April 11, 2013 / 3:06 PM / 5 years ago

Telefonica cuts Czech rates, competition to follow

PRAGUE, April 11 (Reuters) - Telefonica Czech Republic cut its mobile voice and data prices on Thursday, spurring its main peers to announce similar steps in a market often criticised for a lack of competition.

The step could hurt operators’ margins but the share edged up, recovering further from a nine-year low earlier this week.

Telefonica Czech Republic chief executive Luis Malvido said the firm would simplify its offering, introducing three basic voice and data packages priced from 249 crowns to 749 crowns ($12.58-$37.84) per month, and would stop subsidising handsets.

The top package includes unlimited call time and text messages and 1GB of data.

Telefonica Czech Republic’s shares rose 1.9 percent to 279.20 crowns, outperforming other Prague stocks.

Ceska Sporitelna analyst Petr Bartek said the initial impact of the price cut on earnings before interest, tax, amortisation and depreciation could be in the high single digits, while prices could be cut by 10 percent or more.

“The newly offered price package ... is close to prices in Austria which is seen as a highly competitive market,” he said.

He said the price cut was seen as reaction to new proposed conditions for a planned auction of additional mobile frequencies that could lead to the arrival of a new player.

The margin cut could make it more difficult for the potential new entrant, expected to be investment group PPF, to win customers from incumbents Telefonica, T-Mobile and Vodafone.

Vodafone said it would introduce a similar package for under 700 crowns in the coming weeks, while T-Mobile also said it would announce a similar offer in the coming days.

Telefonica is 69.4 percent-owned by Spain’s Telefonica, which is seeking ways to reduce debt. Brokers have said selling part of its Czech holding could be one of the options.

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