Industrial holding System Capital Management, owned by Ukrainian oligarch Rinat Akhmetov, invested $307 million in 2020 in its subsidiary — the media company Media Group Ukraine, according to SCM’s financial statement, Forbes reports.
It is the largest public investment in Ukrainian media in the last seven years after Ukrainian mogul Valeriy Khoroshkovsky sold Ukraine’s television channel Inter in 2013 for $2.5 billion to Dmytro Firtash, another Ukrainian oligarch.
SCM told Forbes that it made the investment to support Media Group Ukraine in the time of the pandemic, accelerated inflation and “the protracted stagnation of the advertising market.”
Last year, the Media Group Ukraine that includes television channels Ukraine, NLO-TV, Football 1 and Indigo TV lost over $100 million. The group’s biggest channel, Ukraine, lost over $43 million, while its main competitors, television channels ICTV and STB that belong to oligarch’s Victor Pinchuk media holding StarLightMedia, ended 2020 with a profit of $1.6 million and $4 million accordingly.
Although Ukrainian advertisers spent $435 million on TV ads last year, 5.6% more than in 2019, SCM said that revenue from advertising “does not cover the cost of content production.”
In Ukraine, media is not a profitable business. The country’s most popular television channels are privately owned by oligarchs like Akhmetov, Pinchuk, Firtash and Kolomoysky who use them for political influence. Akhmetov’s Media Group Ukraine controls nearly 13% of the local television market. Its television channel Ukraine is the fourth most popular in Ukraine.
Akhmetov’s television channels usually speak positively about the oligarch’s businesses and philanthropic projects in Ukraine. In 2017, television channel Ukraine even released a movie that defends Rotterdam+, a coal pricing scheme, whose main beneficiary is Akhmetov’s energy giant DTEK.
Media Group Ukraine signed the agreement for $307 million in financial assistance from SCM in April 2021, two months before President Volodymyr Zelensky submitted a de-oligarchization bill aiming to reduce the power of oligarchs in Ukraine.
If passed, the bill could impose sanctions on Ukrainian oligarchs who formally own or indirectly control mass media. Under these sanctions, people who are officially recognized as oligarchs will be banned from donating directly or indirectly to political parties and taking part in the privatization of state assets.
The bill also states that if oligarchs sell their media to an affiliated person or anyone who does not have an impeccable business reputation, the media companies will still remain under sanctions.
The bill has sparked a controversy in Ukraine. Its opponents say that rather than creating a law on oligarchs Ukraine needs a better rule of law in general — fair courts, functional judiciary system. But those who support the law say that defining the “phenomenon” of oligarchs is the first step in eliminating their power.
