Kommersant, (Moscow) - April 3, 2008

The media holding RBC paid USD 7.7m for the terrestrial TV channel Molodaya Kultura Sibiri (MKS), which owns a frequency in Novosibirsk. Beginning April 1, the company will be broadcasting the non-terrestrial RBC TV (distributed via cable and satellite networks). Non-terrestrial broadcasters generally aim to secure regional frequencies, as advertisers are apt to favor terrestrial channels.

RBC Information Systems announced its acquisition of 100 percent in MKS, a television and radio broadcasting closed joint-stock company, yesterday. The company owns the 21st UHF TV channel in Novosibirsk. The holding said that RBC TV will be broadcast on the frequency from April 1, 2008. The deal price stood at USD 7.7m, taking the necessary investment in the channel's development into account. General Director of MKS Yury Sluyanov confirmed the information. The new acquisition's coverage is upwards of 1.5 million people in Novosibirsk (roughly 90 percent of the city). According to TNS Gallup Media, the channel's average daily audience share (all viewers over the age of four) stood at 0.3 percent in February.

Uralsib Capital analyst Konstantin Belov described the price paid by RBC for MKS as adequate. According to Konstantin Golikov, general director of the consultancy Telecompass, prices for regional TV companies doubled over the past two years because of the general drive among national TV channels to buy regional outlets in bulk. In the estimation of market participants, a channel in a city with over a million people may cost $8m-15m, $1m-5m in a city with a population between 500,000 and 1 million people, and $0.5m-1m in a city with a population below 500,000.

RBC was founded in 1993. Comcon put the monthly viewership of the holding's non-terrestrial channel RBC TV at 12.2 million people in November 2007. According to preliminary results, RBC Information Systems' revenue for 2007 stood at USD 193m, with EBITDA reaching USD 58m. Owners of non-terrestrial channels have long been in quest of regional terrestrial stations. In March, RBC bought up 50 percent in the Yuzhny Region channel in Rostov-on-Don, which now also broadcasts RBC TV 24 hours a day. RBC Information Systems' General Director Yury Rovensky said that the total investment in the three projects (RBC is gearing up to launch its newspaper and website in the city) will reach up to USD 8m. In late 2007, Channel One.Worldwide Network purchased a terrestrial license for its TV Nanny in Lensk.

According to Alexei Trofimov, the general director of Channel One's international version, in 2008 the channel was launched in five of Russia's cities with a population of some 200,000 people. Konstantin Golikov puts the channel's investment in each of the projects at EUR 150,000-200,000. Russian Media Group acquired the Ulan-Ude-based company Stantsiya, which is licensed for terrestrial broadcasting, while the group's affiliates won over frequencies in Biysk and Prokopyevsk.

A real fight has broken out for regional analogous resources, as they are instrumental in boosting capitalizations and generating robust advertising revenue streams, Regional Development Director of Ru.Tv Vlad Kostyuk observed. According to the Russian Association of Communication Agencies (RACA), the TV advertising market reached USD 4.4bn in 2007.

Experts estimate that the regional TV channels took up over USD 1bn of the grand total. In the words of independent expert Mikhail Preobrazhensky, the interest in terrestrial broadcasting stems from the urge to lay hands on regional advertising budgets. "Advertisers, and particularly regional advertisers, are reluctant to advertise on cable channels because of their limited audiences, but they are very interested in terrestrial channels," he said.