CEE investors “looking for stable cash flow”

With continued access to funding, trends from last year – and with M&A driven primarily by the availability of funding – the pattern of consolidation and investment in cable and telcoms seen last year will continue in 2014-15, with investors looking for stability of cash flows more than long-term growth prospects, according to Piotr Nocen, founder and managing partner, Resource Partners, speaking at the Digital TV CEE conference in Budapest this morning.

Nocen said telcos have issues with declines in core revenues and that convergence will continue to be a theme of M&A activity. “When you can make money from leveraging deals, startups are only for the brave,” said Nocen. Cable, DTH and infrastructure players will attract internet, while niche TV channels, DTT, OTT players and online media will attract interest, and IPTV and mobile TV will struggle to attract investors, he said.

Nocen said that the primary driver for convergence will not be from cable operators consolidating with each other but from mobile and telecom players trying to protect their own cash flows and fight against revenue decline. He said this happened in Poland, where mobile and fixed were owned by the same player.

The level of optimism in central Europe is now higher than elsewhere in Europe, according to Nocen. “My personal worry is about western Europe. in spite of seven years of fuelling the economy we don’t see significant improvement in GDP growth rates,” he said.

Despite low growth, there have been transactions in cable and telecoms in the region. the creation of United Group in south-eastern Europe had seen the entry of private equity giant KKR into the region. More interestingly Poland had seen the merger of Cyfrowy Polsat with mobile operator Plus. There was growing interest in online media companies as well, said Nocen.

Addressing the impact of the wider economic background on the industry, Nocen said that it is difficult to predict how markets will respond to tougher central bank-imposed credit conditions. Business sentiment in western Europe is now on an upward trajectory again, but with low interest rates. In central and eastern Europe, there was recovery after the 2008 bust but no return to high growth.  However, Nocen said there were significant differences in growth rates between counties in the region.