Polish Media Shakeup Attracts Hungarian Tycoon's Attention
(Bloomberg) -- A Hungarian media mogul who has prospered in a media market dominated by Prime Minister Viktor Orban’s government and its allies is looking to take that experience to Poland and buy up outlets facing a similar threat.
Central Mediacsoport, run by Zoltan Varga, acquired the Hungarian assets of Finnish media group Sanoma Oyj in 2014 as Orban set out to extend his influence over the press. His government passed a tax of as high as 50 percent of revenue to push mostly foreign owners to sell.
Since then, allies of Orban’s ruling Fidesz party have taken over print, digital and broadcast outlets and shut down the biggest opposition-leaning newspaper. Varga, one of a few media operators who’s dodged government influence, is now looking to leverage that experience in Poland, where the conservative government is mimicking Orban’s pursuit of an “illiberal state” based on Russia and Turkey.
“Hungary’s media market is a battlefield,” Varga, 51, said in a Nov. 10 interview in Budapest. “We’ve learned a lot about political risk in Hungary and we deal well with it. We roll with the punches.”
Like Orban, Poland’s de-facto leader Jaroslaw Kaczynski has accused foreign media owners of interfering in politics and called for domestic entrepreneurs to take majority stakes. Investors from abroad may soon find themselves in conflict with the national regulator monitoring excessive market shares, forcing them to sell, Polish Deputy Culture Minister Pawel Lewandowski warned in August.
The Polish legislation may affect companies including Axel Springer Media AG, whose outlets, including biggest tabloid Fakt, are often critical of the government. Another German company, Bauer Media Ltd., controls Poland’s biggest independent radio broadcaster and website Interia.pl. A unit of Verlagsgruppe Passau GmbH controls about 20 regional newspapers.
“The larger multinational companies that have a lower risk profile may leave the country, just as they did in Hungary," said Varga. "That presents a buying opportunity for us.”
Central Mediacsoport plans a gradual entry, starting with a Polish version of food website NOSALTY. It will then look for a “bigger acquisition in print and digital” in its niche market of women and lifestyle, Varga said. He ruled out buying a newspaper and said a share sale on the Warsaw Stock Exchange would be one way of financing a purchase.
With the Sanoma acquisition, Central Mediacsoport expanded one of the largest media portfolios in Hungary, with brands including Elle, Cosmopolitan, Marie Claire and National Geographic. With revenue of 11.4 billion forint ($43 million) in 2016, it also owns 24.hu, a news website that has carried critical coverage of the Orban government.
Varga, who said he made a fortune in 2015 when he sold his stake in budget airline Wizz Air’s IPO, already has a minority in Poland’s Premium Mobile, a telecom startup. A “large domestic industry player” will buy into Premium Mobile in a deal to be announced within two weeks, Varga said.
"Premium Mobile is a springboard to other investments in Poland, Slovakia and the Czech Republic," Varga said. "Our expansion plans are related primarily to digital investments."
That investment, like the media plan, is based on a view that eastern Europe’s biggest economy may benefit from Britain’s exit from the European Union, Varga said. He cited JPMorgan Chase & Co. and other companies deciding to move business units there, which will eventually help raise salaries and Poles’ spending on digital products.
In Hungary, Varga credits high-quality products that readers and advertisers are willing to pay for as the reason for Central Mediacsoport’s success. He said his confidence was unshaken even as much of independent press passed into the hands of businessmen allied with the government, prompting Hungary to tumble to 71st place in the World Press Freedom Index in 2017 from 23rd in 2010, when Orban returned to power.
“We’re not looking to sell -- we’re looking to buy,” Varga said. “If we were unable to operate here, that would say a lot about the state of the country. We don’t see such a threat today.”
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