The Czech government will allow financial investors to bid for Cesky Telecom, the country's dominant operator, but only in consortium with strategic buyers, the cabinet agreed on Wednesday.

The decision improves the chances of potential bidders such as TDC of Denmark, which could have balked at paying for the 51 per cent stake all by itself but will now be in a strong position to link up with a financial investor such as Goldman Sachs, the investment bank. Two years ago TDC came close to buying the state stake for ?1.82bn ($2.4bn) in consortium with Deutsche Bank.

By contrast Swisscom, another fancied contender, had built a cash pile for its aborted bid for Telekom Austria and could have bid alone.

Against expectations, the cabinet decided last week to hold a tender for its shareholding in Cesky Telecom rather than make a stock market placement after it received strong expressions of interest from Swisscom, as well as TDC and France Telecom. It agreed that only if the bids were unsatisfactory would it float the shares.

The government on Wednesday approved a finance ministry proposal that the tender process be accelerated, with preliminary bids due in early February and a winner selected by the end of March.

At the same time CSFB, the government's adviser, will prepare a secondary offering of shares. If the bids placed in February fall short, the flotation of the shares could take place in late March or April, just after Cesky Telecom releases its 2004 audited results.

Prague's brokerage community, which backed a flotation, has strongly criticised the government's decision to go for a ?dual track? approach.

Analysts predict the tender will fail because of lack of competition and that this will damage the prospects of the subsequent flotation.

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