While Rupert Murdoch struggles to gain full control Sky in the UK, his Polish counterpart has just pulled off an extraordinary deal to keep himself ahead of the competition.
Zygmunt Solorz-Zak heads up a media empire that includes Polsat, Poland’s top commercial broadcaster, and Cyfrowy Polsat, its leading DTH platform. Last week it was announced that the latter would buy the former, effectively its parent company, from Solorz-Zak and his long-term business partner Heronim Ruta. The fee quoted for the acquisition, which should be completed in March next year, was PLN3.75 billion (€944.7 million), of which 69.3% will be paid in cash and the remainder shares in Cyfrowy Polsat.
All this represents a win-win situation for both Solorz-Zak and Dominik Libicki, the president of Cyfrowy Polsat. In the case of Solorz-Zak, he will be left with stakes in both Polsat and the newly expanded Cyfrowy Polsat and – even more importantly – a war chest of some PLN2 billion to pursue his interests.
These are currently focused on the telecom sector, and there has been speculation in the local press that he may try to buy Polkomtel or P2, two of Poland’s top four mobile companies. He is also expected to invest some of his money in building up an LTE technology based 4G network.
Solorz-Zak is convinced that the future lies in the sale of content over the internet and also strongly believes that media and telecom services will eventually be merged.
Libicki certainly shares his future vision of the internet and is also excited by the bigger clout Cyfrowy Polsat will have following completion of the deal. Although the platform has always cooperated with Polsat, bringing the two companies under the same roof will ensure this cooperation is deepened and at the same help create a real powerhouse in the Polish TV industry.
Cyfrowy Polsat and Polsat are certainly already huge players. The announcement of the deal came on the same day as the publication of the DTH platform’s latest set of results. These showed that it ended the third quarter with 3,277,936 TV subscribers, or 361,000 more than a year earlier – impressive growth, indeed, in a market also served by four other competing satellite operations.
The majority of Cyfrowy Polsat subscribers in the third quarter – 2,596,000, or 253,000 more than a year earlier – opted for its ‘Family’ premium package and ARPU for the package was, at PLN41.9, 4% up year-on-year.
On the down side, churn was, at 10.2%, higher than the 8% posted in the same period in 2009.
Cyfrowy Polsat is, of course, more than a one trick pony, being a triple play company rather than just provider of video services. As of the end of Q3, it claimed 60,000 MVNO customers, of whom 90% were post-paid, along with 15,000 internet subscribers.
The platform’s financial performance was also generally encouraging, with revenues (PLN366 million) and EBITDA (PLN104 million) in Q3 being 16% and 25% up on a year earlier and net income falling by 14% to PLN68 million over the same period.
Cyfrowy Polsat is a leading producer of content and already operates no fewer than 11 proprietary channels, four of which are dedicated to sport and one of which is in HD. However, it revealed last week that there are at present no plans to launch any more services, echoing an observation made by Solorz-Zak at the annual PIKE (Polish Association of Electronic Communication) conference in Sopot in October.
The acquisition of Polsat by Cyfrowy Polsat could have implications far beyond the Polsat ‘empire’, not just in Poland but also Central and Eastern Europe (CEE) as a whole.
Interestingly, the deal has similarities to one struck last year in which ITI Group, one of Polsat’s main competitors, sold the DTH platform n to the national commercial broadcaster TVN in what was ultimately another intelligent piece of company restructuring. Last month, TVN also signed a landmark 10-year content deal with the incumbent telco TPSA, which operates both a DTH platform and an IPTV service.
Quite clearly, the creation of a larger Cyfrowy Polsat will be perceived as a threat by TVN and TPSA, as well as, of course, Canal Plus Cyfrowy, the operator of the DTH platform Cyfra+. It is nevertheless a move that is likely to be repeated throughout CEE as convergence between the media and telecom sectors gathers momentum.
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