Law limiting foreigners' share in Russian media to 20% takes effect

Amendments to the Media Law limiting foreigners' share in Russian media outlets to 20% took effect on Jan. 1

Amendments to the Media Law limiting foreigners' share in Russian media outlets to 20% took effect on Jan. 1.

The law was adopted by the State Duma on Sept. 26, 2014, approved by the Federation Council on Oct. 1, and signed by the president on Oct. 14. According to the amendments, foreign countries, international organizations, foreign legal entities and individuals, as well as Russian legal entities with more than 20% of foreign capital have no right to control over 20% of Russian media capital either directly or indirectly.

Previously, the Media Law set the restriction for foreign involvement only in television and the radio at an amount of 50%. The new law applies to all media outlets, including printed and online editions.

Before February 1, media companies are compelled to present documents certifying the compliance of their ownership structure with the new law to the Federal Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications (Roskomnadzor).

The service will be monitoring media activity after the new law takes effect. "As this law works, we will see how a particular media outlet is doing. Every case of tendentious, false presentation of information will be individually investigated," Roskomnadzor head Alexander Zharov said in December.

The only public media company on the Russian market - CTC Media incorporated in the United States (CTC, Domashny and Che television channels) - closed a deal in December to sell 75% stake in CTC Investments (to which all operating assets in Russia and Kazakhstan were transferred) to UTV Holding of Alisher Usmanov and Ivan Tavrin. The final price of the deal stands at approximately $200 million, and UTV has already paid $150 million. The remaining payment will depend on the amount of CTC Media cash flow in the second half of the year. UTV is planned to enlarge the stake in CTC Investments to 80%. The only shareholder of CTC Media will remain Cyprus-based Telcrest (the company is under U.S. sanctions) controlled by structures related to Yuri Kovalchuk, Alexei Mordashov and VTB bank.

Discovery Communications (Discovery and Animal Planet channels) has set up a joint venture with National Media Group. The joint venture is also buying from U.S. Turner the Russian legal entities distributing CNN, Cartoon Network and Boomerang television channels in Russia. Swedish Modern Times Group has sold Viasat channels in Russia to Synergy LLC owned by Anatoly Karyakin, former partner of Baring Vostok Fund.

Walt Disney Company, controlling 49% in the Disney channel in a joint venture with UTV, did not announce the restructuring of the Russian business the day before the New Year's Eve.

Axel Springer Russia publishing house (Forbes, OK! and GEO magazines) was sold to Alexander Fedotov's Artcom Media group. Hearst Shkulev Media, a joint venture between U.S. Hearst Corporation and businessman Viktor Shkulev, has also brought the ownership structure in compliance with the new law: now the Russian partner controls 80% of the company (Hearst and Shkulev used to own the business on parity terms).

Read more: New Russian media ownership law: How will changes affect foreign players?

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