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Downloading Why Are We Buying Media? PPF Minority Shareholder Ladislav Bartoníček Explains Kellner’s Plans
    11/18/2019 Seznam Zpravy

    PPF is expanding in a new sector: media. The group’s media strategy is explained in a Seznam interview with Ladislav Bartoníček, PPF minority shareholder responsible for telecommunications.

    Ladislav Bartoníček was present for PPF’s beginnings and is among majority owner Petr Kellner’s closest collaborators. He discusses developments at Sotio, PPF’s biotechnology division that he led as CEO up to last February, and comments on the reputation PPF and Petr Kellner have in their home country.

    Kellner and Media

    PPF started to interconnect its telecommunications business with media shortly after taking over (the Czech and Slovak telecommunications) provider, O2. Today, its internet TV service O2 TV is an established brand in the Czech and Slovak markets.
    Recently the Group sold a stake in its Hungarian operator Telenor to state-owned Antenna Hungária, which operates TV and radio broadcasting. In Bulgaria, it unsuccessfully tried to buy TV company Nova Broadcasting. A month ago, PPF announced that it reached a deal to acquire CME, which operates TV and radio stations in five European countries. 

    What are your goals in acquiring media?
    Both sectors, media and telecommunications, are very close to one another. It’s even sometimes called TMT (Telecommunications Media Technology). That’s part of the growing trend where operators want to offer clients not just connections, but also other services and content. And one of the most interesting types of content is TV. Its consumption is increasingly shifting to video-on-demand and viewing on mobiles and tablets. We think this trend will continue and we want to be a part of it.

    When you acquire a media company like CME, are you more interested in content, or in acquiring new viewers and listeners?
    First of all, we’re buying profitable companies that make money. And then comes the local content. We can’t and don’t want to compete with Apple TV or Netflix, but it is interesting for us to be able to generate high-quality local content.

    What is local content? Your O2 TV was mostly visible buying sports broadcasting rights.
    That’s local content. Hockey leagues, Czech teams competing in international competitions with proper anchors and commentators, as well as supplementary content – like Tiki-Taka (ed. note: a sports program produced by O2 TV Sport). Another example is the series Ulice (ed. note: Street, a soap opera produced by TV Nova).

    Are you buying media for the influence? Isn’t it a chance to influence public opinion, society, and politics?
    No, for us it’s a business opportunity. If we’re talking about CME, then we were accused of undertaking the transaction because of (Czech) TV Nova. But we’re buying TV stations in five countries for a rather large sum. It would be absurd to undertake such an investment so we could push through five minutes of content in the news, which we never did anyway, and we will not do in the future.

    You don’t have to keep all those TV stations if the CME acquisition does take place. The foreign stations can be gradually sold off.
    We plan to keep them right now.

    In the last PPF annual report, Petr Kellner explained his view of societal values. He said the basic principles of his generation were “freedom, work ethic, business sense, and respect for tradition.” He warned of “ideologies of individual entitlement and egalitarianism.” He added that “new ideologies have the tendency to limit freedom, creativity, and critical thinking.” That’s a clear stance that he could push as a media magnate. Is that PPF’s motive for buying media?
    I don’t want to speak for Petr Kellner, and I think the introduction to the annual report received more attention than it deserves. We do not plan to enter politics or influence public opinion.

    Telecommunications and media now represent 23% of PPF’s assets and financial services are nearly half. What is the goal?
    These are independent businesses led by independent teams. We are not interested in the telecommunication and media division matching finance. We are interested in business opportunities. In telecommunications – without television – we are talking about an EBITDA of €1.250 billion. That’s a lot of money. Moreover, our experience in retail financial services are transferable to telecommunications. Retail in general is something we understand and enjoy.

    Where is Sotio going?

    Sotio, part of PPF, has spent a number of years developing a cancer treatment. Is that still an expensive charity? Can you make money in biotechnological research?
    It’s still costing us a lot of money right now; tens of millions of euro each year. It’s a business with a huge amount of risk. If there wasn’t a chance to bring a life-saving medicine to people, then we would evaluate it much more thoroughly. 

    If you were able to bring a life-saving drug to the market, then it would be a financial windfall.
    We’d never get the medicine to people if we weren’t seeking commercial success. We can’t tell the people in Sotio: Do your research for 20 years. We’d never develop a medicine that way.

    Where do you want to take Sotio?
    We want to make it PPF’s pharmaceutical division focused on cancer treatments.

    Comparable in size and reach to your financial or telecommunication groups?
    I can imagine that. Besides developing medicine, we still need to learn about distribution and everything else involved. However, in this sector, 10 years is nothing. It’s a long-term business.

