Friday, September 22, 2006

Europe’s Largest Outdoor Advertiser Comes To Ukraine

KIEV, Ukraine -- One of the world’s biggest outdoor advertisers has moved into Ukraine’s and Russia’s large-format advertising industries by consolidating forces with a major regional big board outfit in a multimillion-dollar merger aimed at staking out its share in these potentially lucrative growth markets.


French big board and street furniture giant JCDecaux announced Sept. 7 that it had entered the Ukrainian and Russian outdoor advertising markets through the creation of a joint venture called BigBoard BV with Czech-based BigBoard Group SA, in which BigBoard Group SA will have a 60 percent interest, and the family-run JCDecaux will have the remaining 40 percent.

According to JCDecaux, it is the number one outdoor advertising company in Europe and the Asia-Pacific, and number two worldwide.

In addition to large format billboards, the company provides street furniture, such as bus shelters, freestanding units, public toilets and kiosks, and operates more than 700,000 advertising displays across 3,500 cities in 45 countries around the world.

The company reported more than 1.7 billion euros ($2.1 billion) in revenues in 2005 and nearly 950 million euros ($1.2 billion) in revenues in the first half of 2006.

Founded in 1992, BigBoard Group SA has been operating on the Ukrainian market for the last 13 years. In addition to the Czech Republic, Ukraine and Russia, BigBoard also operates in Slovakia and Belarus.

JCDecaux said in its Sept. 7 statement that BigBoard Group SA is the leading outdoor advertising company in Ukraine, with “more than 7,400 faces in 32 cities and a market share of approximately 20 percent.”

In Russia, BigBoard operates more than 3,000 advertising faces, and maintains a presence in eight out of 12 Russian cities with more than 1 million inhabitants.

JCDecaux said that BigBoard Group’s combined Ukrainian-Russian operations generated around $30 million in advertising revenues last year.

“Russia and Ukraine are currently two advertising markets where it is possible to achieve more than 10 percent growth year-on-year,” JCDecaux quoted its co-CEO Jean-Francois Decaux as saying.

“Our joint venture with BigBoard Group SA will enhance our growth profile in the fast growing East European advertising markets, where JCDecaux has already achieved market leadership in the Czech Republic, Slovakia, Croatia, Serbia,” he said.

Under the 60-40 deal, JCDecaux said that BigBoard Group SA is contributing its existing outdoor advertising network in Ukraine and Russia, while JCDecaux is making “a cash injection, which will … allow it to participate in the consolidation of the outdoor advertising market in both countries.”

According to the CEO of BigBoard’s Russian operations, Ruslan Zheludyk, BigBoard BV will represent JCDecaux’s interests, and do business with all of the French company’s clients in Russia and Ukraine, the Russian website Sostav.ru reported Sept. 8.

Askold Shestunov, the CEO of BigBoard’s operations in Ukraine, told the Post on Sept. 12 that his company’s French partner had paid more than $52 million for its 40 percent share in the new Dutch-registered BigBoard BV.

Shestunov said it was possible that JCDecaux could increase its share in the JV in the future, but “no decision or commitment has been made for the time being.”

He said that in addition to the initial $52 million investment, JCDecaux has invested more than $26 million to finance “future external growth.”

According to Shestunov, BigBoard’s contribution to the joint venture would be its Ukrainian and Russian operations, adding that given the Ukrainian advertising market’s growth and increasing competition, it was becoming increasingly more difficult for Ukrainian companies to maintain their share of the market without a foreign partner.

Regarding the fact that both JCDecaux and BigBoard Group SA also have operations in the Czech Republic and Slovakia, Shestunov said that mergers in these countries have not yet been contemplated.

According to Ukrainian Media Monitor, a Kyiv-based advertising-market research firm, in 2005 the country’s outdoor advertising market was valued at $116 million in terms of advertising revenues. Media Monitor estimates the total number of billboards in Ukraine at around 65,000.

Shestunov said the Ukrainian outdoor advertising market is expected to grow to $150 million in 2006.

Regarding market share, according to Ukrainian Media Monitor, BigBoard SA controlled an 8 percent share of the outdoor advertising market, and was the largest outdoor advertiser in Ukraine as of June of this year, followed by Kyiv-based Luvers, Poster, Octagon and RTM, with market shares of 4 percent each.

In Kyiv, BigBoard SA was the second largest in the same period, with a market share of 10.4 percent, behind Luvers, with a 16.8 percent share, and ahead of Poster, with a share of 8.2 percent, and PTM, with a 5.2 percent share of the outdoor advertising market in the capital.

Shestunov said that the 20 percent figure cited by JCDecaux with respect to BigBoard’s Ukrainian market share included the BigBoard network’s partnership agreements with other advertising firms, some of which BigBoard owns, although Shestunov would not disclose which ones.

According to BigBoard’s website, in 2005 BigBoard and Poster merged their sales departments under a company called Big Media.

As for the JV’s possible consolidation targets, meaning other companies that the JV plans to merge with in Ukraine, Shestunov said that “opportunities are being studied.”

Shestunov denied that the JV was looking to monopolize the Ukrainian outdoor advertising market, adding that it was the street furniture concept that JCDecaux wanted to introduce to Kyiv and other cities in Ukraine, where, he said, the concept remains largely undeveloped.

He added that the Ukrainian billboard market hardly leaves much room for expansion, since all the sellable locations in Ukraine’s major cities are taken.

Andrew Kinsel, CEO of Perekhid Media, a Kyiv-based media holding with interests in Internet, publishing, radio, and outdoor advertising through its subsidiary Perekhid Outdoor, commented that a strong foreign partner in the outdoor business was “useful, but not necessary to survive.”

“There will also be room on the market for Ukrainian billboard companies,” Kinsel said.

However, he added, the industry would see significant consolidation within the next five years, when “Five companies will control 90 percent of the market.”

Source: Kyiv Post

1 comment:

Steve Devis said...

This is an excellent example of quality blog content. It’s well-written, interesting, intelligible and uncomplicated. If I were a writer, this is how I would write this content. You have a lot of writing talent.
NYC Sign Company