IHS Analysis : "BeIn Media completes the acquisition of Turkish pay TV operator Digiturk"

Herebelow you will see a very good read by my dear friend Constantinos from IHS Technology on the acquisition of Digiturk by BeIN Media.

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Digiturk, the Turkish satellite pay TV operator, has been acquired by BeIn Media Group. An official statement, earlier this week, by the CEO of the Qatar-based group, Sheikh Nasser Al-Khelaifi, revealed that the deal (rumoured since December) has been completed. There was no official disclosure of the amount of money that BeIn Media agreed to pay, however press reports made reference to an amount close to $1.5 billion. According to the reports, BeIn Media Group will fully control the Turkish pay TV operator, having purchased both the 53% stake of the Cukurova Group as well as the remaining 47% stake owned by the US-based fund Providence Equity. 

Digiturk was put up for sale in May 2013 when the government-controlled Savings Deposit Insurance Fund (TMSF) seized assets belonging to the Cukurova Group. The seizure of assets came as a result of the failure, from the part of Cukurova, to serve a $450 million debt obligation to the state. The acquisition of Digiturk is the latest in a string of investments by the Qataris in the Turkish media market: In 2011, BeIn’s parent company the Al Jazeera Media Network paid $40 million for the pay TV channel Cine5, which was later rebranded as Al Jazeera Turk. In April 2013, Al Jazeera Media Network paid $20 million for a digital terrestrial licence for Al Jazeera Turk. In the first quarter of 2014, the Qatari company launched a new portal (Aljazeera.com.tr), new mobile applications and a digital magazine.  

Our analysisBeIn Media Group’s deal to acquire the leading pay TV operator in Turkey is significant for a number of reasons First, it is the largest-ever takeover deal in the Turkish media market. The previous record was the $1.1 billion sale of the Turkuvaz Media Group to Calik Holding Group back in 2008. The deal also marks the first time that the Qatari group has entered a new market through the acquisition of a pay TV operator.Since acquiring the ART Sports channels in the Middle East in 2009, In the Middle East, Al Jazeera has extended its sports channels around the world. The company first launched the BeIn Sports brand in France with the acquisition of rights to the French football championship and other rights in 2012. Since then, the channels have rolled out in Asia and North America and in 2014 the Qatari group acquired Setanta Sports Australia. Most recently, BeIn Sports launched in Spain. The BeIn Sports brand is now present in 33 countries: the Middle East & North Africa (23 countries), North America (USA & Canada), Europe (France & Spain), and Asia (Indonesia, Thailand, Philippines, Hong Kong, Australia and New Zealand.

BeIn Media Group now controls – either directly or indirectly via the Al Jazeera Media Network – a chain of major media-related investments in Southern Europe. The launch of Al Jazeera Balkans in Sarajevo, Digiturk in Turkey and a long-rumoured investment in Mediaset Premium in Italy will extend its investments furthe.

Entering a market such as Turkey provides a stronghold for further expansion in the near region. Turkey by itself is the largest TV market in South-Eastern Europe (with 83 million people and 20 million TV households). Of equal importance to the Qatari business planners is that their potential target audience can include any geography where the Turkish language is spoken: meaning a roughly estimated audience of 140-150 million people in the Balkans, Caucasus, Central Asia and the Middle East. Digiturk TV packages, especially those carrying Turkish Super League football, have been available in Azerbaijan since October 2013 and the company has been planning expansion into Kazakhstan and Uzbekistan.

BeIn Media Group will benefit from the high growth potential of the pay TV market in Turkey. The Turkish pay TV market according to IHS Television Media Intelligence is far from saturation, unlike other major European markets: in the next five years, pay TV subscribers will experience a growth rate of 32% (rising from 5.5 million in 2014 to 7.5 million in 2020) while pay TV revenues will grow at a rate of 68%, rising from $1.2 billion in 2014 to $2 billion in 2020. Digiturk enjoys a powerful position in the Turkish pay TV market: By the end of 2014, it controlled more than half (54%) of the total number of subscribers and almost three quarters (73.5%) of the total revenues of that market, according to IHS.

However, Digiturk is about to face fierce competition from Turk Telekom (which operates both an IPTV and an OTT TV platform) on its home turf as the telco has acquired the media rights for the UEFA Champions League & Europa League matches for the period 2015-2018 as well as the rights of the Italian and French football leagues.