Under suspicion: Who is monitoring the ownership of the media in Egypt

The role of the Supreme Council for Media Regulation in monitoring the funding of media institutions

Summary

• The authority, which has been in the making for the past four years, has sought to re-establish its control of the media by changing the legislative environment governing the media and redrawing the ownership map of the media.
• In September 2017, “Tawasol” Group, a member of the Falcon Security Services Group, announced its acquisition of “Al Hayat” satellite network.
• In December 2017, Eagle Capital for Financial Investments, S.A.E, announced that it had successfully acquired the stake of businessman Ahmed Abu Hashima in the Egyptian Media Group.
• Official data related to these transactions has not been made available, which means that the current authority is imposing strict confidentiality on the sources of funding for such deals.
• The Supreme Council for Media Regulation is responsible for the establishment and application of a system for monitoring the sources of funding of the media institutions, in order to ensure the transparency and soundness of this funding.

Introduction

Recently, many questions have been raised concerning the ownership of the media in Egypt, most notably in relation to the recent deal completed by Eagle Capital. Mystery prevails over the details of these deals, the sources of their funding, and the motives for establishing new companies and expanding the activities of already established ones.  The questions raised by these deals must be addressed in light of the political context governing Egypt. For four years there were systematic pressures on newspapers and the media. In light of the lack of sufficient information to track and analyze what is happening in the Egyptian media market, the Association for the Freedom of Thought and Expression is trying to look at two deals that were concluded after the establishment of the Supreme Council for Media Regulation –its establishment decree was issued in April 2017- to monitor the sources of funding of media institutions.

Four years of transformations in the media landscape

For almost four years, Egypt has been witnessing wide ranging transformations on all tracks. Among the fields that have undergone dramatic transformations, is the media sector in all its forms whether TV, radio, or print. Most likely, El Sisi’s regime realized the importance of the media in directing public opinion, and shaping attitudes, besides its evolving role as one of the most important means of mobilization. It seemed that an authority is being formed which is trying hard to control the media. The authority faced difficulties in this because of the tremendous increase in the number of media outlets created by the January 2011 revolution, the unprecedented increase in freedoms, the abundance of media production, and the introduction of social media as platforms for disseminating news instantly.

Hence, the aim was to completely restructure Egyptian media and change its map so that it could be used to support the new authority. Two steps were taken: first, to change the legislative structure governing the media scene. This in turn leads to a change in the institutional structure governing the landscape. Article 211 of the Egyptian Constitution (2014) provides for the establishment of an independent body with legal personality and technical, financial and administrative independence. The role of this body is to regulate and supervise media organizations in all of their forms: print, broadcast, and digital. This body is to safeguard the freedom of the press and the media established by the constitution, to preserve their independence, impartiality and diversity, to prevent monopolistic practices, to supervise the sources of funding of media outlets and to establish the framework and standards necessary to ensure that media outlets abide by the rules and ethics of the profession and the requirements of national security. This entity was named the Supreme Council for Media Regulation.

This came as the constitution abolished the Ministry of Information, the Supreme Council of the Press, and the Egyptian Radio and Television Union. They were replaced with the Supreme Council for Media Regulation, the National Press Authority, and the National Media Authority, respectively. The constitutional article identified the scope of competence of the Supreme Council for Media Regulation and set two main objectives; the first related to the organization of the press and media landscape, and the second is a regulatory objective in order to control the scene from the chaos and randomness that swept through the press and media field. Many specialists had warned of the chaos in the field especially after the 30th of June 2013.

The second step was redrawing the map of the Egyptian media market to ensure control of all platforms that address the public. This was done through more control over ownership of media organizations.

This is what the paper discusses with greater focus, trying to link it to changes in the legislative environment governing the media.

Falcon acquisition of Al-Hayat channels

After the Supreme Council for Media Regulation began to exercise its functions – according to the new changes in the legislations governing the media– controversy arose over two major deals. The first was Falcon’s acquisition of Al-Hayat channels. On Tuesday, September 12, 2017, “Tawasol” Group, a member of Falcon Security Services and “Sigma Media”, announced the signing of a framework agreement, by virtue of which the first party acquires Al-Hayat satiate network.

