Taking easyJet out of Russia

Michael Hedges August 11, 2008

News Corporation is beating a hasty retreat from the Russian market, says Kommersant. It’s outdoor advertising arm, News Outdoor Group, may have found a buyer for the Russian business. The usually credible Moscow business daily suggested (August 8) JCDecaux is the only bidder remaining, and at a substantially marked-down price.

A year ago News Outdoor Group said it was looking for a 30% “strategic investor” for the Russian segment. US investment bank TPG Investments said at the time it was willing to part with $1.65 billion for the entire outdoor division. Nothing, obviously, moved.

Then last week (August 6), during an investor conference call from Beijing, Mr. Murdoch – The Elder – pronounced Russia a most inhospitable place. Over the course of the last few weeks News Corp has made known its intention to get out of much of its Eastern European TV business, investing instead in India. And, too, The Elder has the Wall Street Journal to save.

“The more I read about investments in Russia, the less I like the feel of it,” he said. “The more successful we’d be, the more vulnerable we’d be to have it stolen from us.” And this was two days before Russian tanks and troops poured across the border into southern neighbor Georgia.

Russia’s official media was quick to play down the intended withdrawal of a major media company. “It seems not all investors share Murdoch’s opinion,” said Russia Today (August 7). “In the past 6 months foreign direct investment reached 30 billion dollars - 20 percent more that in the same period last year.”

"If somebody was making the decision today about investing into Russia,” said Renaisance Capital’s Roland Nash, quoted by Russia Today,  “when they saw all of the headlines in the western press coming out about problems that exist for TNK-BP it would make them question their potential decision to invest into Russia.  So its definitely negative for Russia."  The TNK-BP “problem” included British Petroleum’s chief executive for the Russian joint venture Robert Dudley effectively tossed out of the country to solidify oil production firmly in Russian hands. And this was just two days before the Russian navy moved to blockade the only shipping port of its tiny southern neighbor.

That News Corp feels the need to exit Russia quickly is only related to the announced exit from Eastern Europe in a small way; geography and corruption. And it’s not because News Corp, owner of Bush administration mouthpiece Fox News, metaphysically avoids dubious entanglements. The Elder has had an interesting relationship with Chinese authorities. And, too, there was that strange radio and TV deal in Georgia. News Corps presumed exit from Bulgaria, Lativa and Serbia likely has more to do with a change in focus than shake-downs by corrupt locals.

Russian authorities, dating back to the waning days of communism, welcome foreign investors but insist on cash up front and, more recently, control. The LNK-BP story has been a wake-up call for foreign investors. Russia on a war footing with pro-Western Georgia only increases anxiety. The Russian stock market hit a 15 month low (August 8) as investors pondered oil prices, currency exchanges and, of course, war.

Like it or not, a developing country’s media sector is significantly enhanced by the operating presence of multi-national media giants. It’s the media version of the ‘easyJet effect.’ It is a multiplier; big experienced media companies know how to talk with other big experienced media companies. NewsCorp’s bTV in Bulgaria is a prime example. CME’s Nova TV in the Czech Republic is another. Lagardère’s presence in Poland, yet another. When a major multi-national media company decides to pull out it’s saying volumes.