1/09/2007

Springer turns to the east

German publishing giant Axel Springer may have had its bid for Haim Saban's ProSiebenSat 1 broadcast group nixed by Teutonic antitrust regulators, but it hasn't given up on its plan to become a leading Euro TV player.

It's little surprise that Springer, which still has 12% of ProSiebenSat 1, is turning on to TV. More noteworthy is that he's targeting Turkey and Poland, the largest not-yet-saturated European mass markets.

Springer, who owns Europe's biggest-selling daily newspaper, the tabloid Bild Zeitung, nevertheless, like all publishers, faces dwindling readership. Bild remains a reliable cash cow, but the question is for how long. In order to give advertising revenues a more stable footing, Springer topper Matthias Dopfner needs to push Springer's TV biz.

"Because the ProSiebenSat 1 deal didn't go through, their coffers are full and they've got money to spend. And their position in their core market is strong. So yes, their chances to expand into TV and the Internet, and become a much bigger player in Europe are excellent," says one investment banker who's operating in the same market as Springer and prefers to speak off the record.

In Germany, Springer recently set up a digital TV division and owns 27% and 27.4% in regional nets Hamburg 1 and Berlin TV, respectively. But apart from these tentative steps, Dopfner has turned his focus to the East.

In mid-November, Springer acquired a 25% stake in Dogan TV for e375 million ($490 mil-

lion). Dogan TV is Turkey's biggest broadcasting company, owning three of the top four local channels, Kanal D, Star TV and CNN Turk, as well as smaller nets. The Dogan web is part of the Dogan Hold conglom, which has a wide-ranging portfolio embracing everything from tourism to energy.

Shortly after, the Turkish conglom announced it would bid for ProSiebenSat 1 but then lost out to equity firms KKR and Permira. Even though at the time Springer insisted that the two developments were unrelated, the Dogan deal could have offered a backdoor into ProSiebenSat 1.

Only weeks after signing with Dogan, Springer inked a deal with Polsat, Poland's largest commercial broadcaster, for a 25.1% stake. The price tag of that stake was a hefty $320 million, which Springer's rival-bidder RTL was not prepared to pay.

Springer justified the high purchase price with the fact that under the new deal it will have the right to appoint Polsat's new financial topper and also two of the seven board members in addition to certain veto-rights. In other words, Springer will be able to throw more weight around the Polsat headquarters than a 25.1% stake might let one to assume.

Also, value of Springer's Polsat stake could increase by $65 million as the broadcaster is expected to go public before 2008.

Polsat deal means that Springer can expand its considerable presence in Poland as it already publishes the tabloid Fakt and national daily Dziennik, making it the country's second-largest newspaper publisher.

Another aspect that makes Poland extremely interesting to the Teuton conglom and its televisual ambitions, is the fact that the country is one of the largest TV markets in Europe in terms of household reach. With an ethnically homogenous population of around 38 million, Poland offers untapped advertising revenue potential.

Polish TV is dominated by pubcaster TVP, but Polsat's flagship channel maintains a healthy 15% audience share and the market is yet to mature.

"Poland is large and you can still make a deal there. As far as television is concerned, mass markets like France, Germany, Italy or the U.K. are closed shops," says the aforementioned investment banker.

However, trouble might still be ahead.

While Springer's Dogan deal has been approved by Turkish antitrust regulators, Polish media authorities may balk at allowing a foreign investor to add to its already powerful media presence in the country.

Springer papers, in particular Bild Zeitung, have a history of political campaigning and taking on board political agendas (Bild was one of the few European papers to openly endorse George W. Bush during the last elections).

The idea of Springer dominating the national media scene with a tabloid-cum-television combo had already irked Teuton regulators and was one of the main, if unofficial, reasons why Springer's ProSiebenSat1 takeover didn't go through.

The question is whether Polish regulators will be more open to the idea of Springer presenting not just an economic but also potentially political force within their country.

Politically, relations between Germany and Poland have frayed in recent months. Amongst the many things the two countries have been squabbling about are a gas pipeline Germany is building with Russia under the Baltic Sea as well as a 16-year-old treaty confirming the post-WWII borders between the two countries.

Poland's nationalist government seems uncomfortable with the idea of Springer -- or any other foreign investor -- buying into Polsat.

Polsat had long been looking for a strategic investor and at one stage had appeared to be in final talks with News Corp.

But News Corp. invested in Polish Catholic net TV Puls, which is run by a Warsaw brotherhood of Franciscan monks.

Nevertheless, if the marriage between Springer and Polsat is given the thumbs up by Polish regulators, it's likely to be an interesting one.

Polsat founder Zygmunt Solorz-Zak has recently been making headlines with the revelation that he worked for the Polish secret police under communism.

Given Springer's staunch anti-communist stand during the Cold War (the Springer headquarters in Berlin were built right next to the wall, so that people in East Berlin could read the latest headlines flashing up on large billboards), its Polsat deal is actually a case of sleeping with a former enemy.

Source:variety.com



Flights to Poland

Novea - Business in Poland