The Czech Republic’s dominant fixed line carrier Cesky Telecom has reported net income of CZK3.7 billion (EUR115.8 million) for the nine months to 30 September 2003, a drop of 6% year-on-year and its lowest profit for eight years. However, the company reported a 16% growth in revenues to CZK6.1 billion from its data, broadband and internet-related operations, to help bolster Group turnover, which it said dropped by 5% to CZK37.5 billion. The PTO is awaiting developments in the ongoing sale of 27% of its shares held by the TelSource Consortium and, having acquiesced to allowing a maximum of five interested parties to conduct due diligence on both the company and its 51%-owned mobile arm Eurotel, Cesky will no doubt hope that its latest financials will not dampen the ardour of would-be investors. The TelSource consortium, which comprises Swisscom and KPN, wants to offload its minority holding via an international offering to financial institutions.
The strong performance from Cesky’s data-based businesses were driven by the increasing popularity of its euroISDN service. In the first nine months of 2003 the total number of ISDN channels climbed by 20% year-on-year to 460,000, while turnover rose by 15% to CZK3.8 billion. The company’s ADSL service, launched in March 2003, had signed up 10,000 subscribers by the end of September, generating revenues of CZK70 million, while internet operations added a further CZK426 million. Meanwhile, Eurotel Prague continued to grow, increasing its customer base to 4.02 million by the end of September, a rise of 9% on the corresponding period of 2002. On a consolidated basis, Eurotel Prague added CZK10.2 billion to Cesky’s revenues – or 27% of the total – although standalone revenues of CZK21.6 billion were only 2% higher than 2002. In August this year Cesky received permission from the Czech Office for the Protection of Economic Competition to purchase the 49% of Eurotel Prague that it does not already own from Atlantic West, a joint venture between US telcos Verizon and AT&T Wireless. The PTO has been trying to buy the stake since 2001, viewing the cellco as key to raising its own value prior to its privatisation; the deal will be worth around USD1 billion.
On a less positive note Cesky’s traditional core PSTN service revenue dropped by 15% to CZK15.7 billion, as a result of stiffening competition from fixed-to-mobile substitution and increased cellular usage in general. The number of main lines in service dipped by 2% to around 3.6 million, representing a teledensity of 35%, compared with a mobile penetration rate of nearly 90%. Commenting on the results, the company’s vice-chairman and CFO Juraj Sedivy conceded that ‘in addition to the expected impact of liberalisation, some regulatory rulings related mainly to internet dial-up interconnection and tariff re-balancing make it increasingly difficult to protect overall profitability, specifically in the fixed line segment’.