UPC adds plank to Polish platform through Nasza TV
European Broadcasting System (EBS) announced last week that it had established a consortium that would take control of Polskie Media, owner of Nasza TV, one of Poland's three private, terrestrial broadcasters.
If successfully completed, the purchase of a stake in Nasza will give UPC an indirect interest in the broadcaster. EBS is a joint venture between Nasdaq-listed SBS Broadcasting and the European Bank for Reconstruction and Development (EBRD). Just two weeks ago, UPC acquired a 13.3% stake in SBS for $120 million.
In addition to its indirect interest in broadcaster Nasza, UPC controls, through its acquisition of @Entertainment, cable operator Polska Telewizja Kablowa (PTK) and digital television platform Wizja TV.
"The strategy is tremendous. By acquiring @Entertainment they are No. 1 in Poland on the cable market, they are No. 1 in the Czech Republic, Hungary and Slovakia, so from the reach point of view it's pretty amazing," said Georg Hotar, a London-based media analyst with ICE Securities. "Their goal is to cover all of Europe."
In addition, UPC's interest in SBS could bring it further Polish market know-how, although some would question how useful it would be. SBS is currently acquiring Central European Media Enterprises (CME), which until the end of 1998 was a partner in terrestrial broadcaster tvn.
However, CME pulled out of tvn after disputes with majority owner ITI Holdings. In addition, CME has run into an ownership dispute in the Czech Republic over Nova TV, its flagship property. This has cast serious doubts over the SBS acquisition.
The addition of Nasza will be yet another piece in the puzzle that UPC and SBS are assembling in Europe. SBS covers 13 countries and reaches 150 million households.
The larger UPC provides cable television, telephony, high-speed internet access and programming services in 12 countries across Europe and Israel. Assuming completion of recently announced acquisitions, UPC networks will pass 8.8 million homes and reach more than 5.5 million cable subscribers. It has strengthened its position to become the second largest cable operator in continental Europe after Deutsche Telekom.
For the puzzle to be complete, UPC needs to add as much of Poland as it can.
"If you look at forecasts for the TV market in Poland there is no country that comes even close to it," said Martin Lindskog, president of EBS.
Hotar added that in the context of the Central Europe region, the Polish market is larger than all other markets combined.
While Nasza TV, with just a 1.54% viewership share, may seem a modest addition, it has an asset that many broadcasters in Poland desperately covet - a terrestrial broadcast license.
"And there are only three terrestrial broadcasters that have it," Hotar said. The other two private operators are supraregional broadcaster tvn and national broadcaster Polsat. "So this is the only remaining route if you want to get into this market and you don't buy or team up with the other two."
SBS could also quickly help Nasza, beefing up its programming. SBS is one of the larger purchasers of programming in Europe, spending more than $100 million annually.
The addition of a terrestrial broadcaster is especially important to the development of UPC and SBS's reach in Poland. Throughout the country, the reach of normal television is far greater than that of either cable or digital TV. In 1998, terrestrial signals reached 52.4% of Polish households, while digital broadcaster Wizja reached just 8%, according to AGB Polska estimates.
"Growth in digital TV will not be as far as we expected half a year ago," Hotar said. "Plus, if you have only pay TV you don't have as much ad revenue as terrestrial TV provides."
While Nasza has known that it has a valuable asset, it also realized it was too small to go it alone. The company had previously tried to do a deal with CLT-UFA, but this was blocked by a group of Nasza shareholders.
After this deal failed, Nasza's board initiated talks with EBS earlier this year, Lindskog said.
Under the terms of the transaction, EBS will hold 47.5% of a consortium that will be majority owned by Polish investors. This consortium in turn will take a 30% stake in Polskie Media, which owns Nasza, and will have 70% of voting rights.
Lindskog would not reveal how much EBS will invest in Nasza, but said a typical TV investment would require $40 million-$70 million to reach the break even point. "Nasza would be on the higher end of that investment because of the size of the market," he added.
This investment will be key to helping the small station grow, Lindskog said. "The station had a cost-efficient and successful launch," he said. "It has been well run, but hasn't had sufficient resources to develop." Given those resources, Lindskog said Nasza TV should be able to grab "a 10% share in the market by the year 2004."
Such a claim brought about a case of deja vu for some, however.
"When tvn was launched, CME planned to get 25% of the market and it never materialized," ICE's Hotar said. "The key issue for SBS will be how they will position themselves on the market in terms of content and strategy, probably staying somewhere in between Polsat and tvn."
But the purchase of an interest in Nasza is not a done deal. There is a possibility that a dispute among existing shareholders could derail the transaction.
Since May, a group of minority shareholders has been trying to take control of Nasza. On May 6, this group tried to elect a supervisory board through a group vote, which put in place just four instead of six board members, the former board size. This new board in turn elected a management board and this was registered in June in Warsaw Regional Court.