The framework agreement was signed by Al-Sayed Al-Badawi , Chairman of the Board of Directors of Sigma Media (Wafd Party Chairman / Liberal Party), and Sharif Khaled, Chairman of , “Tawasol” Group (former   military intelligence official). Al-Badawi revealed that Al-Hayat was sold for LE 1.4 billion (US $80 million). He said the channel’s debts had exceeded one billion pounds (US $ 57 million) over the past period, and most of its revenues were channeled to pay debts.

Falcon was founded in 2006, but its role increased after the revolution of 25 January 2011. The company has 14 branches and more than 22 thousand employees over different governorates. Its main functions include securing universities, public figures, international offices, foreign embassies and international games. Falcon has become the most famous and most prominent in the field of security services. It secured the campaign of the presidential candidate in the 2012 election, Ahmed Shafiq, and the campaign of Egyptian President Abdel Fattah al-Sisi in the elections of 2014. The board of directors is headed by Major General Sharif Khaled, who is a former military intelligence official and former head of the security sector of the Radio and Television Union.

It should also be noted that Home Media Company, a subsidiary of Falcon Security Services and owner of the DRN radio station, has completely acquired Al-Asema satellite channels network in a deal recently concluded.

Egale Capital acquisition of Egyptian Media Group

On December 18, 2017, Eagle Capital for Financial Investments, S.A.E, announced that it has successfully acquired the stake of businessman Ahmed Abu Hashima in the Egyptian Media Training and Consulting Company, S.A.E, which owns a number of newspapers and websites in addition to ON channels network.

“There have been a lot of moves over the past few days, its result was that Eagle Capital acquired 100 percent of Egyptian Media shares,” wrote Hossam Saleh, CEO of the Egyptian Media Company, on his Face book page at the time. “As a result of the acquisition Engineer Osama Al-Sheikh was chosen as Chairman of the Board of Directors of Egyptian Media and a Managing Director instead of Mr. Ahmed Abu Hashima”, he added. Later, Al-Sheikh resigned, and Tamer Morsi was appointed as his replacement.

Eagle Capital for Financial Investments was established at the end of 2016. It is not listed on the Egyptian Stock Exchange, and is similar to the investment funds in terms of its activity. It acquires some entities and institutions in order to develop them, sell them again and benefit from investing in them. Its board of directors is headed by Dalia Khurshid, former Minister of Investment and wife of Central Bank Governor Tarieq Amer. Khorshid said that the acquisition deal is the company’s first business in the field of media, in which the company aims to invest more, as it is a vital sector that touches the daily lives of citizens.

After the deal was closed, the ownership of a number of media and marketing institutions, and satellite channels was moved to Eagle Capital, including: Al-Youm Al-Sabea Newspaper, Swat Al-Umma Newspaper, Ain Magazine, Egypt Today Magazine, Business Today Magazine, Presentation Sport, Infrand news website, Dot Misr, news website, in addition to ON TV channels, which includes ON, ON Live, ON Sport and ON Drama. At that time Masrawy news website quoted some sources confirming that the percentage acquired by Eagle Capital is estimated to be 60% of the company, and is worth LE 600 million to be paid over two years.

In the same context, an official source in the money market revealed to Masrawy news website that it is difficult to list the Egyptian Media Company in the Egyptian Stock Exchange, because it suffered huge losses and did not comply with the legal requirements of listing. The source, who asked not to be named, said the company’s losses were a major obstacle to its listing on the stock market. For example, the losses of “ON” channel, owned by the “Egyptian Media” group, amounted to 325 million pounds, after the production of Ramadan series at a high cost without return. The company was unable to achieve more than 5% of its capital as annual profits for two consecutive years, which is one of the most important conditions of listing on the Egyptian stock exchange. The source added that the second reason, which prevented the listing of the company on the stock exchange, was the ambiguity of a number of items in the budget, and the lack of the complete conditions of listing.

