Russian president Vladimir Putin has signed into law the amendment to the country’s media law that will limit foreign ownership of media companies in Russia to 20%, down from the current limit of 50%. The legislation will apply to both existing and future foreign ownership and comes into effect in January 2016.
Russian broadcaster CTC Media, 100%-owned by a Delaware-based holding company, with Modern Times Group (MTG) as a 37.9% shareholder, will be directly impacted by the law. Russian owners holding through offshore holding structures will have one additional year to comply.
The change also affects MTG’s ownership of its own entertainment channels that are available on a wide range of Russian cable and satellite TV networks, and its shareholding in the Raduga TV satellite platform.
CTC Media said its board has formed an advisory committee consisting of non-executive directors, which is in the process of appointing international and local financial and legal advisers to evaluate any action that it can take to comply with the law, including corporate restructuring, franchising and licensing structures, capital reorganisation or divestments.
“While these new legal requirements are not expected to directly adversely affect our operating business, they do have significant implications for the ownership structure of our Russian operating business by our American parent company and its international stockholders,” said Yuliana Slashcheva, CEO of CTC Media.
“We are analysing our alternative courses of action in these circumstances, in order to comply with the law and best protect the interests of our stockholders.”
“This is obviously a complex situation and we are working closely with local management and our advisers to review the various options available to us moving forward. It is too early to come with a solution for each of the affected businesses, but we are looking at a range of potential outcomes. We have built up these entertainment businesses over 20 years and the channels are some of the most watched in Russia, so we will do all that we can to preserve the interests of all of our stakeholders,” said Jørgen Madsen Lindemann, MTG President and CEO.
CTC represents a considerable investment for MTG, which has seen its shares fall to SEK204 (€22.18), compared with a 52-week high of SEK366.90.