(Adds details, quotes, share price) PRAGUE, March 1 (Reuters) - Spain's Telefonica <TEF.MC> will merge its Czech unit Cesky Telecom <SPTTsp.PR> with Cesky's fully owned mobile arm Eurotel into a single entity, Telefonica 02 Czech Republic, Cesky Telecom said on Wednesday. Cesky Telecom Chief Executive Officer Jaime Smith told reporters he expected the merger to have a positive impact of about 300 million euros ($358 million) through extra revenues and some costs savings. Trading in Cesky Telecom shares was halted before the announcement, and the stock reacted positively to the news once trading resumed. The shares immediately jumped 1.9 percent, and by 1050 GMT they had extended their gains to 3.1 percent at 545 crowns, nearing a 5-year high. Officials said Telefonica O2 Czech Republic would benefit from the combined know-how and expertise of Eurotel, Cesky Telecom, Telefonica, and O2, including in integrated mobile and fixed-line product packages. "The Board of Directors of Cesky Telecom will ask the General Meeting, planned for April 2006, to approve the integration and to adopt the company's new name Telefonica O2 Czech Republic a.s.," a Cesky Telecom statement said. "The integrated organisation is expected to become effective in mid-2006 after all required preparatory and legal steps have been completed." Telefonica recently bought Britain's O2 Plc <OOM.L> in a 17.7 billion pound ($30.95 billion) takeover. Chief Financial Officer Juraj Sedivy said 35 percent of the 300 million euro benefit from the merger on the company was expected to come in the first four years. Smith said more than 60 percent of the gains would come through higher revenue. But he said that in 2007, the first year of the new company's operations, the merger would have a neutral impact. Analysts at Patria Finance said the merged entity might distribute higher dividends, though only after 2006 since it will occur after the dividend payment date. They also said details needed to be seen on what the cost of rebranding would be. ((Reporting by Radek Narovec, writing by Alan Crosby, editing by Quentin Bryar; prague.newsroom@reuters.com; Reuters Messaging: radek.narovec.reuters.com@reuters.net; +420 224 190 477)) For main central European company news, double click on [.CEE] E.Europe hot stocks [HOT-EEU] Main E.Europe news [TOP/EAST] Related stories on [HU] [PL] [CZ] [EEU-STX] [EEU-RES] [EEU-E] For real-time index quotes, double click in brackets: Warsaw WIG20 <.WIG20> Budapest BUX <.BUX> Prague PX50 <.PX50> ($1=.8372 Euro) | 
