TV Puls needs strategic investor

Broadcaster hasn't met expectations TV Puls, last year's newcomer to the television market, hopes to have a strategic investor that can help solve its financial problems by the middle of this year. "They should have a short list of potential investors ready as early as March," said a source close to the situation. "The list might consist of two to three financial investors but it's possible that it will only be the first step to finding an investor." While the Franciscan Order holds a 46% stake in TV Puls and its supra-regional broadcasting concession (which was previously used for catholic TV Niepokalanów) the station is financially fueled by its minority shareholders, mostly Treasury Ministry-controlled companies. The government-dominated shareholders include KGHM Metale, a subsidiary of mining and telecoms giant KGHM Polska Miedź, PZU Życie, Poland's largest life insurer, power grid operator Polskie Sieci Energetyczne (PSE) and oil refiner and marketer Polski Koncern Naftowy Orlen (PKN Orlen). Privately owned software provider Prokom also controls a minority stake. Some firms may be looking to cash in their stakes and get out of broadcasting, though not all shareholders are revealing plans. "We've prepared a strategy for the group until 2004 on how we'll pull out from our investments," said Beata Karpińska, press spokeswoman with PKN Orlen. In January, Andrzej Modrzejewski, PKN Orlen's CEO, told Reuters the company would sell its shares in TV Puls no later than 2004. "But if a strategic investor guarantees an appropriate return rate we will obviously sell our stake (11.92%) in TV Puls earlier than 2004," Karpińska added. Last year KGHM reportedly spent as much as zł. 26 million ($6.19 million) to take an 11% stake, though official figures for all shareholders have not been made public. Piotr Pacholski, a member of TV Puls' management board, said the search for a strategic investor was part of the company's business plan accepted by the shareholders - not a result of financial trouble. "That's why we concentrated on building up the company's value to make it attractive to a potential investor," he said. TV Puls' supervisory board, where every minority shareholder has a representative, in November selected the Bank of America as the company's investment adviser. "Shareholders had a meeting and decided that they're all in favor of finding a strategic investor," said Regina Wegnerowska, spokeswoman for PSE. "So it's not true that we don't have one common approach to the future of TV Puls." Beata Stelmach, a member of Prokom Software's supervisory board, said she could not reveal whether her company would sell its stake in TV Puls once an investor is found. "It's too early for that and the search for an investor is usually a time-consuming process of at least six months," she said. "A temporary slump in the ad market might impact negotiations but it's not crucial in the decision-making process because TV Puls is a long-term investment." Weak line-up disappoints Meanwhile, TV Puls did not live up to expectations, according to media observers. "At the beginning (TV Puls) said it would offer more ambitious and less commercial television for the entire family with no violence and vulgarity," said a media broker who asked not to be named. "But eventually what they offered was no alternative to (broadcasters) Polsat or TVN, television that we're all tired of. (TV Puls') line-up is not really characteristic. It might be that they didn't have money for that but the whole idea wasn't sold well anyway." TV Puls might have lacked funds to invest in its programming after one of its shareholders, Prokom Investment, didn't fulfill its financial obligations, according to another source who asked not to be named. "That's why they also didn't have capital to purchase (broadcaster) RTL7, which would have increased their reach significantly," the source said. RTL7 was eventually acquired by ITI Holding, TVN's owner. Prokom's Stelmach said her company met all the conditions of the contract with TV Puls. According to media brokers, television stations need a 4-5% market share to attract advertising. Despite TV Puls' plans to achieve an audience share of 4% by 2002, it failed to reach even 2% last year, according to AGB Polska, a market research agency. "Within our target group of viewers 16 to 49 years old from cities above 50,000 inhabitants, we reached more than 2% of the audience share in January this year and 3.5% in the group of viewers within our technical reach," said Maciej Pawlicki, programming director for TV Puls. "It proves that we're growing. Please remember that when TVN was launched it had very poor ratings. Only great programs, also in terms of costs, can create a big market share and as a young station we were also hit by the crisis on the ad market," Pacholski said. TV Puls' programming met with some success but the station had to cancel several programs that proved unpopular. News show "Wydarzenia," for example, picked up viewers, grabbing as much as 2% of the audience share but many other programs failed to attract enough viewers. TV Puls ran a daily talk show with popular radio presenter Waldemar Ogiński and another talk show with Wojciech Mann and Krzysztof Materna as hosts, but the two programs flopped and TV Puls' management canceled them. In addition, due to financial problems, many programs and movies are run at least twice a day. "We had to react to the recession on the ad market so we cut back costs and reduced our staff, and gave up on productions that didn't live up to our expectations," Pawlicki said. Meanwhile, Pacholski said he hopes that an increase in the station's reach might help to strengthen its brand. "The (National Television and Radio Council, KRRiTV) still holds several terrestrial frequencies that it could grant - in Katowice, Poznań, Wroclaw, Gdynia and Białystok," Pacholski said. "If we got them all, we could increase our terrestrial reach by 10%." TV Puls has a 15% terrestrial reach (TVN has more than 40% and TV4 over 30%) and including cable and satellite distribution the station can reach 45% of Polish households with TV sets.