Cesky Telecom suits CTO for CZK 4.5bn

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Investiční bankovnictví KB

      CFO of Cesky Telecom Juraj Sedivy spoke in an interview with daily Hospodarske noviny about reasons for making charge for Czech Telecommunications Office (CTO). The company suits CTO for CZK 4.5bn for unpaid losses resulted from universal service obligation. However, the suit reportedly does not cover all losses, which annually amounts around CZK 8bn. He also pointed to discrepancy between the CTO’s decisions and the Telecommunications Act. While the Telecommunications Act says that services, which are not included in universal service package have to be provided for prices, which cover reasonable costs and profit, which was not however enabled by the CTO in the case of monthly fee. Appropriate level of monthly fee is estimated around CZK 500.

       Cesky Telecom previously warned that given the discrepancy and consistent application of IFRS it would have to account for one-time impairment charge for its assets unless the CTO clearly states a schedule, when Cesky Telecom’s tariffs would be rebalanced. This situation is also related to the historical over-investment into the company’s fixed line network (cca CZK 130bn), which was result of contracts, when TelSource became strategic partner and did not account for rapid development of the Czech telecommunications market particularly significant in mobile telephony. Although the one-off impairment charge would have negative impact on company’s financial results, it is only accounting operation that has no impact on cash flows.

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