Dresdner to invest in Radio Plus if station wins Warsaw tender

Private equity group Dresdner Kleinwort Capital (DrKC) may invest in Radio Plus as early as May if the financially troubled radio network receives a radio frequency for Warsaw, according to a source close to the station. While negotiations between the companies have been going on for months, progress has been moderate so far because Radio Plus does not yet have its own license to broadcast in Warsaw, the country's biggest market and richest source of advertising revenue. But last week's decision by the National Television and Radio Council (KRRiTV) to start a tender for a radio frequency in Warsaw could mark a breakthrough in the deal assuming Radio Plus wins the tender, according to the source, who asked not to be named.

"A network without Warsaw is worthless because it's here where all media houses are based and the market is rich," the source told the WBJ. "If (Radio Plus) gets this frequency in Warsaw the network will meet the most important condition to sign the deal with (DrKC)." Roger de Bazelaire, regional director of DrKC's Central and Eastern European private equity unit, declined to reveal details of the negotiations but confirmed they are in progress. "Yes, we're still interested in Radio Plus but we're looking at it in a relaxed way because in this country things take time," he said. "But a radio network that doesn't have a license in Warsaw is difficult to manage. It's simply an essential part of any network." Radio Plus was set up in 1998 when 15 regional radio stations agreed to establish a network using feeds from Warsaw-based Spółka Producencka Plus, a content producer owned by the Polish Episcopate. The station features a mix of news, talk, music and religious content targeted at 25-45 year-olds. "Once the deal is signed, investors will have an absolute majority in Agencja Reklamowa Plus (Radio Plus' advertising company) and the church will keep a 51% stake in Spółka Producencka Plus," the source said.

Second time a charm? Although Radio Plus failed to receive a Warsaw license during the previous tender earlier this year, this time it should have more luck, according to market watchers. "So far the KRRiTV, pressured by (ex-communist Democratic Left Alliance [SLD]) politicians, has been unfavorable towards Radio Plus but the relationship between the church and the ruling coalition has recently warmed up," said a market insider who asked to remain anonymous. According to other sources, Prime Minister Leszek Miller and Józef Glemp primate of the catholic church in Poland agreed on a non-aggression pact. "Until the national referendum on European Union accession next year, the left will not torpedo projects like Radio Plus and the church is expected to support Poland's accession to the EU in return," said a market insider who also asked to remain anonymous. (For details on this topic, see "Government Watch," page 10.) The KRRiTV is expected to start the tender March 4. According to council member Jarosław Sellin, the KRRiTV's chairman is limiting the pool of applicants to those stations with "a religious and social character." "I think that Radio Plus can get this frequency unless some other relevant applicant appears, which is doubtful," he said. The concession process should be finished by the end of April and the winner announced no later than early May, Sellin added.

New year, new deal Radio Plus has been negotiating with DrKC since last year and according to sources close to the radio station, a $15 million agreement was supposed to be signed last Aug. 25, but talks broke down unexpectedly when the Episcopate withdrew its support for the project. The station then replaced its Warsaw-based management with employees from Katowice and the company teetered on the verge of bankruptcy. "Due to internal clashes within the Episcopate a lot of time was lost, the network almost disappeared, and if we sign this deal now we'll get less than $15 million," the source close to Radio Plus said. DrKC's de Bazelaire wouldn't say how much he thought the station was worth. "We're flexible," he said. "A lot depends on market conditions and since the media market is not at its best, especially after Sept. 11, we need a prudent way of investing. So, it's better to invest in tranches rather than everything at once," he said. But Radio Plus needs money if it's to compete with other stations. When the talks with DrKC broke down and the broadcasting center was moved from Warsaw to Katowice, Plus couldn't finish many ad campaigns and lost zł. 450,000 and another zł. 500,000 that could have been made from other deals that it was working on.

According to Jacek Rusiecki, vice president of Agencja Reklamowa Plus and former management board member of Spółka Producencka Plus the station needs the new beginning. "We need to format it in a way that will make it totally different from other radio stations on the market," he said. "Take the U.S. radio market, they have at least 40 different formats so there is a lot to choose from." Other market watchers claimed Radio Plus should aspire to become the No. 2 news provider after RMF FM, Poland's largest private national broadcaster. DrKC, typically an active investor, would also consider making some changes. "It's our general approach anyway," de Bazelaire said. "The church is looking for a partner that would help manage the company professionally. And we can offer financial discipline and independence. Generally speaking we invest for three to five years; in this case it might be five rather than three years." DrKC is present throughout Central and Eastern Europe (CEE). Last June, it raised and closed Dresdner Kleinwort Benson Emerging Europe (DKBEE), a private equity fund targeting the region.