PPF group acquires controlling stake in Telefonica Czech Republic AS

Billionaire Petr Kellner's PPF Group NV  is acquiring a controlling stake in Telefonica Czech Republic AS for €2.5 billion, in a move that would see the country's biggest phone company return to local ownership after eight years.

The takeover would add to Czech billionaire's investments which included retailer Eldorado, gold and silver miner Polymetal International Plc and finance company Home Credit Group, the report said.

Kellner's net worth stands at $11.2 billion according to the Bloomberg Billionaires Index.

Kellner's investment company will acquire a 65.9-per cent stake from Telefonica SA for 305.6 Czech korona a share, with the Spanish carrier retaining a 4.9-per cent holding, according to a statement today from PPF.

Telefonica would receive €2.06 billion of cash at closing, and €404 million in deferred payments over four years.

At the end of June, Telefonica Czech had 5.1 million mobile-phone customers and 1.4 million fixed-access lines as also 1.4 million wireless users in Slovakia.

Telefonica had acquired the stake for $4.7 billion spread over two transactions in 2005.

Revenue at the unit had been falling every quarter since early 2009, with competition from Vodafone Group Plc and Deutsche Telekom AG's local businesses hotting up, and with regulators now looking to open the market to a new operator.

The sale of the Czech unit, which contributed over 3 per cent to Telefonica's earnings, comes as the latest in a series of disposals aimed at cutting debt below €47 billion by the end of the year.

The Spanish company will receive €2.06 billion in cash with the closing of the transaction while the remaining €404 million is to be paid over the next four years. The company will also get a €260-million dividend fron the Czech unit on 11 November.

According to the Spanish group, the deal would help it cut debt by €2.69 billion and it would take a €56 million hit to earnings in the third quarter.

Telefonica said it would continue as a commercial partner for four years with a 4.9-per cent stake in the Czech business.

According to analysts, shuffling assets could free up capital for other deals, including its proposed takeover of the investment vehicle controlling Telecom Italia as also a possible move for the Italian's company's Brazilian operation, Reuters reports.

According to Bernstein analyst Robin Bienstock's note to clients, "This transaction reduces Telefonica's debt and leaves them flexible to participate in Brazilian consolidation (a bid for TIM Brasil) and further investments in Europe.