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After World War II, Czechoslovakia fell within the Soviet sphere of influence.
In 1968, an invasion by Warsaw Pact troops ended the efforts of the country's
leaders to liberalize party rule and create "socialism with a human
face." Anti-Soviet demonstrations the following year ushered in a period of
harsh repression. With the collapse of Soviet authority in 1989, Czechoslovakia
regained its freedom through a peaceful "Velvet Revolution." On 1
January 1993, the country underwent a "velvet divorce" into its two
national components, the Czech Republic and Slovakia. Now a member of NATO, the
Czech Republic has moved toward integration in world markets, a development that
poses both opportunities and risks.
Update No: 083 - (19/03/04)
The choice of the West
The Czech Republic joined NATO in March and is joining the EU in May. This is certainly an important event for those with any sense of history. For twice within ten years Czechoslovakia played a vital role in world history, each time investing the current development with a peculiar significance.
The first was the grave crisis of Munich in 1938, which was resolved by the British and the French selling the Czechs down the river to Hitler, who was given one part of the country by the conference and grabbed the rest in March the following year, an event which shattered the illusions of Chamberlain, the UK premier, and provoked the guarantee to Poland and hence the second World War.
Chamberlain at Munich was abiding by two precepts which are still highly recommended today, He was thinking positively ("I was told as a boy that if you fail the first time, try and try again," he said on his return, waving in his hand his document, co-signed with Hitler, that brought 'peace with honour'). Churchill, who denounced the pact, was the one thinking negatively and could be assumed to be wrong. The second precept, following on the first, was that one should never go to war except at the last resort. This is Chamberlainism to a tee. For it was Chamberlain who did eventually declare war on Germany when Hitler invaded Poland. Churchill's policy would have been to go to war not as the last resort, but when necessary, which with Hitler was as soon as possible, the very first resort.
The second key event was when a communist coup toppled the democratic government in Prague in 1948. This intensified the Cold War, commenced by Churchill in 1946 in his Fulton speech: "From Stettin in the Baltic to Trieste in the Adriatic an iron curtain is descending upon Europe." Czechoslovakia now lay on the wrong side of this divide. For to the west of it lay the West; to the east of it lay the east."
The terms West and East in their modern sense came about in 1946 due to a complex of events. Czechoslovakia had been allowed by the West to be absorbed by first fascism in 1938-9 and then communism in 1948. The Velvet Revolution of 1989 brought it back Westwards again. But the real meaning of the entry into NATO and the EU today is to give this a definitive institutional shape. The Czech Republic and Slovakia, which split in 1993, are now decisively in the West.
Economy picking up strongly
It is highly appropriate at such a time that the economy should be doing well. Manufacturing output went up 4.8% in 2002 and 5.8% in 2003. it is the main constituent of total Czech output, which also grew by 5.8% in 2003.
The reason for the dynamism ahead of EU entry was of course its expectation. It enabled exports to grow higher than imports, so lowering the trade gap.
Czech economy growth figures for 2003
According to figures published by the Czech Statistics Office, the Czech economy grew by 2.9 per cent last year - that is by 0.9 per cent more than in 2002.
Released figures on wages show them growing by almost 7 per cent and thus an average gross wage rose to 16,917 Czech korunas. However, experts are not pleased, saying that wages have been growing too fast and the Czech economy can hardly afford this, Czech TV1 reported.
TVEL to participate in Czech nuclear tender
Czech generating company CEZ AS has invited Russia's OAO TVEL to participate in a tender to supply nuclear fuel to the Temelin nuclear power plant starting in 2005, a source in the Russian company said recently, Interfax News Agency reported.
"The corporation is ready to participate in this tender and we plan to offer improved TVSA-T fuel assemblies for the Czech nuclear power plant," the source said. "We hope to receive a full set of tender requirements from CEZ AS at the end of March," he said. BNFL, Westinghouse Electric Company and Framatome ANP have also been invited to participate in the tender. TVEL already supplies nuclear fuel for all four power-producing units at the Dukovany nuclear power plant in the Czech Republic based on a long-term contract signed in 2001, following an international tender.
