Czechwealth (Czechwealth)
Czech markets  |  October 07, 2010 13:04:45

Telefonica O2 - at what price, consider buying


Telefónica O2 Czech Republic is the leading integrated telecommunications operator in the Czech market. Currently operating more than seven million mobile and fixed lines, making it one of the leading providers of fully converged services in the world. It offers a comprehensive portfolio of voice and data services in the Czech Republic. Particular attention is paid to the growth potential, particularly in data and Internet sector.

The company operates the largest fixed and mobile network including a 3rd - generation network, CDMA and UMTS, which enables transmission of voice, data and video.

The results for its first two quarters of 2010 did not convince investors, companies gain decreased in the order of several tens of percent, even though the company since the beginning of the austerity measures adopted.Management of these disappointing results responded by adopting even tougher austerity measures in the form of tighter controls on investment, further restrictions on the marketing expenditures and the release of 5% of total employees, these measures would be fully reflected until Q4 to Q3 2010. Although in 2Q 2010 are already seeing signs of improvement of management, management of waiting for the rest of the hard work.

To achieve full-year targets in HV, the company decided to act on the sale information line 1188, where the estimated total value of up to CZK 500 million, but he does not intend to sell at any price, the main criterion is the sale price. The company also started a cooperation in PMDP as the first in Europe - Urban Multipurpose solution smart card to replace the loss of future income from fixed segment.

Pilsen cards, integrated in the mobile phone- Pilsen Card in your mobile phone is based on NFC (Near Field Communications). Using this solution is identical to the standard use of Pilsen cards - contactless smart cards based on MIFARE technology, developed by NXP Semiconductors. The pilot phase includes the deployment of up to 1000 phones using this technology. This technology offers great potential, as the phone becomes a medium of payment and will become a major competitor to credit cards. About the technology is no longer interested in the parent company of O2, which plans commercial deployments in the UK, Spain, Brazil and Argentina. Telefonica O2 expects rapid onset into commercial use in the CR and, consequently, the Slovak Republic and within 2 to 3 years, generating revenues of 600 million CZK.

Where the company continues to thrive, is Slovakia, where the company calculates that since 2012, will return the investment made in 2015, the profits could move up to 25% of the dividends paid. With the gradual recovery of the economy should stabilize revenues as mobile and from the fixed segment. Company has continued to CZK 5.65 per share from nerozdělného profit from previous years, which will continue to be distributed as dividends. Management objectives are clear - to maximize profit for the parent company which is very indebted and therefore requires that its investments were profitable, and return the capital invested in the past. The parent company still needs enough capital to finance the purchase of an operator in Brazil by the Portuguese Telecom in 7 billion.Continue in the coming years we expect the dividend retained about 40 CZK per share, with its gradual increase, as it will get better economic results.

Reducing target prices by the big banks and brokers as unfounded and we continue, we believe that a fair price is CZK 460. Therefore, at a cost of around CZK 380 per share as we find it attractive to buy in the medium and even long term.


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