Score One For The Politicians

Michael Hedges December 16, 2009 Follow on Twitter

That politicians seek to control media is the single, universal truth in the relationship between politicians and media. The most authoritarian politicians demand absolute authority over media. More often than not the politicians win. There are no exceptions.

For more than a year the media and business empire of Aydin Dogan has tangled with the Turkish government under Prime Minister Recep Tayyip Erdogan. Dogan is a billionaire with wide ranging business interests including, arguably, more than half of Turkey’s private sector broadcast and print outlets. He has promoted, quite visibly, Turkey’s relationship with the wider world. This has brought him into conflict with PM Erdogan.  

When Turkey’s tax authority ruled that Dogan Yayin Holdings (DYH), the media holding company of Dogan Holdings, owed billions in back taxes and penalties, Aydin Dogan seemed to be working through officialdom for a financial solution. The total tax and penalty would, literally, absorb the company.

There are two related tax problems. One relates to the sale by Dogan Yayin Holdings (DYH) of 25% of Dogan TV to German media company Axel Springer. Tax authorities say DYH owes TRY 914.82 million (about €415 million) for back tax on the transaction and penalties. Then there is another tax penalty of TRY 4.8 billion (about €2.15 billion). (See details here) PM Erdogan has been less than pleased with the Axel Springer deal, particularly in light of a spectacular corruption investigation by Dogan owned newspaper Hürriyet, embarrassing to PM Erdogan’s political party.

Dogan’s business strategy has been to use foreign investment as an insurance policy against the tendency of politicians to impose their will on media outlets. Floating the various media company’s shares – minorities, but significant minorities – on the Istanbul Stock Exchange has been one insurance policy. Joint venturing with high profile foreign media investors has been another.

The Ministry of Finance and DYH failed at the end of November to reach a compromise on the total tax liabilities. Almost immediately, Axel Springer “postponed” a deal to purchase 29% of DYH. Rumors of other media asset sales set media watchers in Turkey and elsewhere wagging.

Dogan’s strategy seems to have changed from negotiating a settlement, increasingly impossible, to protecting his non-media assets. Since last week (December 11), the DYH share price in the Istanbul Stock Exchange has taken a beating, losing more than 5%. Turkey’s Ministry of Finance appeared to quash any outright asset sale by Dogan, imposing a tax lien against company shares not traded publicly.

In the opaque mix of Turkish business and politics, any buyer for Dogan assets would need advance approval from the government. Koza-Ipek Medya Grubu CEO Ali Ipek said (December 2) a deal to buy Star TV, Milliyet and Vatan was in discussion with Aydin Dogan. Word that a deal had been reached on Star TV – and perhaps more – leaked last week (December 10). In a television interview (December 13) Dogan Yayin chairman Aydin Dogan said he’d “like to shrink” the company but “there’s been no handshake.”

Dogan Yayin is the media holding company of the diversified conglomerate Dogan Holdings. Dogan TV (DTVH) is part of DYH. “If you look at Western scale, the group is not too big,” said Dogan in the television interview. “In Turkey, the size breeds envy.”

It’s far from clear how divesting Star TV affects the Axel Springer shareholding in DTVH or the CNN Time Warner shareholding in CNN Turk.

Koza-Ipek derives from the typically Turkish combination of a printing house and a mining company. In May 2008 it acquired television channel Kanaltürk. Principal owner Ali Ipek is considered politically ‘friendly’ with PM Erdogan.

By the end of Monday (December 14), media in Turkey began reporting the handshake had, indeed, taken place. Accountants were working out details, one being which executives would stay with Dogan. But any asset sale by Dogan was further complicated by tax authorities’ rejecting an appeal of the lien imposed against TRY 2 billion (about €900 million) in assets. In a statement to the Istanbul Stock Exchange, Dogan Holdings said it would appeal the decision in the courts.

In a further statement to the Istanbul Stock Exchange (December 15), Dogan Holdings confirmed a “sale or sale to be completed” of Star TV, and newspapers Milliyet and Vatan. There were no other details. Indeed, the statement, published in Borsa Diyalog, said further disclosures “will be made very public” and “rumors with respect to matters” do not originate with the company.

Those rumors have been wild or, perhaps, not. One suggested Time Warner, a joint venture partner in CNN Turk, might buy the part of the DYH assets. Another suggested that Dogan Holdings has sold or is prepared to sell all DYH assets, including newspaper Hürriyet.

Turkey’s private sector media has long provided voice to the political establishment and its opposition. Aydin Dogan, who grew rich from businesses outside the media sector, has contributed to this process, supporting some politicians, opposing others. Dogan Media’s television stations and newspapers have provided critical editorial coverage when others have supported the current political establishment.

None of this contributes in a positive way to the ambition, stronger in some Turkish quarters than others, for European Union membership. Reluctance to adopt standard assumptions of speech and press freedom, or the appearance thereof, waves a red flag in the faces of the European Commission and more than a few European leaders.

“Regarding Turkey,” said out-going EU Expansion commissioner Olli Rehn to La Libre (December 8), “we cannot open any chapter in the pre-accession negotiations before making sure that the laws addressing freedom of speech have been completely reformed. The quality is much more important than speed.”

For both Aydin Dogan and PM Erdogan there is the appearance of a simple calculus. Winning is an all or nothing race.

See also in ftm Knowledge

Media in Turkey

With roots in the East and branches in the West, media in Turkey is big, bold and sometimes government controlled. This ftm Knowledge file shows the size and the shape of this rich media market. 30 pages PDF includes Resources (December 2009)

Order here