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Telefonica 02 Czech Republic, or T-O2, said Monday it is challenging an earlier decision from a lower Czech court in the country''s constitutional court over repossession of property in a long-running dispute with the local unit of T-Mobile.

T-O2, majority owned by Spain''s Telefonica, said it is willing to pay court-ordered financial compensation of roughly 2 billion koruna ($128.6 million) to T-Mobile so that T-O2 can proceed with its planned property divestment put on hold by the court''s repossession.

"The payment of this compensation will have no impact on our finances as it is a long-dated issue," said T-O2 Chairman Salvador Anglada Gonzalez, adding that the company has already created reserves for this payment.

Last year, a Czech court ordered the repossession on the behest of T-Mobile in relation to a long-running dispute between the two companies over interconnection fees charged by T-O2, the country''s former dominant operator.

Wood & Co analyst Igor Muller welcomed T-O2''s decision to unlock its property so that it can proceed with the sale it has planned for several years.

"The fact they will be able to sell their property is positive but unfortunately real estate prices in Prague have eased from their peaks," said Muller.

T-O2 officials declined to give any estimate as to the value of its property slated for sale.

In the past, analysts have estimated the worth of the portfolio T-O2 can seek to sell at CZK5.67 billion in the company''s book value terms and that the company can generate about EUR250 million in gross profits from the transaction.

T-O2 said the real estate at issue in repossession is of a greater value than the value of the compensation.

"We are going to pay the disputed two billion (koruna) fee, but this is no way means we have accepted T-Mobile''s claim and we are doing this to unblock the frozen properties," said Jakub Chytil, a member of the T-O2 board of directors, in a conference call.

Chytil said that T-O2 expects that in the end, T-Mobile will lose the case over interconnection fees, and is confident at least a portion of the CZK2 billion will later be returned to T-O2.


Source:Dow Jones Newswires