Advisor Mladek: new government’s priority is to complete privatization of Cesky Telecom and sale of

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Investiční bankovnictví KB

      Prime minister’s economic advised Jan Mladek said in an interview with Reuters that new government’s priority is to complete privatization of Cesky Telecom and sale of 16% stake in CEZ through capital market. Privatization of Cesky Telecom should be launched in September and completed in the first quarter of 2005. Timing of the sale of 16% stake in CEZ would depend on the company’s success in privatization of Slovenske Elektrarne (SE). According to Mladek, Slovak government is likely to restrict ownership changes in the acquirer.

       Based on the advisor Mladek’s statement, the market could almost surely count on sale of 16% stake in CEZ through the capital market. If CEZ does not succeed in privatization of SE and the Slovak government would restrict ownership changes in CEZ that full privatization of CEZ would be effectively blocked or complicated with sanctions imposed by the Slovak government. Reduction of the government’s stake by 16% would be the only way to get money for public finance reform. In our view, this scenario would have negative impact on the market, as full privatization would be effectively blocked or complicated with conditions set by the Slovak government with probable negative impact on privatization revenue. If CEZ does not succeed in privatization of SE than the government would first reduce its stake in CEZ by 16% and than fully privatize the company. Moreover, in both cases the market would worry about the share overhang, which would limit their upside potential.

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