O'Brien: The job I really love is radio

In March, WaWa had the technical capability to reach about 5% of the nation, while its market share was a little more than 1%, according to research firm Osrodek Badania Opinii Publicznej (OBOP). However, on April 1 WaWa transformed itself into a radio network. In addition to its Warsaw frequency of 98.8 MHz, it now has 12 additional frequencies in Krakow, Gdansk, Gdynia, Szczecin, Koszalin, Kielce, Olsztyn, Lublin, Balystok, Rzeszow, Zielona Gora and Siedlce. At the same time, the station shifted its play list away from a classic rock format to pop music.
The plan to broaden WaWa's reach last year attracted the interest of Irish investor Denis O'Brien, who in September purchased a 33% stake in the station. While new to Poland, the 39-year-old is no stranger to radio or Central Europe. His first Dublin-based company was a radio station, 98FM. Today, through its Radio Investments company, O'Brien also owns a radio network in the Czech Republic, branded Radio Kiss, as well as Radio Net, which sells advertising to national clients and advertising agencies on behalf of the Radio Kiss stations, along with 12 independent radio stations.
O'Brien also owns a telecom holding company, Esat Telecom Group, which has stakes in Esat Telecom, a business telecom company, and Esat Digifone, Ireland's No. 2 GSM cellular phone operator. The holding company is listed on the U.S.'s Nasdaq exchange and has a market capitalization of about $240 million. The WBJ's Marta Karpinska talked to O'Brien about his move into Poland and the radio market here. An edited version of their conversation follows.
Q: You're one of the few foreign investors who has put money in Poland's radio market. Why did you choose to invest here?
A: I've been coming to Poland for donkey's years. I came over here with two friends and, like everybody who was coming to Poland then, we were looking around at what was going on with the market. We spent an awful lot of time trying to get a regular radio license, but we weren't successful. But still, we ended up deciding we definitely wanted to invest in the local market here. It's really great. So we went looking for the right kind of partner. We wanted to find somebody already on the market who was already successful and had a history of being into the radio business. And practically every time we came over here, we would listen to WaWa and anybody we talked to, such as different agencies, knew about it and said it was well recognized on the market. So eventually we decided that instead of coming here alone, why don't we seek a Polish partner. That's when we decided to approach Wojciech Reszczynski, WaWa's president and main shareholder.
Q: Why Poland?
A: Because it's a huge market, which is still growing. It's much bigger than, for example, the Czech one. If you take the size of the population, the consumer market that has been developed here, it's a great opportunity for advertising. And the media market is very, very crowded, but the natural thing is that it will change over a period of years.
Q: But isn't the media market pretty difficult with its licensing requirements, a 33% cap on foreign investment and strict supervision by the National Radio and Television Council (KRRiTV)?
A: The licensing regime in Poland is much more progressive than in Ireland. In Ireland, you're only allowed to own one license. (There) the state regulates the radio industry, but it also owns the biggest radio group in the country (RTE), they obviously don't want to have too much competition. So that's one of the reasons why we decided to leave Ireland and invest in Poland.
Q: And you already own a successful radio station in Ireland?
A: Yes, but if we wanted to go and invest in other cities in Ireland, we wouldn't be able to do that. And we think (coming to Poland) is basically cheaper. So we left Ireland and decided to be adventurous and go find other partners here.
Q: Did it take you a long time to strike a deal with your partner here?
A: We spoke for a number of months and eventually said, O.K. let's go into this. So we set up Modular Investment, to make an investment with WaWa, and we reached an agreement together last September.
Q: Did you talk to other stations? WaWa was never the strongest player on the market, and when you were talking with the company it was still a local Warsaw radio station, with a minor market share.
A: We spoke to another group, but eventually there wasn't really a meeting of minds. And WaWa's plan to soon enter 12 other markets was very appealing.
Q: So when you started talking to WaWa they already had licenses for other cities?
A: Yes. When we started talking to Wojciech he had already received four or five licenses, and he was hoping to get together another four or five soon. So straight away we saw an opportunity to move forward, and when he was very successful with getting the other licenses, it created a different bargain and we saw a better opportunity. But we still know we're competing with state radio, we know we're competing with two pretty big commercial networks.
Q: But by entering new cities your station has drastically increased its reach?
A: Yes. As of April 1, we have 12 new stations. And all of them have been launched simultaneously, with a very strong outdoor campaign, and other media as well. And we see it as just the first stage of market development.
Q: What is your reach right now?
A: Right now, 20% of urban households remain in our reach.
Q: What's the ultimate goal?
A: I think there is an opportunity to be the third network on the market and become very strong, competing against Radio Zet and RMF.
Q: How different is the Czech market from Poland? Is the competition there as strong?
A: It's exactly what is going on there as well. The state radio is getting weaker and the commercial stations are getting stronger. But it's an incredible market as well.
Q: What's your position on the Czech market? You own a network of radio stations with the brand name Kiss. What else is there?
A: We own four stations. We are in Prague, Plzen, Brno and Ostrava.
Q: And within those four cities, what's your reach?
A: We have a million listeners a day, out of ten million.
Q: Is a tenth of the market pretty good for the radio industry?
A: Yes. And then we have other partner, where we don't own a radio station, but through our network we sell advertising for them. So it's the fastest growing network now in the Czech Republic.
Q: And what about other regional markets. Have you ever considered going, for example, into Hungary?
A: We did look into Hungary. The Hungarian government had an auction, when they sold two radio stations for $20 million approximately each, which came with national licenses. And we just didn't think that if you pay $20 million for a national license, you can make money and get a return. So we've looked into that, but we just thought it didn't make any sense at all.
Q: Why radio? In Ireland, you're involved in a number of businesses, including the telecommunications market?
A: Telecommunications is my day job. But the job I really love is radio. My first business I ever owned was a radio business, and that gave me enough capital to go into telecommunications, including GSM, to compete against state telecommunications. In Ireland, we have a really strong state-owned (Telecom Eirrin) telecommunications company. We're a private company competing against state-owned telecoms.
Q: Maybe you should come over here. Many people would welcome more competition for Telekomunikacja Polska (TPSA).
A: Maybe when radio WaWa is fully established as a national player, then maybe Wojciech (Reszczynski) and Mieczyslaw Adamski (the second largest shareholder in WaWa) will go with me into the telecom business. You never know. But the main thing about being in business is obviously having fun. And the radio business is always fun, and it can be also very profitable.
Q: So how much did you spend to purchase the WaWa stake. Is the figure I've heard, zl. 8 million ($2.31 million), correct?
A: We never revealed the amount of the investment we put into this deal.
Q: When do you expect to break even?
A: Maybe a year and a half or two years.
Q: You're an optimist then?
A: Yes, Irish people are known for their optimism.