Friday 20 May was one of the most dramatic days in the Croatian media, the day which will determine the development of media in Croatia and with that, the Croatian society. That marked the final day for the submission of bids for the concession of the HRT Third Program that the government has decided to privatize. This is also the first legal tender for a national TV concession, since the one won by Nova TV was orchestrated by Ivić Pašalić and his partners from his criminal media cartel Grupo, and was anything but regular. Had Croatia been a law-abiding state, that tender would have long ago been nullified and another drawn in its place. However, considering that the former government was completely in the hands of Ivić Pašalić, and the new government fears a media attack by Grupo, it is perfectly clear that that tender will likely never be nullified.

TERMS FOR WINNING THE CONCESSION According to the competition regulations, there are six terms for winning the concession. The first is the programming offered by each bidder. A certain quantity of the program will have to be domestic, and a certain amount foreign. The HRT Council will obviously give greater attention to those programs which have a higher amount of domestic programming. The second condition is personnel. The company which attracts the most professionals and well known people from television media will have the better shot. The third and fourth conditions are technical and technological, that is, experience in program management. The fifth is adequate facilities and the sixth condition is of a financial nature. The annual price for the concession is 50 thousand Euro. The annual lease for 48 base and 269 supplemental transmitters and relays is 5 million Euro, which is payable to Transmitters and Relays, formerly a part of HRT.The winner of the third program concession will in fact win media space in which events in Croatia can be created. Other than the dull state television and Nova TV, whose management failed to jump on the opportunity to play a larger role thanks to a poor choice of editor for the information-political program, the owners of the third program will be the most powerful people in the country, regardless of which party or political option happens to be in power. The program will have solid ratings and will destroy the state held advertising monopoly and its outrageously high prices. Within two or three years, the investment of 10 million Euro will bring its owners a several fold return.

Mixed consortia

Croatian law does not permit the owner of the television station to hold more than a 33% stake. For that reason, consortiums have been formed with a minimum of 3 members. The decision on the concession will be made by the HRT Council, consisting of 9 members, and the decision could be made as early as late June, much earlier than originally anticipated. The reason is that the majority of the Council members wish to finalize the decision before the new Electronic Media Act is passed, after which point a new Council will likely be selected. The Act could already pass through parliamentary voting in early July, which is why it is no surprise that individual bidders are showing so much interest in information on the council members, among which, as Nacional has learned, a great fear has set in.

Zagreb media circles are swarming with stories that each vote on the council is worth 200 thousand Euro, which the Council members are fiercely denying. Meanwhile, they fear that secret controls and wiretapping which they believe the police or POA are conducting on their phone lines, in an attempt to prevent any possible bribery or attempts at corruption. If the decision is not made by late June, then it will be made in early October. There is a third solution – that the entire tender could be terminated due to a conflict of interest between the parties of the ruling coalition, which nonetheless have the deciding influence over the Council members.

Of course, such an outcome would make no one happier than Ivan Čaleta, the alpha and omega of Nova TV, who despite great pressures and burdens from Grupo has succeeded in making a respectable and financially successful TV station in a relatively short period of time, of course, with the exception of the news program.

The majority of the domestic candidates chose foreigners with big experience in creating television for their partners. However, the foreigners, who need the domestic shareholders for now due to the current law, will do their utmost to get rid of them at the first possible opportunity. The greatest battle is being fought between two media giants: Germany’s RTL and America’s NewsCorp. In the division between these two, the other companies fighting for a chance are the Swedish-Dutch SBS, the American CME owned by the controversial heir to the Estee Lauder fortune and a completely domestic consortium the Moslavina television Net.

Talks on the composition of the consortia have been intense over the past few months. Only one day before the bid deadline it appeared as though everything was finally ironed out. The two largest domestic players, TDR and HT, had signed pre-contracts with SBS. They had agreed to equal partnership relations in which each company would hold a third of the concession, as the law permits. NewsCorp, which was also interested in these companies as partners, backed away from the competition for that reason. As Nacional learned, the entire situation was turned upside-down in the early morning hours of 20 May, which Ivica Mudrinić received a fax from SBS at 2:45 a.m. laying out the new terms. In the new draft contract, SBS sought a majority package for itself and all management rights. They demanded that TDR and HT hold shares which would be transferred over to SBS at the right time.