    Capitalism as a Bad Word

    PPF has an impressive history, but it doesn’t have a good reputation in Czech society. That was recently visible when you were (for quite many people) unacceptable as a sponsor of Charles University and your efforts to take over TV Nova caused concerns. It’s also rumoured you try to influence foreign policy to match your interests. Are you doing something wrong?
    It’s always your fault if you have a problem. We’re not going to say how great we are and how everyone is mean to us. But the image in the media, not just of PPF, is generally warped. It’s about wow-effect, outrage and headlines that are visible on social networks. People don’t do the work to think about things.

    The PPF story doesn’t win Czech sympathies. If you say the words “Kellner” or “billionaire” in public, it’s not seen as positive. A simplified media image reflects the general feeling. Does that bother you?
    Most people have never met Kellner, so it’s just their feeling. But as we live and work here in Czechia most of the time, PPF’s reputation is fundamental and we cannot ignore it. We have to work on better communication and doing a better job of explaining things, which is an issue we underestimated.

    We sometimes hear that Czechs are too plebeian, egalitarian, jealous, and don’t like those that are successful. Do you agree?
    I think that may be an oversimplification. The truth is, however, that capitalism is a bad word for many people 30 years after throwing off the yoke of communism. It’s partially the fault of politicians that form public opinion. The main issues in “prime time news” seem to be constantly negative, despite the country being better off than ever before. All kind of public campaigns aim to create fear – of migrants, billionaires, corruption. What’s not said is that companies like ours and others are improving the country. We create jobs and opportunities for Czechs abroad. You can’t do that without entrepreneurs.

    Do you think the view of wealthy people and business success was influenced by companies like PPF having their roots in the 1990s when corruption and embezzlement of public property were a systemic part of the transformation from communism to capitalism?
    I don’t think so because the social climate and view of entrepreneurs is worse now than it was some 10 years ago.

    Maybe we knew fewer details 10 years ago than we do now…
    There were many affairs back then, but (now) we’re talking about cases from 25 years ago. Society can’t be shaped by things that old. The economic transformation took place and there were many mistakes and problematic cases, including corruption and bankruptcies and so on. But that was a long time ago. We should discuss other things. The question whether it should have been different doesn’t make sense because no one can answer that.

    We were less aggressive than Motoinvest

    You’ve been with PPF practically since the beginning. Do you remember your first meeting with Petr Kellner?
    After the revolution, I was studying a special MBA program here in Prague. A classmate knew Petr and we met and agreed that it would be interesting to work together. For me, it was a chance to apply what I had just learned. And it worked.

    When did you personally understand that you were present at the birth of a special company? That PPF is something exceptional?
    I probably can’t give you one moment. A big shift was when we took a minority stake and thanks to some agreements and options began operating Česká pojišťovna (translator’s note: an incumbent Czech insurer). And we were able to do it well. At that point, it was clear we are capable of doing big things.

    It’s interesting to compare the beginnings of PPF and Motoinvest where Pavel Tykač started. PPF and Motoinvest both tried to take control of large state-owned financial institutions after the second wave of coupon (voucher) privatization. You were interested in banks. You acquired the insurer Česká pojišťovna. But the state started to pass laws thwarting Motoinvest and the company eventually went bankrupt. What was the difference?
    I don’t know the history of Motoinvest in detail. The truth is Motoinvest was incredibly aggressive. It’s not clear what would happen to a bank under their control. There was a feeling that Motoinvest could abuse the assets of the acquired banks. I don’t know if that was a real risk, but the fear was expressed. We tried to be humbler and show we’re interested in business, not the insurer’s technical reserves.

    But both you and they were interested in acquiring capital you could develop. Have you considered the limits in the chase for capital and what is beyond the pale?
    We considered it. We discussed methods of advertising; to what extent it’s ethical or not ethical to frighten an institution or investment coupons (vouchers) holder.

    What role was played by agreements with politicians and your ability to convince them when you took over the insurer? Pavel Tykač once said in an interview that Motoinvest’s mistake was underestimating lobbying, negotiations with politicians.
    In the case of the insurer, it was a single fundamental moment: talks about who would administer the company when it ended up in financial trouble. At the time, we were able to convince the Czech National Bank and the Finance Ministry that we had a plan to restructure and return it to the black. And we basically haven’t dealt with institutions and politicians since then.

    Could PPF have grown to its current size at another time? Without the coupon (voucher) privatization, without the specific conditions of nascent capitalism in the early 1990s?
    I think so. In a different field and with other opportunities.

    For example?
    Modern technologies; companies like (antivirus) AVG and Avast. Certain opportunities open at certain points in time. Our opportunity was the transformation of the economy. That doesn’t mean there aren’t other opportunities. Our dream, for example, is to do something big in biotechnology.

    Key Moments for PPF

    After the insurer, what were the other key moments building PPF?
    Another important moment was when we acquired Moravská leasingová společnost. The leasing firm was in trouble and we decided we would try to develop the business model instead of liquidating it.

    That was your first encounter with consumer loans?
    Yes. We said it would be an interesting business. It was an opportunity we took at the right time with the help of the right people.

