Market Insight

Is Al Jazeera joining the chase for Digiturk?

December 20, 2013  | Subscribers Only

Constantinos Papavassilopoulos Constantinos Papavassilopoulos Principal Research Analyst, Service Providers & Platforms

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Qatari-based broadcaster Al Jazeera is reported to have joined the list of possible buyers of troubled Turkish satellite pay TV operator Digiturk. Local press reports say that the Arab operator has appointed investment banking firm Barclays Capital to act as consultant for the acquisition process.

The assets of Digiturk, as well as those of 11 other companies, were seized in May 2013 by the Turkish Savings Deposit Insurance Fund, a Turkish government agency, after parent Cukurova Group failed to meet debt obligations. Cukurova currently controls 53% of Digiturk's shares while the rest is in the hands of private equity fund Providence Equity Partners.

Digiturk is estimated to have an equity value of $1 billion and has debt of $500 million. The Savings Deposit Insurance Fund and the Turkish government expect that a bidding process for the acquisition of Digiturk will begin around the first quarter of 2014. 

Our analysis

Al Jazeera's interest in acquiring the 53% stake in Digiturk has been rumoured since the summer and would fit well with its recent strategic direction that has centred on the acquisition of sports rights and the international roll-out of sports channels. Digiturk controls the broadcasting rights for premium soccer in its home country (the Turkish SporToto soccer League) up to 2015. Furthermore, with more than 16 million TV households, Turkey is among the largest TV markets in Europe and has a dynamically growing pay TV sector.

We forecast that the number of Turkish pay TV subscribers will grow to seven million in 2017 (a 25% increase from the 5.5 million in 2012) while pay TV revenues will experience an 80% growth rate going from €778 million in 2012 to €1.4 billion in 2017. Turkey seems to be a pivotal market for Al Jazeera's expansion as the Qatari-based operator has already invested $40.5m in 2011 for the acquisition of beleaguered Turksih pay TV channel Cine5, which was renamed to Al Jazeera Turk. Al Jazeera Turk, a news channel, will start broadcasting in 2014 in Turkish. The channel will be available on both satellite and DTT after acquiring a ten-year DTT license in 2013 for $20m.

Al Jazeera is not the sole non-Turkish operator to be linked with the acquisition of Digiturk. Among other bidders rumoured to have shown an interest are Vivendi, 21stCentury Fox and Liberty Global. Bidders will have a fight on their hands, however, as local Dogan Media Group is said to have made a $740 million bid for Digiturk. 

Al Jazeera's interest in the Turkish television market would also fit with its strategic aim of becoming a key premium broadcaster in all Muslim countries. Turkey and Indonesia are the two largest Muslim countries in terms of population, outside Al Jazeera's home base of the Middle East, and the Qatari operator is present in both: in Indonesia with the offer of three BeIn Sports HD channels (BeIn Sports 1 HD, BeIn Sports 2 HD & BeIn Sports 3 Premier League HD) and in Turkey with Al Jazeera Turk.    

Al Jazeera's recent recent international expansion has seen it launch sports channels in France, the Baltics and the USA and it will launch Al Jazeera English HD in the UK from next year.

Organization
Al Jazeera Digiturk
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