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Hungary EU Presidency: Definitely Will Not Make Europe Great Again
28 June 2024
As the PPF investment group navigates controversies and probes across Europe and beyond, its entanglement with political influences and market dynamics reveals a complex legacy that continues to evolve in the post-Kellner era.
The Prague-headquartered PPF investment group has recently attracted international media attention.
This follows turmoil at the largest commercial television station in Slovakia and, more notably, reports of the European Commission launching a probe into some of PPF’s dealings. The probe concerns PPF’s €2.2 billion sale of its telecommunications assets in Bulgaria, Hungary, Slovakia and Serbia to the United Arab Emirates’s state-backed e& (or Etisalat) in the summer of 2023. Experts say this marks the inaugural EU probe under the new Foreign Subsidies Regulation, targeting significant players in PPF and e&.
The group’s investments encompass diverse sectors such as banking, financial services, telecommunications, media, biotechnology, real estate and industry, spanning markets across Europe, Asia and to a lesser extent also North America.
Czech billionaire group back under scrutiny
Tensions between the management and journalists at PPF-controlled Markíza escalated last month. Michal Kovačič, the host of Na telo, Slovakia’s most popular political programme, criticised the management of Markíza in an unauthorised address to the audience. He warned against the “Orbánisation” of Slovak media.
While the probe and the situation in Markíza are unrelated, they have moved PPF back into the spotlight. This level of scrutiny has not been seen since the era of Czech populist President Miloš Zeman. During Zeman’s presidency (2013-2023), PPF was accused of orchestrating Czechia’s closer ties with Beijing and the Kremlin, with Zeman acting as a convenient puppet rallying nationalist and populist forces.
Similar to the early 2020s, PPF has vehemently denied involvement in informal political deals. “Owners are not interfering and will not interfere to the advantage of the [Slovak] government,” PPF’s CEO Jiří Šmejc said in mid-May in Prague. He made this statement during a press session where he presented PPF’s second most successful financial results in the company’s history. PPF controls Markíza through Central European Media Enterprises (CME), which it acquired in 2020.
“[Owners] will always push the management and editorial council to strictly ensure that we have objective and professional news. And that is all. We certainly won’t dictate what the news should be like. We just want, and we have some monitoring systems in place, for the news to be objective,” Šmejc added.
Manipulating business, politics and media in Central Europe
However, like a few years ago, politics affect several PPF businesses, not just in Asia but across Europe too. This is particularly visible in PPF’s involvement in Slovakia’s digital toll system through the Sky Toll company, part of PPF’s ITIS Holding, an umbrella company that also includes Czech Toll and technology companies TollNet and PaySystem.
The saga of Sky Toll dates back to 2009, during the first cabinet of populist Prime Minister Robert Fico. Since then, Slovak anti-corruption NGOs and journalists have criticised its services as overpriced. The success of previously unknown Sky Toll also foreshadowed the expansion of companies now linked through ITIS Holding into digital toll markets in Czechia and Slovenia, with reports suggesting Croatia as the next destination.
In light of Sky Toll’s activities, many Slovak journalists took PPF’s claim of keeping politics and business separate with scepticism. Alarm bells rang for some after Markíza shut down its political podcast Cirkus Politikus last autumn and after the TV’s long-term news director Henrich Krejča was replaced by Martin Kratochvíl, who was described as “a media mercenary” by a seasoned Slovak journalist in a private conversation with Visegrad Insight.
By then, the Slovak media scene resembled the “media war” in Slovenia during the last cabinet of populist right-winger Janez Janša in 2020-22, especially after Fico labelled Markíza, dailies SME and DennikN, and the online news outlet Aktuality.sk as “enemy media”.
In March, the cabinet filed a legislative proposal aimed at restructuring the public broadcaster RTVS, a process that would automatically eject the current management. This proposal sparked domestic protests and international criticism, accusing Fico’s cabinet of attempting to control RTVS. In the latest development, RTVS journalists stepped up their protests and declared a strike, but the ruling coalition has pushed the contested legislation through parliament, where it holds a narrow majority of 78 out of 150 legislators, on 20 June.
Moreover, shortly after Kovačič criticised the Markíza management in May, the show Na telo was suspended, prompting a strike alert among Markíza staff supporting Kovačič. In response, Slovakia’s Minister of Defence Robert Kaliňák, one of Fico’s closest collaborators in the ruling Smer party, backed the Markíza management.
Kaliňák alleged that there is “a political bias” against Fico’s government among liberal journalists in Slovakia. “We reject bias from political activists posing as journalists,” Kaliňák said of the award-winning Kovačič. He added, “As a government, we cannot accept that any journalist, who is not capable of respecting the rules of balance, resolves disagreements with an employer through a pirate entry.” He also pointed to “imbalance in [political] discussions” as the reason for filing the controversial legislative proposal aimed at restructuring RTVS.
