US embassy cable - 05PRAGUE197

UNCLAS PRAGUE 000197 
 
SIPDIS 
 
STATE FOR EUR/NCE AND EB/CIP 
COMMERCE FOR 4232/ITA/MAC/MROGERS 
 
E.O. 12958: N/A 
TAGS: ECPS, EINV, ETRD, EZ 
SUBJECT: MAJOR EUROPEAN TELECOMS COMPANIES MAKE PRELIMINARY 
OFFERS FOR CESKY TELECOM 
 
REF: A. 04 PRAGUE 1790 
 
     B. SOFIA 208 
 
1.  Five entities made preliminary offers for the Czech 
Republic's leading telecoms company, Cesky Telecom (CT), by 
the January 31 deadline for doing so.  They are the Spanish 
firm Telefonica, Belgium's Belgacom, Swisscom, and two 
financial groups, a consortium of the U.S. company Blackstone 
Group, CVC Capital Partners and Providence Equity and another 
consortium of the Czech holding company PPF, the Slovak 
financial firm J&T and data telecommunications company InWay. 
 The government will require the latter two bidders to find 
partners with experience in managing telecoms in order to 
have access to CT documentation.  Apparently InWay (a 
subsidiary of PPF) does not fill the bill.  The financial 
bidders may turn to companies like France Telecom or Vodafone 
that had shown interest but did not actually put in a 
preliminary bid.  They may even try to find a partner among 
the companies that did bid. 
 
2.  Offers are preliminary and may change after full due 
diligence is finished.  Binding offers are due March 31.  The 
preliminary offers, as reported, should be reassuring to the 
the Czech government that it made the right decision in 
seeking a "strategic" sale before turning to a public 
offering on the stock exchange as just occurred in Bulgaria 
(reftels).  The government approved continued negotiations 
with the five bidders on February 9.  The most interesting 
offers are the outliers.  PPF was highest at Kc 71.3 billion 
($3.1 billion), while Swisscom came in lowest at only Kc 60.9 
billion ($2.6 billion).  The offers may say something about 
how much PPF wants to win, and about how confident Swisscom 
feels it is.  All but Swisscom are offering more than the 
current Kc 400 ($17.40) per share price of CT shares on the 
local stock market.  At that price, the state's shares are 
worth Kc 66 billion ($2.86 billion). 
CABANISS