BRE pulls out of multimedia deal
By : Leo Broomfield
BRE Bank's decision last week to pull the plug on a planned zl. 80 million ($18 million) investment in Multimedia Polska, Poland's third-largest cable-TV company, may lead to further market consolidation, sector analysts said.
"One can easily imagine a merger of MultiMedia and Vectra, and quite possibly with smaller cable television firm Dami (owned by private TV broadcaster Polsat's Zygmunt Solarz)," said Krzysztof Stefaniak, an analyst at Compress, Vectra's media agency.
Corporate BRE Bank's decision not to finance Multimedia's expansion reportedly stemmed from pressure by the country's second-largest television cable firm, Vectra, which took out a zl. 120 million ($28.5 million) loan earlier this year with BRE Bank. BRE Bank and four investment funds managed by BRE Private Equity received 26% of Vectra's share capital in exchange for the loan.
Vectra said that if BRE Bank were to grant special loans to Multimedia, it would consider the move a breach of its investment contract with the bank. Vectra president Tomasz Wegrzynski said a loan to Multimedia Polska would also mean unfair competition and undermine BRE Bank's reputation.
Vectra and Multimedia, which each have about 350,000 subscribers, are vying for the No. 2 position on the domestic cable television market. To improve their position, finding additional sources of financing is key to determining which will be able to challenge the dominant market player, Amsterdam-based United Pan European Communications (UPC), which has more than one million subscribers.
Reports suggest that BRE Bank may now be pushing for a merger of Vectra and Multimedia to help create a company capable of taking on UPC. The sector's break-even point is estimated at one million subscribers.
Vectra has picked up more than 100,000 new subscribers this year through the acquisition of 23 smaller firms, mostly in the northern part of the country. The company said it would increase expenditures this year by zl. 45 million ($10.7 million) three times more than in 2000 to modernize its network and increase the company's Internet services from its offices in Swinoujscie, Sieradz, Skierniewic, Lowicz, Gostynin, Elblag, Bialystok, Bielsko-Biala, Wroclaw, Olsztyn, Suwalki.
In July, Vectra paid zl. 30 million ($7.1 million) for Kielce firm Maxtel and plans to buy six more cable firms by December. Stefaniak said the company may eventually acquire up to 30 such operators, mainly in the Wielkopolska region.
Analysts said last week that the next phase of consolidation could see a single company comprising Vectra, Multimedia and Dami merging with UPC to create a telecommunications outfit capable of taking on Telekomunikacja Polska when the market becomes fully liberalized in the next few years.