FOREIGN ECONOMIC COOPERATION
Czech, Romanian premiers discuss increasing trade, EU entry
Czech Premier, Vladimir Spidla, who paid a two-day official visit to Romania recently, said that he and his Romanian counterpart, Adrian Nastase, shared an interest in increasing mutual commercial relations between the two countries, in Bucharest, CTK News Agency reported.
Spidla also said, after his meeting with Nastase, that he admired the progress which has placed Romania on route to European Union membership, which Bucharest would like to achieve by 2007. The Czech Republic, which will join the EU in May, would like to share its experience with Romania and provide it with advice, Spidla said.
Spidla also met with Romanian President, Ion Iliescu, and the chairmen of both houses of the Romanian parliament. An office of the investment agency Czechtrade was also opened in Bucharest for the occasion of Spidla's visit.
Spidla, accompanied by Industry and Trade Minister, Milan Urban, and Agriculture Minister, Jaroslav Palas, as well as a sizeable delegation of business representatives, left Bucharest for Macedonia.
11 companies bid to advise on Cesky Telecom sell-off
The National Property Fund (FNM) has received 11 bids in a tender for adviser for the privatisation of the dominant Czech fixed-line operator Cesky Telecom (CT), FNM spokeswoman, Petra Krainova, said, Interfax News Agency reported recently. Krainova would not name the bidders.
"A commission of experts from the finance, it and interior ministries and the FNM should choose an adviser by end-April," said Krainova, adding that the winner is expected to have knowledge of the Czech telecommunications market and experience operating in the Czech Republic.
By the end of June, the adviser should submit a recommendation for privatising the state's 51% state in CT.
Analysts say the state is likely to sell CT directly to a single bidder or place a public share offering on capital markets. CT's privatisation should be completed by 2005. The market value of the state's 51% stake in CT is estimated at 50bn Czech crowns. The state is selling CT together with its 100% subsidiary Eurotel, the largest Czech mobile operator and CT's most profitable unit. Investors already reported to have shown interest in CT include the Danish telecommunications firm TDC, the Czech financial group PPF, controlled by Petr Kellner, and the CVC Equity Partners fund.
Analysts say in a statement Eurotel is the most attractive part of CT for investors.
Mobile operators Orange and Vodaphone are allegedly interested in Eurotel. The last attempt to sell CT, in 2002, failed when the TelSource consortium refused to sell its 27% share in the compnay together with the state.
An agreement between the state and TelSource on a joint sale of their shares was cancelled after TelSource quit the company in December 2002. TDC the winner of the 2002 tender, offered some 56bn crowns at that time. CT operates 3.6m fixed lines. Eurotel has more than 4.2m clients. CT showed a consolidated preliminary net loss of 1.8bn crowns in 2003, down from a net profit of 4.3bn crowns one year earlier. The loss, the firm's first in nearly 10 years, was mainly due to the company's need to write down part of its assets. In 2003, CT posted an impairment charge of 9.9bn crowns to write down part of the company's investment in its network.
"In 2003, CT's performance was highly influenced by the hostile regulatory environment, which historically has not allowed tariff rebalancing, has imposed economically unfair termination charges for internet dial-up and tolerates an absence of transparency in a number of regulatory decisions including the interconnection charges," CT's spokesman Vladan Crha told Interfax. He said earlier in February the firm would pay a dividend from retained earnings despite the expected 2003 loss. Last year CT approved a policy of paying dividends worth between 50% and 70% of its consolidated net profits in 2004 and 2005. Analysts expect CT to pay a dividend of around 10 crowns per share. CT's shareholders will vote on dividends in mid-June 2004.
The firm's consolidated revenues reached 51.5bn crowns in 2003, a decline of 3% year-on-year. CT's 2003 revenues were driven dial-up and broadband internet access services..
The group reduced its workforce by 21% last year to 10,911. Due to severance payments, this staff reduction will lead to a decrease in personnel costs starting from 2004, said the firm. CT's investments reached 7bn crowns last year, a decline of 38% year-on-year.