    Was another key moment in PPF’s history the first investment into TV Nova? The financial speculation that brought in about ten billion (koruna) and brought Petr Kellner and Jiří Šmejc together.
    That was certainly a key moment, especially because of the connection with Jiří Šmejc. But not just him. PPF is where it is because of a number of people that joined us at that time.

    Are there other key moments in your history?
    Certainly the joint venture with Generali. At a certain point it was clear we weren’t able to add value to Česká pojišťovna insurer but a connection with a large multinational company could. That changed us. First, we learned what it means to partner with a global firm – both the good and the bad. We expanded our territory because we managed Generali PPF Holding in 14 countries. In the end, we exited the holding under very advantageous financial conditions.

    And then came the investment into telecommunications. You also went down a couple of dead ends. You took a beating in Russia. First you failed to participate in the Russian privatization and later you clashed with Russian magnate Oleg Děripaska over insurer Ingosstrach. There may even be more painful things we don’t know about.
    The experience from the Russian privatization was unique for us and moved us forward a great deal.

    Kellner’s Dead Ends

    PPF mostly took a big loss from the Peter the Great Russian privatization fund. You even left Russia for a while …
    But we learned a lot. In terms of our conflict with Oleg Děripaska, in the end we left Ingosstrach without any major losses. The lesson is that we didn’t research the specifics and circumstances well enough and we didn’t evaluate them properly.

    It’s not possible to fight local magnates in Russia?
    In general, there’s little point in going to war against other magnates …

    Hostile takeovers can be, however, very lucrative, like the acquisition of Orco developer by Radovan Vítek. There are lawsuits, but if he survives it’s a deal that will launch him into second place in the Czech wealth rankings behind Petr Kellner.
    There are groups and people that focus on that type of business. We don’t really work that way. We don’t think it’s attractive to seek conflict.

    But you’ve had your share – such as the takeover of Sazka lottery company with Karel Komárek. Do conflicts stress you out?
    I’m not stressed, but I see more opportunities in things that are creative, that go forward where I can come up with something great, create something, and not lose time in legal battles.

    Can you build a multinational empire without conflict?
    No. You have to know how to aggressively defend yourself and a certain toughness is necessary in certain specific cases. It’s a question of setting boundaries and limits.

    What about assessing risk? Russia is still a risky country. You were the first consumer loan investor to go into China. You’ve entered into untouched Asian markets. Is risk the basis for success?
    That’s the adventure. It’s intuitive. It’s hard to give it a clear structure. You have the hard data of how the market behaves, what it looks like, how it grows, what the potential is. Then you learn the reality is different. It’s about courage, intuition, and hard work.

    We’re Restless

    What are the other contributors to PPF’s success?
    I think PPF is successful because we’re restless. And the most restless of all is definitely Petr Kellner.

    It’s a bit of a shortcut. He’s a great strategist who has a long-term vision and can connect things that aren’t obvious at first. He’s also able to go into great detail when necessary; to go from the helicopter view to micromanagement when it makes sense. He’s extremely hard working and is practically always thinking about business, which can be difficult for the rest us sometimes.

    Petr Kellner recently decided that PPF will only do big deals worth over €100 million or in markets with more than 100 million people. Where did that come from?
    At about the time of the O2 acquisition, we looked at our portfolio of assets and said that the smaller projects should be part of companies we own and not at the level of PPF. It would be ineffective because a project with the potential to make €10 million needs the same attention as a bigger project.

    PPF and China

    What do you see as China’s role in the world today?
    It’s a different culture and it’s complicated to apply our optics based on European, Judeo-Christian culture. I can’t simply judge and say that it’s a repressive regime …

    But in European terms, it is a repressive regime, is it not?
    In European terms it is, but the question is what are the functional alternatives?

    Many people, such as the clear opinion of Prague City Hall, say we shouldn’t do business with them if they violate human rights.
    That’s an individual choice. I don’t know if this line of thinking is just based on headlines and how much people know the reality; how much work they put in. There’s probably no point in contradicting that opinion if someone has it. But if you say that we won’t do business with China, then others will immediately take our place: the Germans, the French… And in China 10 million people, the whole Czech Republic, is just a small town. China won’t suffer if Czechs stop doing business with them.


    Ladislav Bartoníček
    Graduated from the Prague-based Czech Technical University (ČVUT)
    Joined PPF in 1991 as an executive director
    Was CEO of Česká pojišťovna universal insurer (the key asset that launched the growth of PPF empire) for ten years
    Was CEO of biotechnology company Sotio in 2014–2018
    Currently serves as CEO of PPF Arena 1, the company that consolidates PPF Group’s investments in telecommunications, since February 2019
    Holds a 0.535% stake in PPF (one of Petr Kellner’s minority partners)

    Author | Zuzana Kubátová


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