Indicative offers for Cesky Telecom

PE firms have linked up with three trade buyers to submit indicative offers for the Czech telecom operator.

Three PE-backed consortia are believed to be considering offers for a majority share in the Czech telecommunications firm Cesky Telecom (CT). According to Czech newspaper Mlada fronta Dnes, offers are likely to be in the region of E1.6bn, considerably lower than the E2.5bn target set by the Czech government. 

The government had originally specified that Cesky would only be sold to a trade buyer. However the massive debt burden carried by many of Europe’s major telecom operators has opened the way for private equity consortia to submit bids in conjunction with trade buyers.

Deutsche Bank is believed to have tabled a bid in alongside Deutsche Telekom and Orange, which is eyeing Cesky's mobile phone operator Eurotel. CVC Capital Partners and Spectrum Equity Partners will back a bid put forward by Swiss telecom operator Swisscom which already owns a 13 per cent stake in CT. The third consortium comprises Doughty Hanson, Warburg Pincus and Apax Partners which are supporting a bid by the Greek carrier OTE and financial investors.

Investors interested in buying into Cesky are expected to submit their final bids to the government's adviser JP Morgan by the last week of March. The Czech government will make a final decision on the privatisation of CT in the first half of April, although the government has made it clear that it may cancel the tender if offers from potential investors are too low. National elections are scheduled to be held in June which could delay the process further.

If any of the three PE-backed bids is successful, it will be the first leveraged buyout in Central and Eastern Europe, and a rarity by European standards.

Irish phone company Eircom plc was bought out in late 2001 by a consortium led by Soros PEP equity funds for E3bn. Earlier this week, Vivendi Universal announced the sale of its 49 per cent stake in Elektrim Telekomunikacja, majority owner of Poland’s largest mobile telecoms company to a consortium of financial investors.