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European firms team up to invest in untapped television advertising markets in the Balkans February 17, 2007

Posted by grhomeboy in Advertising, Media.
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Apace Media Chief Executive Didier Stoessel said a joint venture the company has entered with Sweden’s Modern Times Group in the Balkans will help it profit from the region’s surging television ad market.

“If you look at the average advertising spending per head in Western Europe it is around $70, in central Europe $30, Bulgaria is $10 and FYROM $5 and the rest of the Balkans even lower,” Stoessel told Reuters in a telephone interview from Bulgaria.

“The potential for television advertising growth is absolutely tremendous. You are happy to have a few percent when you are in the UK, but you are disappointed if you have growth below 15 percent when you operate in Central and Eastern Europe,” said Stoessel, who is also Apace Media’s chairman.

Apace, which is listed on London’s Alternative Investment Market, operates as a television production company and runs a group of television channels in Bulgaria and the Former Yugoslav Republic of Macedonia (FYROM).

As part of the joint venture deal announced yesterday, Stockholm-listed entertainment broadcasting group MTG is paying Apace 8.5 million ($11.15 million) for a 50 percent holding in Balkan Media Group (BMG), the newly named joint venture. All of Apace’s Eastern European broadcasting assets will now be held in BMG.

“We benefit from their expertise in terms of program buying and we benefit from their financial power in terms of future expansion,” Stoessel said, referring to MTG.

The deal means Apace’s Balkan assets are valued at around 12.5 million pounds. The company’s market value is 15.1 million. Seymour Pierce analyst Charles Peacock, who has a buy rating on Apace, said the deal highlighted value within the company.

“With around 2 million pounds net cash on Apace’s balance sheet, this values the content creation division at 2 million pounds, which is too low for a business that we expect to have generated over 7 million pounds revenues in 2006 and grow substantially in 2007,” he said.

Charles Stanley analyst Paul Bates, who also has a buy rating on Apace, said the joint venture helped strengthen the company’s foothold in the Balkans.

“In strategic terms it takes what they are doing in the Balkans and gives them acceleration and momentum. It also allows them to capitalize on opportunities by using the strengths of MTG,” said Bates.

Apace said its drive to boost the commercial share of viewing on BMG channels will require more programming spend.

MTG is one of two leading publicly traded businesses operating in the Balkans. The company is mainly active in the Nordic region but has been actively pursuing a growth strategy in Eastern Europe and Russia. The other leading Balkan player is Central European Media Enterprises Ltd.

CME trades in Prague and on the Nasdaq and is popular among investors seeking growth in ad markets of new European Union members or candidates.

Stoessel, who founded Apace five years ago and has worked previously as a Merrill Lynch investment banker and HSBC corporate financier, said his company began investing in the Balkans 18 months ago by buying television channels.

“We found there was little understanding in London of this part of the world… so we think it is a better strategy to team up with a large player and work with them going forward.”

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