Market Insight

Private equity group buys Balkan pay TV giant

October 16, 2013

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Private equity group Kohlberg Kravis Roberts (KKR) is to acquire the South-Eastern European pay TV and broadband operations of SBB/Telemach Group. The deal, the value of which was undisclosed, sees the assets in SBS/Telemach transfer from equity firm Mid Europa Partners to funds advised or controlled by KKR. Mid Europa claimed that it trebled the value of its investment in the company. The acquisition is subject to approvals from local competition authorities and is expected to complete by Q1 2014.

The transaction is another example of the increased interest in cable investment in Europe this year, following the acquisition of a stake in Polish cable operator Inea by Warburg Pincus earlier this year and Vodafone's purchase of Kabel Deutschland in Germany. It also marks an entrance into European cable investment for KKR, which in May sold its stake in Australian broadcaster Seven West Media. The purchase of SBB/Telemach suggests a shift in KKR's media focus towards cable TV.  

This deal does not mark the first cable exit for Mid Europa, following its sale of Poland's Aster in 2010, which generated a 23% return on investment. However, the deal does signal the company's final divestment of cable. The equity group first acquired SBB in 2007, and followed this with a period of consolidation in cable investment. This included the creation of Telemach through the purchase of UPC Slovenia in 2009 and the merging of SBB and Telemach at the end of 2012. Most recently, SBB/Telemach Group have pursued a consolidation strategy, via the acquisition of regional players, such as Bosnian cable operator Art-Net in March 2013.

SBB/Telemach Group's current position suggests a valuable asset which as well as providing a healthy return for Mid Europa is likely to prove a strong addition to KKR's portfolio. SBB is currently the leading cable TV operator in Serbia, having 614,000 cable homes to its name at the end of 2012, which comprised approximately 54% of total cable homes, and a growing TV subscriber base. It is also a major satellite player in Serbia through its Total TV DTH platform, which also operates in Bosnia and Herzegovina, Montenegro, Croatia, Macedonia and Slovenia. SBB's partner Telemach is the leading cable player in Slovenia, with approximately 127,000 cable homes, and has presence in Bosnia and Herzegovina. Overall, SBB/Telemach claims 1.8 million revenue generating units (RGUs) across the six  countries in which it is active, which in addition to pay TV includes internet, fixed and mobile telephony services. Following the sale of SBB/Telemach Group, Mid Europa is likely to turn its focus to its mobile and telecom investments, such as its minority stake in T-Mobile Czech Republic through Falcon Group, Bité in Lithuania, and Hungary-based Invitel.

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