Bulgaria’s Prime Time: TV Drawing Investors

By David Jolly

Bulgaria does not enjoy the best reputation for governance these days, but that has not kept investors from piling into its television sector this week, on a bet that the Balkan country will be one of the next tiger economies of Europe.

In one of the biggest foreign acquisitions of a Bulgarian company, Modern Times Group, the largest Scandinavian broadcaster, said Thursday that it would pay euro 620 million, or about $970 million, to acquire Nova Televizia, a Bulgarian broadcaster, from the Antenna Group of Greece.

The deal follows the announcement Tuesday that Central European Media Enterprises, a European broadcaster founded by Ronald Lauder, the former chairman of Estee Lauder, would pay $172 million for an 80 percent stake in two Bulgarian television channels owned by Top Tone Media Holdings of Bulgaria.

Bulgaria, which joined the European Union in 2007, has struggled to overcome corruption. The European Commission last week froze hundreds of millions of euros in aid, citing poor administration, corruption and organized crime.

Although it is the poorest state in the European Union, membership has given the economy new life, and its gross domestic product grew at an annual rate of 7 percent in the first quarter of the year.

The country’s television industry, whose programming is heavily skewed toward reality shows, has been booming.

“The Bulgarian TV advertising market is the fastest growing in Europe,” Hans-Holger Albrecht, the Modern Times chief executive, said during an interview. “The country has a growth rate similar to Russia’s, but it’s part of the EU, and there’s a lot of investment coming in right now.”

Lilly Georgieva, managing director of the Bulgarian division of MindShare, a media buying agency owned by WPP Group, said the country’s television advertising market had been growing at an annual clip of 25 percent to 30 percent since 1997. Television advertising, which totals less than euro 200 million, makes up 70 percent of overall ad spending.

By combining Nova with the Diema group of TV channels, in which Modern Times owns a controlling stake, the company will have about a third of the television advertising market, which will be worth more than $600 million this year, according to ZenithOptimedia, a media buying agency.

In buying Nova, Modern Times is taking on BTV, owned by the Balkan business of News Corp., which leads the market with a two- thirds share. The News Corp. business is for sale, too; it is expected to fetch up to $1.2 billion.

The “Pop Idol” program on BTV draws as much as 35 percent of prime time audiences. Nova, which has an urban-focused, young and predominantly female audience, broadcasts “Big Brother” and “Who Wants to Be a Millionaire,” two top shows, as well as “CSI,”"House” and “Prison Break.”

TV2, the bigger of the two channels that Central European Media Enterprises is acquiring, has the capacity to reach 70 percent of the country’s viewing population, but its ad market share is in the single digits.

Modern Times, which is based in Stockholm, got its start in 1987, beaming satellite broadcasts to Scandinavia from London at a time when commercial broadcasts were not allowed. Today its Viasat Broadcasting unit runs 50 television channels, broadcasting to 24 countries.

The company has proved its willingness to go beyond its borders, as it is the largest shareholder in CTC Media, the biggest independent television network in Russia. The company is also seeking to add to its media properties in Scandinavia, Eastern and Central Europe with a new broadcasting operation in Ghana, its first foray into Africa.

The company, which has posted double-digit revenue growth for the last 15 quarters, will finance the deal from its own funds, as well as by raising about $500 million of new debt. Investors were disappointed with the deal, sending shares of Modern Times down more than 11 percent Thursday in Stockholm.

As part of the deal, Modern Times will also acquire Nova Plus, a new channel dedicated to reality television, as well as Eva, a women’s magazine.

Antenna, a privately held Greek media group owned by the Kyriakou family, said it would use the proceeds from the sale to expand its business, both in southeastern Europe and in Greece.

Originally published by The New York Times Media Group.

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