The previous management board is now appealing the court's decision to register the new board. This board in July also elected a supervisory board. EBS is now awaiting rulings regarding the legal imbroglio before it can acquire its Nasza stake.
If successfully completed, the purchase of a stake in Nasza will give UPC an indirect interest in the broadcaster. EBS is a joint venture between Nasdaq-listed SBS Broadcasting and the European Bank for Reconstruction and Development (EBRD). Just two weeks ago, UPC acquired a 13.3% stake in SBS for $120 million.
In addition to its indirect interest in broadcaster Nasza, UPC controls, through its acquisition of @Entertainment, cable operator Polska Telewizja Kablowa (PTK) and digital television platform Wizja TV.
"The strategy is tremendous. By acquiring @Entertainment they are No. 1 in Poland on the cable market, they are No. 1 in the Czech Republic, Hungary and Slovakia, so from the reach point of view it's pretty amazing," said Georg Hotar, a London-based media analyst with ICE Securities. "Their goal is to cover all of Europe."
In addition, UPC's interest in SBS could bring it further Polish market know-how, although some would question how useful it would be. SBS is currently acquiring Central European Media Enterprises (CME), which until the end of 1998 was a partner in terrestrial broadcaster tvn.
However, CME pulled out of tvn after disputes with majority owner ITI Holdings. In addition, CME has run into an ownership dispute in the Czech Republic over Nova TV, its flagship property. This has cast serious doubts over the SBS acquisition.
The addition of Nasza will be yet another piece in the puzzle that UPC and SBS are assembling in Europe. SBS covers 13 countries and reaches 150 million households.
The larger UPC provides cable television, telephony, high-speed internet access and programming services in 12 countries across Europe and Israel. Assuming completion of recently announced acquisitions, UPC networks will pass 8.8 million homes and reach more than 5.5 million cable subscribers. It has strengthened its position to become the second largest cable operator in continental Europe after Deutsche Telekom.
For the puzzle to be complete, UPC needs to add as much of Poland as it can.
"If you look at forecasts for the TV market in Poland there is no country that comes even close to it," said Martin Lindskog, president of EBS.
Hotar added that in the context of the Central Europe region, the Polish market is larger than all other markets combined.
While Nasza TV, with just a 1.54% viewership share, may seem a modest addition, it has an asset that many broadcasters in Poland desperately covet - a terrestrial broadcast license.
"And there are only three terrestrial broadcasters that have it," Hotar said. The other two private operators are supraregional broadcaster tvn and national broadcaster Polsat. "So this is the only remaining route if you want to get into this market and you don't buy or team up with the other two."
SBS could also quickly help Nasza, beefing up its programming. SBS is one of the larger purchasers of programming in Europe, spending more than $100 million annually.
The addition of a terrestrial broadcaster is especially important to the development of UPC and SBS's reach in Poland. Throughout the country, the reach of normal television is far greater than that of either cable or digital TV. In 1998, terrestrial signals reached 52.4% of Polish households, while digital broadcaster Wizja reached just 8%, according to AGB Polska estimates.
"Growth in digital TV will not be as far as we expected half a year ago," Hotar said. "Plus, if you have only pay TV you don't have as much ad revenue as terrestrial TV provides."
While Nasza has known that it has a valuable asset, it also realized it was too small to go it alone. The company had previously tried to do a deal with CLT-UFA, but this was blocked by a group of Nasza shareholders.
After this deal failed, Nasza's board initiated talks with EBS earlier this year, Lindskog said.
Under the terms of the transaction, EBS will hold 47.5% of a consortium that will be majority owned by Polish investors. This consortium in turn will take a 30% stake in Polskie Media, which owns Nasza, and will have 70% of voting rights.
Lindskog would not reveal how much EBS will invest in Nasza, but said a typical TV investment would require $40 million-$70 million to reach the break even point. "Nasza would be on the higher end of that investment because of the size of the market," he added.
This investment will be key to helping the small station grow, Lindskog said. "The station had a cost-efficient and successful launch," he said. "It has been well run, but hasn't had sufficient resources to develop." Given those resources, Lindskog said Nasza TV should be able to grab "a 10% share in the market by the year 2004."
Such a claim brought about a case of deja vu for some, however.
"When tvn was launched, CME planned to get 25% of the market and it never materialized," ICE's Hotar said. "The key issue for SBS will be how they will position themselves on the market in terms of content and strategy, probably staying somewhere in between Polsat and tvn."
But the purchase of an interest in Nasza is not a done deal. There is a possibility that a dispute among existing shareholders could derail the transaction.
Since May, a group of minority shareholders has been trying to take control of Nasza. On May 6, this group tried to elect a supervisory board through a group vote, which put in place just four instead of six board members, the former board size. This new board in turn elected a management board and this was registered in June in Warsaw Regional Court.
The previous management board is now appealing the court's decision to register the new board. This board in July also elected a supervisory board. EBS is now awaiting rulings regarding the legal imbroglio before it can acquire its Nasza stake.