Kaliňák’s statement from the end of May came two weeks after an assassination attempt on Fico, when it was becoming apparent that the shooting was unlikely to cool down the aggressive rhetoric used by cabinet politicians. In a rare moment, immediately after the shooting, both the government and the opposition came together to condemn the assassination attempt, but the continuous attacks on liberal media in the country signal the period of relative lull is over.
Against this heightened atmosphere, the Czech branch of the International Press Institute (CZ IPI) addressed an open letter to the majority owner of PPF, Petr Kellner’s widow Renáta and Šmejc. In it, the Chairman of the Supervisory Board and editor of Reportér magazine, Robert Čásenský, wrote that “personal guarantees to maintain” Na telo and Kovačič on Markíza’s programme “can be the first step in confirming your resolution to defend and support free journalism.” He highlighted that “freedom of media in Slovakia and Czechia is hardly separable given the proximity of audiences in both countries and mutual sharing of media content.”
Kellner’s death left PPF unchanged
Under the watch of Šmejc, who succeeded Kellner at the helm of PPF after a period of transition following Kellner’s death in 2021, PPF has maintained that its exit from the Russian market – where the group has been active in transportation, real estate, banking and other fields – was “ethically correct”. However, following the Russian invasion of Ukraine, it is difficult to imagine that PPF’s image could withstand the growing criticism of companies still active in Russia.
Although PPF’s increasing involvement in Russia since the early 2000s mirrored the era of Vladimir Putin’s United Russia party without much media attention in Prague, it is unlikely this relative obscurity would have continued. Furthermore, Šmejc himself told journalists in May that the exit from the Russian market, where he oversaw PPF activities in the 2000s, was also “a business correct decision because it is more and more difficult to sell these assets.”
PPF is still in the process of selling its real estate assets there, and the sale of PPF Life Insurance is awaiting approval from Russian authorities.
Perhaps more revealing than what has changed about PPF is what the case of Markíza illustrates about what has not changed. As Visegrad Insight wrote in February 2021, PPF has faced accusations of entering into business cooperation with majority-state-owned Telekom Serbia. Serbian opposition and independent journalists describe Telekom Serbia as being under the firm control of Serbia’s autocratic-leaning President Aleksandar Vučić and his ruling Serbian Progressive Party (SNS).
Visegrad Insight was one of the outlets that examined the leaked Telekom Serbia presentation. In this presentation, the management described the cooperation with PPF’s then Telenor (now Yettel) as leading to “a complete destruction” of SBB, a part of the United Group, whose media give room to Serbian opposition and government critics. Under this cooperation, Serbia’s state operator would grant Telenor access to the telecommunication infrastructure.
PPF has dismissed these reports as part of what it said were tough competition practices in the region. However, non-government-aligned NGOs and journalists describe the media and telecommunications sectors in Serbia as clearly lacking the degree of plurality seen in Western markets.
Historic EU probe?
The 2023 sale of a controlling 50% plus one share in PPF Telecom assets in Bulgaria, Hungary, Serbia and Slovakia first brought PPF to the headlines, primarily for introducing the Emirate Telecommunication Group Company (e& or Etisalat) to three EU markets and one EU candidate country.
The recently announced EU probe into the deal will be “the first use in an acquisition of the [EU’s] new powers under the Foreign Subsidies Regulation (FSR),” according to Brussels-based lawyer Alec Burnside, as quoted by the Financial Times. This investigation comes amid concerns that the majority state-owned e& received state funding for the deal, giving it an unfair advantage over market competition.
“The FSR allows us to tackle distortive support from third countries for the acquisition of businesses in the EU,” commented Margrethe Vestager of the European Commission (EC).
“The alleged subsidies notably take the form of an unlimited guarantee from the UAE and a loan from UAE-controlled banks directly facilitating the transaction,” the EC stated in a press release published earlier this month.
The EC has until 15 October to decide. Whether it approves the transaction or not, the case already exemplifies PPF’s notable business record with countries where business interests and state interests are intertwined. In this respect, PPF’s modus operandi has not significantly changed.
Petr Kellner built the company leveraging government contacts during the era of Czech and Russian post-communist privatisations, and he has embedded this approach in the selection of managers, many of whom still form the backbone of the company, including his collaborator Jiří Šmejc.
Others include CFO Kateřina Jirásková and her husband Petr Jirásko, who heads the largely private clientele-oriented PPF Bank, and who have been a firm part of PPF’s core already.
What has changed since Kellner’s heyday is the continued proliferation of PPF in IT, media and entertainment, not only in Central and Southeast Europe but also in Germany, Sweden and Poland.
Additionally, PPF has maintained an image of a company that is indifferent to the erosion of democracy and unwilling to confront autocratic regimes. This in combination with PPF’s increasing focus on digital markets are rather worrying signs.
When PPF management speaks of “objectivity” in a similar manner as Robert Kaliňák and other Slovak cabinet members, then it should be questioned what type of objectivity PPF pursues. That is, whether it is the same desire after “objectivity” which allegedly prompted the sitting Slovak cabinet to redraw the media landscape in the country, and which critics condemn as a power grab in disguise.
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