The PPF investment fund, owned by the richest Czech Petr Kellner, is buying the largest media group in Bulgaria from Sweden-based MTG. The deal signed in February valuates Nova TV at 185 million euro.
The deal is just a link to a far wider move of Mr Kellner in the region related to the acquisition of a different and significantly larger business - the operations of the Norwegian telecommunications group Telenor in Bulgaria, Serbia and Montenegro. The actions of the new investor demonstrate that he most likely plans to unite media and telecommunications platforms and services into a single group with the intention of selling it to a larger player in the future.
At the level of Bulgaria, the change of the owner of Nova is the first step towards the expected radical overhaul of the TV market, since the other big national player, bTV owned by Central European Media Enterprises (CME), may also be sold soon. Thus, 10 years after Nova TV and bTV simultaneously changed their owners, the two major media groups will have new shareholders in the span of a few months.
The Czech owner
Mr Kellner will be the third foreign owner of Nova TV, established in 1994, after the Greek Antenna and MTG. However, unlike the previous two buyers for whom television business was a major focus, the new one is an investment fund active in various industries (see the info graph). Although the news that PPF is the preferred bidder for Telenor's business in Bulgaria, Serbia and Montenegro came out in early February, according to sources of Capital Kellner had expressed interest in Nova TV as early as last summer.
The Czech bidder already knew that the deal with Telenor is confirmed when the final offers for Nova TV were submitted in January. This combination is likely to have resulted in Kellner's generous offer for Nova TV. Although there was not much competition, still there were more than three bids, according to a source close to the bidding process.
PPF will also receive the Internet company Netinfo 70% owned by the Nova Broadcasting Group. The remaining stake of 30% is held by Bulgarian nationals Radosvet Radev and Hristo Hristov, and according to two sources no deal for their share has been reached. But according to information obtained by Capital negotiations are underway and have reached the price stage.
"The richest Czech businessman" (such a statement, of course, is always debatable but Kellner's fortune is valued by Forbes at $16 billion) may finish the negotiations with Telenor by the end of this quarter and after receiving all the necessary regulatory approvals, including from Bulgaria's competition authority, he may get control in the summer. Therefore, in a matter of months Kellner is set to acquire the largest mobile operator by revenue in Bulgaria and the largest media group in the country consisting of seven television channels and Netinfo.
The combination of these assets (a telecom, content-making television, video-on-demand platforms such as Diema Xtra (with English and Bulgarian football championship rights), Netinfo's online services) provides many other opportunities to create and distribute content along with access to millions of users, as well as to their data and habits. The trend of convergence between telecoms, media, and cable and Internet operators is rapidly changing each of these industries on a global scale, and according to sources of Capital, it is very likely that Kellner will set in motion exactly such a plan not only with Nova and Telenor in Bulgaria but also throughout the region.
A complete package
The distribution of content over mobile devices like smartphones and tablets has been booming in recent years. At the same time, many young consumers do not even watch traditional TV and it is vital for media companies to partner with telecommunications giants to reach the audience. Telecoms are entering the paid TV industry through platforms such as Internet TV and streaming services. The third major player in the equation - the cable operators - also establishes partnerships with telecoms. Thus, three different industries overlap and converge. Examples are the recent mega deals : Comcast operator became a media giant with the acquisition of NBC Universal in 2011, while at the moment, AT&T is expecting the U.S. authorities to approve the purchase of Time Warner Inc. for 85.4 billion dollars. Other similar mergers and acquisitions are also expected. There is an ongoing transformation from a triple service - the so-called triple play (voice - video - data) to a quad play with the addition of a mobile device. Thus video-on-demand is the new standard for telecoms, cable operators and media companies.
Kellner seems to be aiming to achieve something very similar, naturally on a smaller scale. PPF's headquarters refused to comment on details of their strategy or say anything else outside the official announcement. According to some analysts, by uniting platforms and services, he may close the business cycle of the telecom that lags behind its competitors precisely because its packages do not offer video content and fixed Internet services. The exclusive content in Telenor's offers in the future may appear with the development of a pay-per-view service, for example the Diema channels are suitable for such a service - they hold the rights to the English and Bulgarian Championships, television series and movies.
