Czech Existing Mobile Providers Sole Winners in Tender

The Czech Republic’s three existing mobile operators won frequencies that will let them offer 4G services in an 8.5 billion-koruna ($421 million) tender that failed in its goal of bringing new competition to the market.

The Czech Telecommunication Office yesterday said T-Mobile Czech Republic AS, Vodafone Czech Republic, and Telefonica Czech Republic AS -- which Czech billionaire Petr Kellner’s PPF Group agreed to buy -- were the only winners of frequency blocks in the 800 MHz range in an auction that will boost the country’s 2014 budget revenue.

The regulator, known as CTU, wanted the sale to improve services and attract investment and competition in a local market long dominated by the three large providers, by allocating a frequency band to a new entrant. The spectrum will allow operators to join the global trend of offering 4G Long Term Evolution, or LTE, technology that will let consumers shop online and stream data faster.

“Despite the fact the fact that CTU created ideal conditions for a fourth operator to enter the market, both new interested parties, in the end, decided not to join the Czech mobile market,” CTU said in yesterday’s statement on its website.

Telefonica Czech shares rose 0.3 percent to 299 koruna by 1:24 p.m. in Prague, paring this month’s drop to 3.6 percent and valuing the company at 96.3 billion koruna.

New Investment

Telefonica and T-Mobile bought two 800 MHz blocks each for 2.4 billion koruna and 2.2 billion koruna, respectively. Vodafone bought one 800 MHz block for 2.7 billion koruna. Each of the three companies also bought spectrum in the 1,800 and 2,600 MHz bands. Unsold frequencies in the 1,800 MHz range will be auctioned to mobile operators by the end of 2014, Novak said.

By comparison, DNA OY, Elisa OYJ and TeliaSonera AB won two 800 MHz blocks each for a total 108 million euros in October in an auction in Finland, whose population of 5.4 million is around half the size of the Czech Republic’s.

The Czech tender is a repeat of one that failed in March when the regulator ruled that bids exceeding 20 billion koruna risked triggering an unwanted jump in prices for users. Then, PPF was the only newcomer bidding against the incumbents.

Mobiles, Tablets

CTU head Jaromir Novak had repeatedly said bringing new investment and improving competition, not earning revenue, were the main goals of the new auction. After the failed March sale, providers cut tariffs that, according to Finnish consultancy Rewheel, had been the European Union’s second-highest.

“I expect that customers will be able to start using fast Internet in their mobiles or tablets on a large part of Czech territory within one year,” Novak said in the statement.

The two prospective newcomers, Revolution Mobile, a former unit of PPF, and Czech billionaire Karel Komarek’s Sazka Communications, did not buy any frequencies, CTU said.

Kellner’s investment company, which will purchase a 65.9 percent stake in Telefonica CR for 305.6 koruna a share, withdrew from the auction in September, citing conditions that preclude it from merging with a rival for 15 years. It then sold the unit to its executive officer.

That preceded Deutsche Telekom AG’s Nov. 10 announcement it had agreed to buy GTS Central Europe for 546 million euros ($730 million) from private equity firms including Columbia Capital, HarbourVest Partners, taking control of land-line networks in Poland, the Czech Republic, Hungary and Romania.

Newcomer Absent

The 2.8 billion koruna Telefonica paid in all for new spectrum was less than the 6 billion koruna estimate of Citigroup researchers, who said the lower price, the absence of new competitors and prospects of a stable market meant any minority buyout offer based on PPF’s acquisition price was now less attractive because “material value” could be created in the months needed to clear the deal with Czech and European Union authorities.

“The relatively low LTE spectrum prices” from the sale “create a healthy precedent for the upcoming auctions in Poland and Hungary,” Citi analyst Dalibor Vavruska said by e-mail from Prague.

Telefonica Czech said it would start building a 4G network in the first half of next year.

“Data are the future of the telecommunication’s market,” Telefonica CR Chief Executive Officer Luis Malvido said in a statement. “We’re planning to invest billions of koruna in the next five years into building and developing the LTE networks.”

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