Market Insight

Volia continues consolidation of Ukrainian cable TV

October 02, 2012

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Ukraine's Competition Office gave the country's largest cable TV operator, Volia, the green light to buy a majority stake in Ukraine's third largest cable TV player, PPF-controlled, Odeko Group. According to local sources, Volia paid $14m for the stake in Odeko.

In 2008 PPF Partners acquired 25 small cable TV players in Ukraine, creating Odeko Group. As of mid-2012 the operator provided triple play and digital TV services to about 200,000 RGUs in 11 cities in Western Ukraine.

Volia is one of the assets of UGF III and SGFII, private equity funds managed by SigmaBlayzer. The operator's shareholders include Providence Equity Partners.

In the fourth quarter of 2012 there are still about 550 cable TV operators in Ukraine. The vast majority are small players, typically providing only up to 50 analogue channels. Cable TV penetration has been stuck at the same level - around 20 per cent of homes - for the last few years. Cable operators have cut their investments in network roll-out, primarily due to the unfavourable economic situation. On the other hand, difficult economic conditions are accelerating consolidation in the market, with many players looking to sell.

Volia acquisitions-based strategy has itself been a major driver of consolidation. The operator has grown from about 500,000 TV subscribers in 2008 to over 1.3m in mid 2012. The acquisition of Odeko Group will extend Volia's network to about 3.4m homes passed, pushing its TV subscriber figure to 1.5m and its share of the cable TV market to well over 40 per cent in terms of subscribers.

In practically every Central Eastern European country there are a great number of cable TV providers, with the top three to four players holding over 50 per cent of subscribers and gradually increasing their shares of cable TV. There are also many other investment groups active in the cable TV market in central and eastern Europe. Some of them are pursue a similar strategy to PPF, purchasing a number of smaller players - for example, BKS Capital Partners in the Czech Republic. Most of them, however, prefer a strategy similar to Volia's investors: backing up a large player, with which they keep acquiring other, primarily big, operators: for example, AXA in Latvia, EQT in Bulgaria and Macedonia, or Liberty Global in Poland. Liberty's UPC, having bought Poland's fourth largest player, Aster, in 2011, is now likely to acquire the country's third largest operator, Multimedia Polska, which was put on the block by its owner, Emerging Ventures Limited, a few months ago.

A recent decision by the Ukrainian broadcasting regulator may accelerate the process of consolidation of the cable platform in the country. The regulator gave must-carry status to all free-to-air DTT channels broadcasting in the country. As Ukraine launched digital terrestrial TV in DVB-T2 standard there are now over 30 such channels, mostly small once. Broadcasting such a high number of free to air channel will considerably limit channel-line up of small players, most of which will find upgrading to digital too expensive.

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