KKR eyes more Balkan growth

US private investment firm Kohlberg Kravis Roberts (KKR) is looking at expanding further into the Balkans, after last week’s acquisition of pay TV outfit SBB/Telemach Group.

“Now that we’ve done our homework on the macro side, it does open doors for us to look at other opportunities in the region,” said Henrik Kraft, who heads KKR’s technology and telecoms team in Europe.

“This is our first direct investment in Southern Eastern Europe,” KKR’s co-founder and co-CEO Henry Kravis said. “It is a sign of our confidence in the prospects of SBB/Telemach and in the region.”

With KKR backing, Belgrade-based SBB/Telemach is expected to expand its existing Serbian and Slovakian pay TV and broadband services across the region and might look to acquire another operator in Croatia.

KKR took over SBB/Telemach (aka United Group) with the help of former US ambassador to Serbia Cameron Munter, but a week after the deal was announced, there is still no confirmation or denial of speculation that the US firm paid a whooping €1bn (US$1.4bn) for the regional telecommunications leader.

However, data released by the Serbian Business Registers Agency shows it was the right time for an injection of US capital: SBB made a profit only in 2011, when it earned €3.46m on revenues of €110.2m. Last year, income grew to €117.2m but with a net loss of €10.5m, the financial report states.

Kraft said SBB/Telemach’s operations are “as modern and sophisticated as in Western markets, but the company is operating in a market with a low penetration of broadband and pay TV services. We’ve seen that story develop in Western markets. There’s a lot of growth potential.”

KKR said it intends to keep pursuing a consolidation strategy, with the aim of possibly listing SBB/Telemach on the Warsaw stock exchange, or selling it to a mobile phone operator looking to offer other services to its customers.

SBB/Telemach might also try to take over Croatian cable TV and broadband operator H1 Telekom, valued at €30m with some 130,000 revenue generating units. Telekom Austria was considering bidding for both SBB/Telemach and H1 Telekom, hiring Bank of America Merrill Lynch to advise it on the deal, but eventually decided not to.

KKR acquired the SBB/Telemach Group from its majority stakeholder Mid Europa Partners, a buy-out group focusing on Central and Eastern European markets. KKR said SBB/Telemach’s management team, led by founder Dragan Solak, will remain in place and retain a minority stake in the company.

SBB/Telemach comprises Serbia Broadband (SBB), Telemach Slovenia and Telemach Bosnia & Herzegovina, plus satellite TV platform Total TV operating across six countries: Serbia, Slovenia, Croatia, Bosnia & Herzegovina, Montenegro and Macedonia. SBB/Telemach has 1.7 million revenue generating units.