O2 Czech Shareholders Approve Spinoff of Infrastructure Assets

O2 Czech Republic owners approved a plan to break the company in two as they seek new channels to boost declining profits.

Shareholders of the country’s largest telecommunications company, in which billionaire Petr Kellner’s PPF Group NV holds 85 percent, voted to move its fixed and mobile networks and data centers into a new entity named Ceska Telekomunikacni Infrastruktura AS, or Cetin. They also approved a gross dividend of 13 koruna per share at a meeting in Prague on Tuesday.

O2 Czech says the breakup will curb regulatory hurdles and allow Cetin to sell services to other operators, making each of the successor companies more profitable than now. Owners of O2 shares will get an equivalent number of Cetin stock, which won’t be listed, while O2 capital will be reduced, according to the proposal.

“The partition of the company into two entities may increase the value for shareholders by improving the profitability of both entities and by giving each company more flexibility,” O2 Czech said in the proposal.

Those who voted against the plan are entitled to sell shares in the new company to Cetin itself for a price that will be determined by an expert evaluation, it said.

The revamp represents risks for minority shareholders, according to Josef Nemy, an analyst at Komercni Banka AS in Prague, who recommended selling O2 Czech before the meeting.

While O2 price will suffer a “steep drop” after the breakup, Cetin stock may be harder to sell, he said by e-mail on Tuesday before the vote.

“Investors trying to sell Cetin in the future may struggle to find a counterpart other than Cetin itself or PPF, in which case the price could be lower,” Nemy wrote.

O2 Czech shares fell 3.5 percent on Tuesday to 195.3 koruna at the end of trading in Prague, the lowest since March 11 and valuing the company at 61.7 billion koruna ($2.5 billion). The stock is down 16 percent this year.

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