Emerging Europe’s largest ever media deal becomes part of US-China row

It was one of the biggest media deals ever seen in emerging Europe, but it may now become the subject of a US Treasury investigation.

Last October, Central European Media Enterprises (CME), currently owned by AT&T and which operates some of the most popular TV channels in Central and Eastern Europe, announced that it was set to be acquired by an affiliate of the Czech PPF Group in a cash transaction valued at approximately 2.1 billion US dollars.

PPF Group invests in multiple market segments such as financial services, telecommunications, biotechnology, real estate and mechanical engineering. Now, a US senator, Marco Rubio, has written to the US Treasury Secretary Steven Mnuchin asking for the deal to be reviewed by the Committee on Foreign Investment in the United States (CFIUS), as it undercuts US national security interests related to Central and Eastern Europe, as well as to China.

Senator Rubio claims that both the PPF Group and its CEO, the Czech billionaire Petr Kellner, have a record of acting as China’s proxies inside the Czech Republic.

“Approximately one third of the PPF Groups’ profits come from subsidiary Home Credit’s individual lending business in China,” says Rubio in his letter. “This politically precarious business relies on the Chinese government’s non-banking loans license. Consequently, Mr Kellner and his companies have supported China’s malign activities abroad.”

The senator goes on to say that in Serbia, PPF-owned telecommunications finns are working with Huawei to develop 5G networks, and that in the Czech Republic, PPF’s cell phone operator and telecom equipment provider run on Huawei’s equipment.

“Most egregiously,” adds Mr Rubio, “PPF’s subsidiary, Home Credit, hired a public relations firm for 2,000 hours of work devoted to manipulating Czech public opinion favorably toward China. This work included spying on Czech politicians, pressuring media to withdraw news articles critical of China, and creating a new think-tank, Sinoskop, to employ biased analysts to influence public debate. Finally, it has come to my attention that PPF has already used its expected acquisition of CME’s Czech media outlets to intimidate Czech media and politicians into silence.”

Mr Rubio also states that the United States has an interest in preserving a free and open media environment overseas as well as preventing the Chinese Communist Party from subverting these platforms in its efforts to undermine democratic norms worldwide.

“In the interest of US national security, I respectfully request you conduct a CFIUS review of this deal,” he concludes.

The PPF Group has hit back at the claims, stating that Senator Rubio is relying on false information supplied by the Czech politician Pavel Fischer, and identifies a number of factual inaccuracies in his letter calling for an investigation. These include a denial that PPF is propagating Huawei’s technology as it inherited it when acquiring Telenor’s assets in Central and Eastern Europe two years ago.

PPF continues its statement by saying: “Over the course of 30 years, PPF Group has grown to become one of the largest Czech companies, and today it operates in 24 countries across three continents. PPF’s shareholders and its top management have always espoused the principles of freedom, liberal democracy, and a free market. The fact that we, like thousands of other Western companies, also operate in China, does not in any way imply a contradictory worldview. Far from it; as people who have lived a considerable part of their lives under totalitarian communism, we deeply value freedom of expression.”

The statement concludes: “We therefore reiterate that PPF is buying CME as a complement to its telecommunications business, without any ulterior motives. As part of the process of acquiring CME, PPF Group is cooperating with all the relevant regulatory bodies, and we are providing them with all necessary information. PPF Group will contact Senator Rubio to provide him with accurate information about our company.”