Unique Spin-Off Advice to O2 Czech Republic

Before the spin-off, O2 was the largest integrated telecom operator on the Czech market O2, with its balance sheet value amounting to more than CZK 75 billion at the end of 2014. O2 shares were and continue to be publically traded on the regulated market.  In January 2014, the PPF Group (one of the largest investment groups in Central Europe operating in Eurasia and Asia as well) became the majority owner of O2. The remaining shares are held by tens of thousands of minority shareholders.

O2 continues to exist after the spin-off which also led to a new company Česká telekomunikační infrastruktura a.s. (CETIN) being established. The demerger had an even exchange ratio so O2’s shareholder structure was replicated on the date CETIN was established – 1 share in CETIN was allocated to every share in O2.

The spin-off resulted in unbundling – the telecommunications infrastructure has been transferred to CETIN while O2 remains a telecom operator. Voluntary unbundling can be considered unique on a global scale in the telecom industry.

However, the spin-off was unique for many other reasons. O2 is a company with a large and uneven shareholder structure and, in addition, with listed shares. Therefore, CETIN has a statutory obligation to buy-back its own shares from certain shareholders soon after the spin-off. As a result, a special information memorandum had to be submitted and approved by the Czech National Bank – both of which are comparable in scope to an IPO. This was the first time such statute-required procedure was applied in the Czech Republic in connection with a transformation. Moreover, the scope of real property which transferred to CETIN (tens of thousands of land tracts, buildings and rights attached thereto all over the Czech Republic) required an entirely distinctive approach towards the land registration authorities.

The demerger was also unique even in terms of standard corporate procedures. In order to provide the tens of thousands of O2 shareholders with the opportunity to vote, correspondence (remote) voting was available – for the first time ever in a company with such a large shareholder structure. Despite that, the general meeting was one of the most monumental in Czech history – both in terms of duration and the number of attending shareholders.

Given all the special features, the applied procedure may become a benchmark procedure for similar transformations of large telecom operators worldwide.