12th Apr 2005 12:58
Telefonica SA12 April 2005 Press Release 12/04/2005 TELEFONICA AND THE CZECH GOVERNMENT SIGN THE CONTRACT FOR THE PURCHASE OF CESKY TELECOM • Cesar Alierta, Chairman of the Board and CEO of Telefonica, andStanislav Gross, Prime Minister of the Czech Republic, have presided over thesigning ceremony for the purchase of the Czech operator in Prague today. • With the acquisition of Cesky Telecom, Telefonica expands itsactivities to a country with the second largest and healthiest economy amonglast year's new European Union members. • The deal is a well-grounded acquisition of an integrated operator witha leading position in its market, providing attractive financial returns forTelefonica's shareholders from the very beginning. • The acquisition of Cesky Telecom will increase Telefonica's customersworldwide to more than 130 million. Prague, April 12th, 2005.- Cesar Alierta, Telefonica's Chairman and CEO of theBoard, and Stanislav Gross, Prime Minister of the Czech Republic, have presidedtoday over the signing ceremony for the acquisition of a 51.1% stake in CeskyTelecom by the Spanish operator. The contract has been signed six days afterthe Czech Government unanimously approved the sale of Cesky Telecom toTelefonica, following the recommendation of the Czech Privatisation Committee. Well-grounded acquisition of a leading integrated operator in its market The acquisition of Cesky Telecom further develops Telefonica's strategy oforganic growth complemented with selective acquisitions of fixed and/or mobiletelecommunication operators with strong positions in their respective markets.The acquisition allows Telefonica to benefit from increased economies of scale,in order to further improve its competitive position and its return onoperations. Cesky Telecom is the leading operator in fixed and mobile services in the CzechRepublic, with an edge over its competitors thanks to being the sole integratedoperator in its market. In December 2004, the company operated 3.4 million fixedlines and had 4.6 million mobile subscribers. Last year's turnover amounted toEUR 1,948 million, with an EBITDA of EUR 911 million and a 46.8% margin . It is the most profitable and efficient operator in the region, with lowindebtedness and attractive credit ratings (S&P rating: A-, Moody's rating:Baa1). Given its high and stable margins, significant cash generation and relative sizecompared to Telefonica, the acquisition of Cesky Telecom is a low-risktransaction. Telefonica supports the plans laid out by Cesky Telecom's successful managementteam, and is confident that the integration of the company into a group withglobal presence and experience will bring synergies and higher efficiency.Telefonica will particularly support Cesky Telecom in developing and capturingthe high growth potential of the Czech broadband and 3rd generation markets. Financially attractive deal for Telefonica shareholders The acquisition of the 51.1% of Cesky Telecom amounts to EUR 2,746 million;payable in euros, at an exchange rate of CZK 30.09 per euro. The price per share(CZK 502) was 20.8% higher than the company's trading price at closing on theday preceding the submission of bids and only 4.3% higher than the secondhighest bid. The price offered implies an acquisition multiple of 6.4 times EBITDA 04, whichcould be further reduced to approximately 6.0 times after the compulsory tenderoffer for up to the remaining 48.9% shares in the company. The price of the tender offer, to be decided in due course, will be set as thehighest of the following: 85% of the price paid for the 51.1% stake; the averageprice of Cesky Telecom shares during the six months prior to closing; or avaluation prepared by an independent expert(1). The transaction will increase Telefonica's earnings per share by +0.3% in 2006and +0.8% in 2007 and free cash flow to shareholders in the range of 2.5% - 3.0%in 2006 and 2007. These value creation indicators are expected to be even morefavourable after the tender offer; earnings per share could increase by +1.0% in2006 and +1.7% in 2007, with free cash flow increasing by approximately 5.0% -5.5% in 2006 and in 2007. Telefonica's remuneration to shareholders and its credit solvency is furtherreinforced with the acquisition of an asset with high operating margins andstrong and growing cash generation. Telefonica, third largest telecom operator worldwide Telefonica, third largest telecom operator worldwide in terms of marketcapitalisation and second largest integrated operator, is confident about thegrowth potential of Cesky Telecom in its market, where it has maintained aleading position in both fixed and mobile services. As a result of itsmanagement policy, Cesky Telecom has shown excellent operating results, highmargins and presents a healthy financial situation. Incorporating Cesky Telecom into the Telefonica Group is fully in line withTelefonica's strategic goal of becoming the largest and best integratedtelecommunications company in the world by the year 2008. The acquisition of theCzech operator will allow Telefonica to reach more than 130 million customersworldwide. Cesar Alierta, Chairman and CEO of the Board of Telefonica, thanked the CzechGovernment for the trust vested into the Spanish company and expressedTelefonica's wish to contribute to the economic and social growth in the CzechRepublic through a sector as dynamic as telecommunications. "We are delighted tobe able to include Cesky Telecom among our assets. It is a well-managed companyand we believe that our long-term experience in the industry will enable us tocapture its full potential in terms of growth and quality of services," saidCesar Alierta. Integration schedule The transaction is subject to the approval of regulatory and competitionauthorities of the Czech Republic and the European Commission. This process isexpected to be completed within three months. After the acquisition of the 51.1% stake, Telefonica will incorporate CeskyTelecom's fixed and mobile activities into its own operations, in whichTelefonica has a leading position in the majority of the markets where it ispresent. After closing the acquisition of the 51.1% stake, and in compliance with theCzech Republic legislation, Telefonica will launch a tender offer on theremaining Cesky Telecom shares. The tender offer process is expected to befinalised in the last quarter of 2005. (1) Note: All estimates in this press release in relation to the tender offerimpacts are assuming a tender offer price equal to 85% of the price paid for the51% stake, and assuming 100% acceptance in the tender offer. For more information on TELEFONICA please refer to: www.telefonica.es For further information: Direccion de Comunicacion Corporativa Tel: +34 91 584 09 20 Press Office Fax: +34 91 532 71 18 Gran Via, 28 - 3a Planta e-mail: [email protected] 28013 - MADRID http://www.telefonica.es/saladeprensa This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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