This has been an incredibly challenging year for Modern Times Group (MTG) in Russia.
Many moons ago, I remember interviewing Hans Holger-Albrecht, the then head of the company, about its activities in Central and Eastern Europe.
He made no secret of his pride of those in Russia, where it had enjoyed first mover status among western media groups and established a strong presence. Crucially, Holger-Albrecht saw the country as one of MTG’s main drivers of growth, not just then but for the foreseeable future.
Fast-forward to late 2014 and things began to unravel. Firstly, we saw the DTH platform Raduga TV, in which MTG held a 50% stake, come under increasing pressure. It was eventually forced to close at the end of last year, ostensibly on the grounds that it did not have a valid licence to operate in the country.
Now this year, ahead of changes to legislation that will reduce the permitted level of foreign ownership in Russian media companies to 20%, MTG tried hard to find a solution to its involvement in CTC Media, one of the country’s leading broadcasters and in which it had held a majority stake. However, it eventually conceded defeat, with the station being sold for a knockdown $200 million – the final price could be even lower – to an affiliate of UTH Russia.
This week, following a short period of speculation, MTG has also sold its Russian and international pay-TV channel business for a total of $45 million. In the case of the Russian business, which consists of factual, movie and sports channels, it has been acquired by the Russian company LLC Sinerdzhi, while the international business is now in the hands of Sabiero Holdings Limited, a wholly owned subsidiary of the international private equity firm Baring Vostok.
Jørgen Madesen Lindemann, MTG’s president and CEO, made a compelling point in discussing the latest sale when he said that the cash income from its $123 million of cash investments in Russia since 2001 will, at around $770 million, be over five times that amount.
My view, however, is that given the choice MTG would almost certainly have chosen to remain a key player in Russia. It’s by far and away the largest market in the CEE region and despite current difficulties, especially in the advertising sector, soon likely to re-enter a period of strong growth.
