Our take...
The acquisition of Alpha Media Group is a wise move, (1) due to the overall dynamics of the Greek TV advertising market and (2) Alpha Media Group's relative position in that market.

(1) While considered part of western Europe, TV advertising growth rates in Greece are only just below those of eastern European markets. From 2001 to 2007, the Greek net TV advertising market grew with a compound annual growth rate (CAGR) of nine per cent from Euro300m to Euro500m and is expected to deliver annual net growth of six to seven per cent throughout the next five years. This stands against TV advertising CAGR 2008-2012 of 1.3 per cent in the Big Five western European markets combined. The fact that gross TV advertising expenditure in Greece fell by six per cent in Q1 2008 over the same period in 2007 does not contradict a positive outlook as it has to be read against a very strong 2007, which showed exceptional TV advertising growth of 18 per cent due to strong demand and rate increases.

(2) As the third biggest TV channel in terms of advertising revenue, Alpha TV occupies a potentially rewarding challenger position and could increase its gross TV advertising market share from 15.3 per cent to 16.8 per cent in Q1 2008 over the same period in 2007. While Mega, the Greek number one channel, could consolidate its already large share of gross TV advertising (it only grew by 0.5 per cent to 31.6 per cent in Q1 2008 over Q1 2007), Antena 1's share dropped from 24 per cent to 20 per cent. This lack of gross revenue growth at the two leading channels can only be partly explained by the fact that they could not sustain the 2007 rate card increases as their commercial target audience (15-44 years) during prime time dropped by 7.4 per cent (Mega) and 1.1 per cent (Antena 1) from Q1 2007 to Q1 2008. In contrast, Alpha TV could increase crucial prime time audience by 4.6 per cent over the same period. This leads Screen Digest to believe that Alpha TV has also achieved more bargaining power on the net market, as better audience shares allow the channel to lower discount rates and decrease the discount rate gap to Mega and Antena 1. As public channels only play a minor role on the Greek TV advertising market with a combined gross share of 5.3 per cent, the potential market for Alpha TV is promising. However, it has a close competitor in Star channel, which held a 16.5 per cent share in the gross TV advertising market in Q1 2008. RTL Group's involvement allows Alpha to draw on the group's extensive programming portfolio and create synergy effects between RTL Group's production arms and its in-house company Plus Productions. The availability of high-calibre content is likely to further drive audience shares, allowing Alpha TV to take on the market leaders and to offset threats by Star TV, which does not have such powerful backing. Star's audience growth was flat in Q1 2008.

The Greek deal comes as a surprise. Analyst attention recently focused on whether the Bertelsmann announcement of mobilising cash for a free TV acquisition might mean that an investment by RTL Group in British broadcaster ITV was imminent. British regulators have issued a ruling which forces BSkyB to reduce its 17.9 per cent stake in ITV to less than 7.5 per cent because its high share was deemed anti-competitive and against the public interest. This led analysts to believe that either Italy's Mediaset or RTL Group were about to invest. While RTL Group's interest of investing further in eastern Europe is also widely known, Greece has been off the analyst radar as speculation revolved around the new EU entrants. The lack of Bertelsmann money in the Greek deal also means that RTL may still make a larger, Bertelsmann-backed acquistion in the mid-term.