much as 850 million euros. It also struck deals to acquire control of Royal KPN NV’s German business in an 8.55 billion-euro transaction, and to gradually increase its holding in the company that owns 22.4 percent of Telecom Italia SpA. Telefonica has net debt of about 48.6 billion euros.
In an interview in July, Russian billionaire Vladimir Evtushenkov said he’s studying takeover targets in markets including the Czech Republic. In January, Lidove Noviny reported that Czech billionaire Petr Kellner’s PPF Group may consider a takeover of Telefonica Czech Republic.
Radek Stavel, a spokesman for PPF, declined to comment, as did Evgeniy Chuikov, head of investor relations at AFK Sistema, Evtushenkov’s holding company.