Mudrinić was shocked that SBS would do this to him and Ante Vlahovic at the last possible second – counting on the fact that there would be no time to form a new consortium to noon and that they would have to accept their blackmail.

However, the assessment by SBS and its advisors – with Toni Ramljak from the investment house CAIB as their prime consultant in Croatia – was a poor one. After consultations with the directors of Deutsche Telecom and Vlahović, Mudrinić rejected the ultimatum and that night began to put together a new consortium. Considering that it was a matter of hours, Vladimir Smolec, owner of the largest marketing agency Digitel, which works for both TDR and HT, helped in the endeavour. In the dead hours of night, they contacted the top people in Newscorp and by the morning had set up a new consortium of equal partners.

In another part of town, another drama was unfolding. Having learned that TDR and HT had rejected their ultimatum, SBS and its consultant found themselves in an exceptionally uncomfortable position. At once they were left without a consortium which would follow their rules of the game. Time to the bid deadline began to diminish. They had to return to those they had first negotiated with, and who had been convinced that their race for the concession was over before the bid deadline even approached.

In this situation, their good luck charm was Marijan Kostrenčić. One of the greatest sly privatization players, who had his fingers in the double sale of Vecernji List (first to Zubak and Nuic and then to Styria), in the formation of VIPnet and a series of other acquisitions. With his help, by the morning, Vecernji List (30%), the Croatian Music Union (24.5%), the Croatian Olympic Committee (2.5%) and Kostrenčić himself through his company Intel (10%) had entered into the consortium. Considering that SBS had certainly not backed away from their demand to have a majority share package, it would appear that the Croatian Music Union are holding shares for SBS, while SBS will finance their part in launching the program which will cost a minimum of 10 million Euro.

With their entry into the consortium, Vecernji List clearly showed the direction they wish to develop in. Horst Pinker, director of Styria, is planning to build a media house which will include TV and radio in addition to printed media. Further proof of their intentions were the talks on buying Radio Cibona, which were recently finalized.

RTL and EPH?

The second strongest consortium is the one surrounding RTL, which brought together Podravka, Agrokor, Atlantic Trade, and Hypo Vereins Bank and is tightly connected to the two parties in the ruling coalition – SDP and HNS. The founder of Radio 101, Željko Keber, now with Hypo has media experience and is considered to be one of the most respected men in the Croatian media. Since the very beginning, he was interested in the creation of the news program in the consortium, and made that a condition of his participation in the entire project. Though he received a firm promise to that effect, it is yet to be seen how things will unfold if RTL wins the bid. That is, there have been suspicions since the very beginning that the consortium is tied to Europapress Holding and its owner Nino Pavić. The best evidence of the suspicion of his participation in the entire contest over the third program was seen in the recent visit by CEO of the German media company WAZ, co-owner of EPH, to Premier Račan and Parliamentary president Tomčić.

In the company of Nino Pavić, Erich Schuman visited the highest Croatian officials from the start, lobbying for the RTL option, in which WAZ is co-owners. With that act, the Premier made it clear from the get go whose side he was on, which the remaining contenders received with great dissatisfaction.

None of the consortium members were convincing in their claims that WAZ had nothing to do with them, but opponents from other consortia believe that this is not the case, and that granting the concession to RTL would in fact be the establishment of a complete media monopoly by EPH in Croatia.

The entirely domestic consortium is NET from Kutina, which over the past few years has succeeded in achieving high ratings in Zagreb and eastern Croatia with very little funds. As Nacional has learned, if they win the concession, they will be supported by the banks and investors. Like the remaining bidders, they are also lobbying within the ruling structures, at all levels. However, the winner will be the won who manages to secure 5 votes of the total 9 available in the Council.

The Council will have to choose between eight bids, five of which are known and three which are still unknown. That is, the official bid opening will be held on 3 June. Those well acquainted with the situation claim that at least one of the bids is from Ivan Čaleta who purchased the bid documentation through his company Studio Millenium.

Whether the tender will succeed will be seen soon enough. The most interesting question of all is how HTV will conduct itself, considering that the appearance of a new TV station in no way suits them. Will the winner be decided through a fair battle and the best bidder or will politics again be the deciding factor? The game has begun, and this will certainly be one under much public scrutiny. The stakes are too high and the results could tailor the fates of many. Including Croatia.