HOW ŠOLAK BECAME THE RICHEST SERB: Tailoring laws with the help of lobbyists in Brussels and Washington (13)

In order to achieve his goals and launch TV N1, Dragan Šolak had to make sure that the media laws were amended such that distributors would be allowed to be content creators.

This fight took place on three major fronts. One front included the direct involvement of David Petraeus, Chairman of the KKR Global Institute. Petraeus's business plans and ambitions were made known to the Serbian authorities on two occasions – in the fall of 2013 and the spring of 2014 – when the former CIA director visited Belgrade. The second pressure front was evident during the public hearing. SBB was strongly in favour of amendments to the Draft Law on Electronic Media, insisting that the article of the draft law banning ownership concentration in distribution and content creation be withdrawn. The explanation for this was that "the practices in other EU countries allow distributors to also be news programming content providers." The then N1 director, Brent Sadler, threatened to raise the entire case to the European level if Belgrade refused to yield.

Lobbyists from Brussels and the imposing of Šolak's provision

Making good on this threat, United Group hired the Brussels-based law firm Gide Loyrette Nouel to lobby the European Commission for amendments to the law that would allow distributors to also be content creators. As a minority stakeholder in UG, the EBRD also lobbied for the law amendments in Brussels, putting forward the same arguments as Gide. As a result of the lobbying, the Enlargement Unit returned the Law on Public Information and Media to Serbia, with the comment attached that Article 46 should be revised to allow distributors to create content via an affiliated legal entity. The Government of Serbia accepted Brussel's proposal to amend the controversial provision unquestioningly.

Such action on the part of the Brussels administration was utterly surprising, given that it had applied different standards before, e.g. in the cases of Croatia and Slovenia, whose laws do not have this kind of provision. The EC followed a similar logic with Serbia's Public Service Broadcaster RTS. In 2009, RTS was forced to separate programming production and distribution, the latter being taken over by the PE Broadcasting Technology and Links (ETV). The Commission's rationale read as follows: "No legal provision of the EU in the area of broadcasting does not impose a mandatory separation of content creators and distributors."

"As regards the EU Acquis, Serbia has the right to allow vertical integration of its content creator and distributor," Myriam Ferran, then Head of Unit "Serbia" at the General Directorate for EU Enlargement, noted, making it seem as if Serbia had requested the provision in question rather than having the provision imposed on it.

The upshot: Telekom's hands were tied while SBB was given a free rein. At the same time, the new media laws made it possible for a company to own several media outlets, on condition that its viewership share did not exceed 35 percent. This allowed the Greek Antenna Group to legalize its ownership in TV channels Prva and B92. Having made these decisions, Brussels let the Serbian regulators tackle all the future risks associated with the imposed solutions. The Serbian regulators would prove to be no match for the challenges at hand.

In a series of manoeuvres and playing around with the legal provisions, N1 became a television channel registered in Luxembourg and owned by Adria News. Adria News d.o.o., however, is a production group in Serbia which makes programming for its employer in Luxembourg, from where this programming is allegedly broadcast. Even though an argument that the proposed solutions favour Telekom was often put forward during the public hearing, the exact opposite turned out to be the case in practice. The adopted solutions left the state operator with its hands tied, preventing it from taking part in the market competition on equal terms.

While privately-owned operators were allowed to start their own television channels and make media content, the provisions of the Law on Public Information made it impossible for Telekom as a state/public-owned joint stock company to start and own media outlets. This then became a frequent topic and argument in the media outlets controlled by Dragan Šolak, disputing Telekom's right to own TV channels and to produce film, TV series, entertainment, and other sorts of content.

In disputing this right, they went to such lengths as to question whether Telekom had the right to invest "state funds" in developing its own business in the first place. Unlike Serbia, in countries where Telekom is state-owned, such as Germany or Austria, such questions are not even posed. How important it was for United Group to own television news companies was evident in the years following the launch of TV N1, during which time this television channel became a media cudgel targeting anyone who stood in the way of implementing Šolak' business plans.

Why the state gave in

One of the key questions was why the state granted the requests made by Brussels and Washington that were not supported by a great many arguments. The key point in making these decisions was the top government people's assumption that in 2016 Telekom would be privatized and that consequently the state had no interest in interfering in regulating further the relations in this sphere. As the privatization of the state operator never materialized, Telekom's management decided in 2018 to put up a more active fight for its market position. As a result, in 2021, it has become the number one operator in all four categories under consideration: mobile and fixed telephony, internet, and cable provision.

COMING UP NEXT: How Šolak sold cable operator SBB to himself three times