In tentative step onto Ukrainian market, a billionaire-owned Dublin-based media company acquires to Ukrainian FM stations
In a tentative step onto the Ukrainian market, Communicorp Group, a Dublin-based media company owned by Irish billionaire Denis O’Brien, has acquired two Ukrainian FM radio stations.
Citing the reasons why Communicorp ended up specifically buying national stations Nashe Radio and Kyiv-based Radio Apelsin, Christo Grozev, Communicorp Group director for international strategy and development, said “They were willing to move fast. They also were transparent enough.”
The owners of the radio stations that Communicorp first looked at wanted “to go and shop around in a formal bidding process,” Grozev explained. Meanwhile, the entire deal with Nashe Radio and Radio Apelsin was closed in only five months. To comply with local laws, Communicorp, which also owns 31 stations in Ireland, Finland, the Czech Republic and other Eastern European countries, had to acquire the shares through its local subsidiaries. Now, 71 percent of both stations are owned by Ukrainian subsidiaries of Communicorp, while the rest of the shares are held by the Irish company directly.
Grozev says the deal terms imposed by the stations’ owners prevent him from disclosing the size of the transaction, which he says Communicorp itself “wouldn’t mind doing.”
Apelsin was bought from Cartel Publishing Group, and Nashe Radio was previously owned by Alfa Bank.
“It was not a cheap deal,” Grozev said, adding that the prices are comparable to those for Western European radio stations of similar financial performance and not “some crazy new market standards.”
Explaining Communicorp’s interest in Ukraine’s FM-radio market, Grozev pointed out that the country’s growth rate is far greater than elsewhere in Europe. “We will not stay with only two stations … we will try to expand our presence [in Ukraine] as much as possible.”
The All-Ukrainian Ad Coalition estimated that in 2005 the combined ad revenues on radio stations in Ukraine totaled $20 million, up 54 percent over 2004. The coalition forecasts $26.5 million in market growth, or a 33-percent increase, by the end of 2006.
Natalka Fedoryshyn, general director of Radio Lux, an all-Ukrainian FM station that broadcasts in more than 30 cities nationwide, says even though at the moment she finds nothing to worry about in Communicorp’s entering the market, things might change if the Irish group keeps on buying.
“If several radio stations are controlled by a single foreign owner, whose main interest is making money, I don’t think it will benefit the audience greatly,” she said.
At the same time, Fedoryshyn says that the market research techniques Communicorp intends to bring here will be positive for the local radio market.
Grozev does not rule out that Radio Apelsin could be re-launched under an international brand name that Communicorp might import to Ukraine. As for the content, he says it will be left up to the local managers to handle; the new owners will only be concerned with introducing market research techniques that will help determine exactly what scores well with the audience.
Grozev said that the way most Ukrainian radio stations operate at the moment is a combination of “gut feeling, intuition and imported experience,” but not nearly enough emphasis is given to researching the market.
Fedoryshyn agrees with Grozev, adding, however, that sometimes intuition can be more accurate than market research in making decisions.
“Using intuition, [Radio Lux] made it into the top five of Ukrainian radio stations from the very bottom of the list in about two years.”
In the case of Nashe Radio, which already broadcasts in 30 Ukrainian cities, investment will be mainly in market research, while Radio Apelsin, currently available in Kyiv only, will require at least $500,000 in investments to turn it into a national radio station.
Grozev thinks that the stations’ formats will remain more or less mainstream, serving Ukrainian, Russian and Western pop music.
Communicorp’s plans for Ukraine, however, go beyond the mainstream. Grozev said that the other stations they plan to acquire here are likely to be geared toward specific music formats, which is something that is practically non-existent on the market today. He expects that market growth will come from earning profits on narrowly segmented stations with target fans of a particular music style. Grozev is positive that, for instance, a jazz station would be very successful in Ukraine.Nashe Radio top manager Bogdan Kozachenko points out that one is better off sticking to “a premium music format” like jazz or classical music when deciding on a particular market segment for a radio station. Such music styles typically attract what he calls a “quality audience” and would be attractive for sponsors despite lower-than-average ratings.
