Turkish media reports disclose that the satellite pay TV operator Digiturk has been acquired by Sheikh Nasser Al-Khelaifi of Qatar. The reports indicate that the Sheikh has agreed to pay $820 million for the acquisition of 53% of Digiturk.
Digiturk, from its launch in 2000, was managed by the Cukurova Group, a large Turkish holding group with interests in many sectors of the country’s economy. However, last year Digiturk was seized by a state entity after Cukurova Group had failed to meet its debt obligations. The satellite pay TV operator was on sale from May 2013.
Sheikh Nasser Al-Khelaifi is the Chairman and Chief Executive Officer (CEO) of French football club Paris Saint Germain and a member of Qatar’s Olympic Committee. It has been reported that the Sheikh has very close ties with the ruling family of the Gulf emirate. No official announcement of the deal is being made public yet, however Turkish Media are reporting that the Al Jazeera Media Network will take part in the business management of Digiturk.
The acquisition of Digiturk marks the largest all-time takeover deal in the Turkish Media Market. The buyer, Sheikh Nasser Al Khelaifi is the Chairman and CEO of beIN Media Group (an Al Jazeera Media Network spin-off that manages a number of sports channels under the brand name beIN Sports-formerly known as Al Jazeera Sports) as well as the Chairman of the Qatar Sports Investment (QSI). QSI is a sovereign fund which was founded in 2005 and was formed as a joint initiative between the Qatar Olympic Committee and the Ministry of Finance of the Gulf State. QSI is an investment vehicle through which the Qatari Government instruments a key acquisitions’ strategy in the business of sports: QSI is the owner of the French Paris Saint Germain football club, the largest shareholder of sportswear company BURRDA as well as the sponsorship partner of one of the most prominent football clubs in Europe, Barcelona FC.
For the Qataris, the acquisition of Digiturk serves a plethora of strategic goals, like:
Digiturk was on sale from May 2013 when the state-controlled Savings Deposit Insurance Fund seized several assets belonging to the Cukurova Group (parent company of Digiturk). Cukurova Group had a 53% majority stake in the satellite pay TV operator while private equity fund Providence Equity Partners is holding the rest 47% of shares. The seizure of Cukurova’s assets came as a result of the inability of the company to serve a USD450m debt obligation. Digiturk was not the only Media asset seized: FTA TV channels Show TV and Skyturk360 and daily papers Aksam and Gunes have also been seized. Digiturk, as a lucrative asset, has attracted the interest of some of the largest Turkish Media and Telecoms corporations like the Dogan Holding Group, Turk Telekom and the Dogus Media Group. Turkish Media had cited International Media companies like News Corporation and Liberty Global as interested in acquiring the Turkish pay TV operator.
Dogan Holding Group had made the highest reported bid for the 53% stake, offering in January 2014 $880m. Dogan’s first bid was to the height of $742m back in September 2013, while Turk Telekom’s submitted non-binding offer stood at $530m. Interestingly enough, the amount of money that the Qataris have been reported to have agree to pay is around 7% lower than Dogan’s final offer ($820m versus $880m). However, IHS Television Media Intelligence believes that a possible acquisition of Digiturk by Dogan Holding Group would have been blocked by the Competition Authority of the country. The reason is that Dogan already controls the second largest satellite pay TV platform in Turkey (D-Smart) and a possible takeover would have granted Dogan with significant market power (SMP) in the Turkish pay TV market. According to IHS Television and Media Intelligence, a further reason as to why Digiturk did not end up into Dogan’s hands is the rather strained relations that Aydin Dogan (the owner of Dogan Holding Group) has with the President of the Turkish Republic, Tayyip Erdogan. In Turkey, close ties with the ruling political elite are a necessary prerequisite for Media companies that want to expand their business entities and it is not a coincidence that the other Media assets, seized from Cukurova, all ended up in the hands of political allies of Mr Erdogan like the Ciner Holding Group (FTA TV channel Show TV) and the STAR Media Group (FTA TV channel Skyturk360 and daily papers Aksam and Gunes). Under this framework, the Al Jazeera Media Network seems, to the eyes of the Turkish government, like a very favourable candidate for acquiring Digiturk, as recently Turkey and Qatar have aligned their Middle Eastern policies fully supporting the politics of the Muslim Brotherhood. The recent close ties between the two countries have been emphasized by a string of investments by Al Jazeera to the Turkish Media market: The Qataris have created the channel Al Jazeera Turk (established in Istanbul and broadcasting in the Turkish language) and have paid $20m on April 2013 for obtaining a Digital Terrestrial Television licence for the channel. Furthermore, in the first quarter of 2014 Al Jazeera has launched in Turkey a new portal (Aljazeera.com.tr), new mobile applications and a digital magazine. In total the Qataris have agreed to invest more than $850m in the Turkish Media market.
The financial backing from the new Qatari owners will undoubtedly strengthen Digiturk’s dominant position in the Turkish pay TV market. However, as the pay TV business in the country is facing positive prospects for the near future, the other major players (D-Smart, Turksat and TTNET) are not going to watch idly by: just one week prior to the Digiturk takeover TTNET (the IPTV offspring of Turk Telekom) has announced the acquisition of Media rights for the UEFA Champions League and Europa League competitions for the period 2015-2018, a move that will certainly boost TTNET's subscriber numbers.