The number of fixed lines operated by CT fell 2% to 3.59m crowns at end 2003, a fact the firm attributes to rising competition. While CT's number of clients fell, mobile phone penetration continued to rise, reaching some 95% in 2003, up from 84% in 2002. CT announced its final audit 2003 financial results recently.
Cesky Telecom asks Eurotel to halt high-speed Net project
The Czech Republic's dominant fixed-line operator, Cesky Telecom (CT), has ordered its mobile phone unit Eurotel to halt work on a project to provide high-speed Internet access, CT spokesman Vladan Crha recently confirmed to Interfax. The project, announced last year, was to allow Eurotel customers with the oldest prefix - 601 - to access the Internet at speeds of 384 kB/second, or six times the speed of a dial-up connection. The service, using CDMA technology, was to have been launched in mid-2004.
Reconstructing the oldest analogue mobile network, which has about 36,000 clients, was expected to cost 400m Czech crowns, the Czech daily Mlada fronta Dnes (MfD) reported.
"The project has been postponed until Eurotel submits its detailed business plan for 2004," said Crha. CT wants to see whether the project would pay off, he added. Crha admitted the new Eurotel could cut into CT's revenues.
Komercni banka (KB) analysts say they believe Eurotel will be allowed to continue the project. They say they can't imagine CT hampering Eurotel's ability to complete on the highly competitive mobile market. "CT has no plans to stop Eurotel its GPRS service (another competing project) according to Crha. CT has owned 100% of Eurotel since it bought a 49% stake from Atlantic West in 2003. An estimated 25% of the country's 10m residents connect to the Internet via dial-up accounts at speeds up to 56kB/second.
Recent market surveys show mobile phone operators have taken the lead in non-dial-up connections. Eurotel has over 40,000 clients who use their mobiles to connect to the Internet, while T-Mobile has 10,000, and Cesky Mobil (CM) 5,000. Experts believe mobile firms will continue to attract new clients thanks to their recently launched GPRS service, offering unlimited Internet access for a flat monthly fee. Fixed-line operators attract new clients chiefly through ADSL technology that allows households to connect to the Internet at 512kB/second by means of standard telephone lines.
CT had a total of 15,000 ADSL customers at the end of 2003. Twenty alternative service providers and Internet service providers registered another several thousand ADSL clients. CT operates 3.6m fixed lines in the Czech Republic. Eurotel, CT's most profitable arm, has over 4.2m clients, Interfax reported.
Czech Telecom acquires internet agency M.I.A.
Czech telecom operator Czech Telecom has acquired local Internet company M.I.A. for an undisclosed sum.
M.I.A. is a media, advertising and marketing agency running three Web sites: the portal and search engine Zmije (the Viper); daily newspaper and magazine aggregator Trafika (The Newsstand); and tech-oriented Webzine Svet namodro (Bluish World).
The network has also captured the largest chunk of the market share for Internet advertisement in the Czech Republic. With the total revenue of Kc 16 million ($0.45 million) it controls some 25 percent of the market.
Czech Telecom, however, is not interested in M.I.A. because of its advertisement sales, and not only because of the low volume of revenue compared to its preliminary 1999 revenues of Kc 51.9 billion ($1.45 billion) total revenue. The purchase is a sign of Czech Telecom's increasing focus on the Internet, and its expectation that M.I.A. can build an attractive e-commerce and ISP customer portal.
M.I.A. is currently negotiating the takeover of several smaller Czech Internet companies.
"We want to improve the portfolio of our content," Daniel Docekal, technical director of M.I.A., acknowledged.
Bessel Kok, acting head of Czech Telecom, said that a new Internet-oriented business group within Czech Telecom is currently in its the formative process, and will likely be called Value Added Services Group. Czech Telecom's ISP business, Internet On Line, and M.I.A. will both constitute parts of this new unit. Rumours are already stirring about a potential sale, spin off or flotation of this new company.
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