Split likely for Czech Republic's largest telco as O2 owner mulls spinoff

According to local reports, the telco could be split up into separate fixed and mobile businesses.
Written by Michiel van Blommestein, Contributor

Investment firm PPF is considering separating O2, the largest telecoms provider in the Czech Republic, into two companies.

The company confirmed the possible split after local businesses newspaper Hospodářské noviny broke the news last week without naming its sources. It said O2 would spin off its landline and broadband business into a separate company, while the original O2 would continue to offer mobile and other services. The fixed-line company would be a wholesale telephony provider, with the new, slimmed down O2 as one of its clients.

According to a short statement from O2, the telco is "considering and analysing options for separation of the fixed telecommunication infrastructure into a separate entity that would be providing wholesale services for other telecommunication companies on the market". Currently, the company is analysing the possibility and says it will only make a decision once the analysis is completed.

O2 was formerly owned by Spanish telecoms giant Telefónica until it sold off most of its Czech and Slovakian operations to investment firm PPF late last year.

Earlier this month, the Czech O2 reported a year on year fall in revenues of around 8.9 percent for the first half of 2014. For the mobile side of its business, the drop was almost 16 percent — a result of economic slowdown in the region and hard times in the telecoms market as a whole, despite O2's improving fortunes in neighbouring Slovakia.

Hospodářské noviny speculated that regulatory concerns may have inspired the possible split. Because O2 is the dominant player in the fixed line telecoms market, it is subject to additional scrutiny from the Czech Republic's anti-monopoly regulator UOHS. O2 has had cases brought against it and its predecessor Cesky Telekom for alleged anti-competitive behaviour: it was fined in  €7.2m in 2006, and an investigation began in 2011 into a separate case of possible abuse of market position.

The speculation is that by splitting into two units, only the newer of the two companies would fall under Czech anti-monopoly regulations, keeping the customer-facing side of O2 out of the winds so it has more flexibility to operate. It would also be easier for the new company to counter any monopoly claims if it does not offer any retail services itself.

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