New Czech Ownership of Central European Media Should Boost Profits, if Not Reputation

New Czech Ownership of Central European Media Should Boost Profits, if Not Reputation

The completion of Czech billionaire Petr Kellner’s (pictured) buyout of broadcast network Central European Media Enterprises (CME) has raised hackles in Kellner’s native country, where a healthy suspicion of media moguls has been fueled by the prime minister’s own online and print holdings.

Kellner’s company, PPF, which began the acquisition process of CME a year ago, paying $1.1 billion for the network, had its purchase approved by regulators and the European Commission last week. The CME holdings, which comprise leading commercial broadcasters and studios stretching from Prague to Sofia, dominate the regional market, but were thought to be marginal to the core value of AT&T, which acquired them when it merged with Time Warner in 2018.

Kellner has pledged to respect the independence of CME’s news organizations, announcing, “We want to build on those successes and on the position that these networks occupy in their respective markets as independent broadcasters.” PPF is also looking to create “new business opportunities between media operations and telecommunication services,” it announced in a statement.

But Kellner’s assurances are being taken with a grain of salt in Prague.

PPF “will have a hard time convincing others that it will maintain objective reporting,” says Dusan Jilcik, an analyst for Czech financial group Starteepo. The observation echoes the concerns several observers have voiced over CME’s dominant position in the TV news market with a total reach of 97 million viewers in the Czech Republic, Slovakia, Slovenia, Bulgaria and Romania.

Czechs have become suspicious over “the influence of large financial groups on the media, news and journalism,” Jilcik adds, with most major media outlets in the country owned by such companies. It’s likely that journalists for CME news organizations “will leave them for small but independent media,” Jilcik predicts.

Kellner’s PPF group also has close relations with China, where it serves as that market’s largest Czech investor, causing further concern.

“PPF has big business in China,” notes Jilcik, where its consumer loan company, Home Credit, operates, and their hiring of a PR company last year to improve China’s image in the Czech Republic caused an “uproar.” At the same time, he notes, PPF’s professional standards are high and it has already shown signs it will staff its broadcast organizations with veteran executives.

“PPF Group is not used to losing and will go hard on the profitability of the whole CME,” Jilcik says. “They will pay for and attract highly experienced managers in the TV business in Central Europe.”

He cites PPF’s announcement that CME will be run by CEO Didier Stoessel, a former Merrill Lynch investment banker who has managed a Bulgarian TV group. No longer will CME be led by the likes of Adrian Sarbu, a Romanian businessman who 10 years ago “showed ignorance of the local television market,” says Jilcik, while another CME exec, Jan Ondrusko, fumbled badly at TV Nova, CME’s broadcaster in the Czech Republic.

“Ondrusko failed fatally with the risky strategy of significantly increasing the price of advertising time,” says Jilcik, “due to which TV Nova irretrievably lost a lot of clients from large corporations.”

Other commentators have cited similar concerns about media influence, noting that Czech Prime Minister Andrej Babis, whose group Mafra owns major daily newspapers Mlada fronta dnes and Lidove noviny, made similar assurances that he would respect objective reporting when he was elected in 2017. The publications have since taken heat for a seeming reluctance to cover Babis aggressively, or the mass anti-corruption protests against him in the streets of Prague.

In the case of PPF, its business ties in China have worried some in the West as well, such as U.S. Senator Marco Rubio, who met with Czech parliament members including Pavel Fischer in February over concerns that telecommunications companies owned by PPF are cooperating with Huawei on the development of 5G mobile networks.

Earlier this year, two Czech Pirate Party senators, Lukas Wagenknecht and Jan Lipavsky, also asked members of the U.S. Congress and CME shareholders to investigate the buyout.

Aside from the CME purchase, PPF recently acquired telecom Telenor, which operates in several European countries, including the Czech Republic, where it owns a majority in the largest mobile phone operator O2. PPF minority shareholder Ladislav Bartonicek said last year that the main goal of the CME acquisition is to obtain content that it can offer its telecom customers.

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