Telefónica Red Alierta

One of Europe’s telecoms incumbents seems to be empire building again. That is the only explanation for Telefonica’s trump bid in the auction for Cesky Telecom. As a piece of financial engineering, the deal will admittedly create value for Telefonica. The all-in cost for Cesky would be E5.8bn. The Spanish group could fund this with cheap debt. Assuming an after-tax interest rate of 4%, the annual funding cost would barely exceed E200m. Set against this, Cesky throws off E600m of free cash a yea...