The chain is still lacking a link - Internet and a satellite or cable operator. Both competitors to Telenor in Bulgaria - BTC and Mobiltel, have such a business, while Telenor sometimes wanted it and sometimes did not. The largest distributor of TV and Internet, which may be a target of acquisition, is Bulsatcom. So far there is no reliable information about PPF's potential interest in the operator, but it may be a matter of time and completion of the two pending transactions. The Bulgarian satellite operator is facing financial problems with servicing its debt, therefore a sale would be a very possible scenario.
No clear conclusions can be drawn about Kellner's his future plans from his previous investments. He owns the O2 operator in the Czech Republic and Slovakia and offers TV services and content on demand and on subscription, but has no media outlets. Kenner's only experience in television was the Czech NOVA which he owned years ago and sold to Bermuda-headquartered Central European Media Enterprises (CME), the current owner of bTV in Bulgaria.
According to sources of Capital, Kellner does not plan any radical changes in the management team of Nova TV, at least at this point.
MTG's new strategy
And while Kellner's arrival is somewhat surprising, the MTG's departure from Bulgaria has a perfectly logical explanation. After acquiring Nova for 620 million euro in 2008, the Stockholm-based group has been developing its business in Bulgaria for ten years. However, despite the relatively good financial results of the Nova Broadcasting Group (consolidated revenues of BGN 194 million and BGN 38 million in operating profit for 2017), the Swedes have never been able to recover their investment. That was clear from the very start. The first years of their operation in Bulgaria passed under the influence of the global financial crisis. The advertising market collapsed and returned to growth just a year ago, albeit from a very low base, which further hindered the recovery of the investment.
Since last year, the Scandinavian group has gradually started selling its media assets in Europe. In short, it remains in the media business but is getting rid of the distribution platforms.
The advertising market
The sale of "Nova" comes at a time when the revenues from TV advertising on the Bulgarian market are growing. Last year, for the first time after a very long period, Nova and bTV raised their prices, which was largely the result of the saturation of their advertising blocs.
The simultaneous operation of two separate audience measurement systems remains a serious problem. GARB works with bTV and awards higher ratings to bTV, while Nielsen Admosphere - Bulgaria works with Nova and gives it higher ratings. At the end of 2016, when Austrian national Florian Skala became CEO of bTV replacing Pavel Stanchev, the market hoped that the change could also lead to transition to a unified measure of spectator interest. More than a year later, the hopes for a solution to the problem are pinned on the new owner of Nova. "May the purchase have a good impact on the market, may we have new investments and may the group develop even better over the next period," says Tatiana Lozovich, manager of Sofia-based MediaS Com agency.
Why do televisions' owners matter
The competition between Nova and bTV has dramatically changed not only the TV shows of the big channels but also the advertising market and the production business. The arrival of Kellner, and afterwards of a new owner of bTV, will lead to a new stage in the development of the television industry in the country.
The parent company of bTV, CME, is also looking for a buyer of its businesses in Bulgaria, the Czech Republic, Slovakia and Romania, estimated at around 2 billion euro. Petr Kellner's name was also mentioned in regard to a possible deal and some Czech media reported at the end of November that he was preparing to bid in a consortium with other Czech and Slovak investors jointly with Chinese energy company CEFC. The main interest of all these investors in the package is focused on the Czech NOVA TV and the Slovak TV Markíza, but the deal is expected to be block-based and comprise the entire regional business of CME, including bTV. Reuters later reported that Kellner had refused to participate in the negotiations, and that the main contender for the CME business now is the Czech Penta Group partnering with CEFC. If this information is confirmed, another Czech investor will enter the Bulgarian TV business. However, the Kellner's participation should not be ruled out completely from a deal for bTV: he has had business relations with Penta over the years and has a warm relationship with Chinese investors as well as official representatives of Beijing. Given a strong anti-monopoly authority, unlike the Bulgarian one, such a purchase should not be possible because it create a complete monopoly.
The new owner of Nova is also expected to provide guarantees for media freedom in the TV channel. Over the past year, Nova indicated on several occasions that it is extremely well aware of the way in which it must cover sensitive topics such as the bankruptcy of Corporate Commercial Bank, the business deeds of MP Delyan Peevski, corruption. It would be sufficient to recall that Nova terminated its relations with its news director Darina Sarelska, who got entangled in a political scandal. Morning news anchor Anna Tsolova was taken off the air and she and her screen partner Viktor Nikolaev were subjected to tax inspections which found no wrongdoing.