Modern Times Group (MTG) has just received a shock in Bulgaria.
Five months after agreeing to sell the Nova Broadcasting Group to the Czech-owned PPF Group for €185 million, it has had the deal blocked by the competition authority CPC.
The writing was arguably on the wall at the beginning of June, when CPC launched an in-depth investigation into the sale. Normally, it would have given its approval, and with little if any delay.
In an analysis, the Bulgarian daily Capital says CPC used “weird arguments” in coming to its decision. These include that a merged entity would give it a significant advantage over other providers and distort competition, which seems strange given that PPF Group currently has no media interests in Bulgaria.
It also points out that this is precisely the same argument that CPC used to start its investigation. Moreover, its decision is “unprecedently short” and not backed by any facts and figures.
Capital is in addition of the view that there is political resistance to the deal.
Significantly, CPC has used similar arguments this week in blocking a major transaction in the electricity market that would have seen Intercom buy CEZ’s Bulgarian assets.
In both instances, CPC’s decisions can be appealed to the Supreme Administrative Court within a period of 14 days.
While this option will almost certainly be taken up by MTG, there is little doubt CPC’s decision has dealt a major blow to the Swedish company. Disposing of Nova was to be the last step in a strategy that has seen the Swedish company withdraw from the broadcast market in Central and Eastern Europe, starting in Ukraine and Russia and then moving on to the Baltics and Czech Republic. Given the way it has completely re-oriented its business in the last 2-3 years, there really is no reason for it to remain in Bulgaria.
CPC has in addition dealt a blow to PPF Group, which is also currently awaiting a European ruling on its proposed take-over of Telenor interests in the CEE region.
The bottom line is that securing regulatory approval is never a straightforward process. UPC found that out earlier this year when it decided to drop its bid for Multimedia in Poland. CME, too, has struggled to complete the sale of its broadcast assets in Croatia and Slovenia in a deal announced a year ago.