In the year 2016, “Egyptian Media” announced that it had signed an agreement with the investment bank FIB Capital to restructure the company in preparation for listing its shares on the stock exchange. The CEO of FIB Capital, Omar Al-Maghawari, said that his company will conduct the financial structuring of the Egyptian Media Group and all its subsidiaries in order to integrate the activities of the various companies and achieve financial savings in preparation for the initial public offering

On Sunday 15 May 2016, businessmen Ahmed Abu Hashima and Naguib Sawiris signed an acquisition contract, by virtue of which Egyptian Media Company acquired the entire shares of ON TV channel owned by Sawiris. Egyptian Media said in a statement after the acquisition, that it aiming to regain the Egyptian leadership in the media, television and drama industry in accordance with ambitious competitive rules. It added that the acquisition of ON TV will be followed by other steps that support the company’s main objective of restoring Egyptian leadership in the field of media.

It is worth mentioning here that the Egyptian Media Company was registered with the General Authority for Investment in June 2, 2013 (Commercial Register No. 66705 in the General Authority for Investment). This information is according to an official document published by Mada Misr website. The name of Abu Hashima emerged in 2009 with the growth of his investments in the field of iron and steel, but his political role began after the revolution of January 25, 2011, when he bought “Al Youm Al Sabea” newspaper, and was known to be close to the Muslim Brotherhood. Following the dismissal of the former president Mohamed Morsi, Abu Hashima became one of the strongest supporters of President Abdel Fattah Al-Sisi, the most prominent financier of the pro-regime “Future of the Nation” party. He also contributed to the state-run Tahia Misr fund. Ever since 2016 Abu Hashima’s Egyptian Media Company started purchasing media organizations.

Deals without official information

Since the formation of the Supreme Council for Media Regulation, the Egyptian media market has witnessed two major ownership transfer deals that have attracted the attention of the public opinion, and have raised many questions, most notably about the relationship of funds invested in the two deals with the security apparatuses. This is what several press reports have pointed out -AFTE has not been able to obtain reliable information about them. In a report entitled « Egypt: When the intelligence services take control of the media” by the French “Reporters Without Borders”, the organization expressed its concern about what it called the control of businessmen close to the government and the security apparatuses of a number of Egyptian media institutions

The organization, based in Paris, said that «the intelligence men are closer to the media than ever before», pointing to the acquisition of a number of businessmen -known with their relations to the security services- of a number of media institutions.  It also referred to the continuous and steady control of the Egyptian authorities of the media scene, even the media institutions close to the regime. The organization linked the acquisition of Al-Hayat to the earlier stoppage of the channel’s broadcast because of government debts. Reporters without Borders saw this as a kind of pressure on the Al-Badawi, whose party refused to approve the Tiran and Sanafir islands agreement.

Mada Misr website -blocked by the Egyptian authorities since May 2017- revealed that Eagle Capital for Financial Investments, is a private equity fund owned by The Egyptian General Intelligence, and was recently established to manage all Intelligence’s civilian investments in a large number of intelligence-owned companies, according to sources some of which deals directly with the new company, and one of them met Dalia Khurshid personally at the company’s headquarters in the Fifth Settlement.

While it is true that there is an awareness of the entry of security apparatuses as a major player in the media market, which was reported by independent media, yet official data on these deals have not been made available. This means that the current authority enforces a strict framework of confidentiality on sources of funding of these deals and their relation to security agencies.

The Supreme Council for Media and monitoring the transfer of media ownership  

After reviewing all the decisions issued by the Supreme Council for Media Regulation, as well as all the committees formed by the Council to follow up the various areas of work, the association was unable to find any statements or committees formed to ascertain and investigate the facts concerning the changes of ownership in the Egyptian media market.

On December 24th, 2016, President Abdel Fattah El-Sissi issued a decree approving the Press and Media Regulation Law No. 93 of the year 2016, which provides for the establishment of the the Supreme Council for Media Regulation, the National Press Authority, and the National Media Authority. The decree determined the objectives, specializations standards of formation and working systems of each of them. In article 3, the law states that the Council aims to protect the freedom of the press and the media in the context of free competition, and in particular the following:

• Ensuring the independence, impartiality, multiplicity and diversity of press and media institutions.
• Ensuring economic competition and preventing monopoly in the field of media.
• Monitoring the sources of funding of press and media organizations.

Article 4 of the same law stipulates that the Supreme Council shall exercise its powers in the manner specified in this law, and in particular the following:

– The establishment and application of a system of monitoring the sources of funding of media and press institutions, so as to ensure the transparency and integrity of this funding, and monitoring its implementation [the system] in partnership with the concerned bodies and agencies.

– Ensuring that economic activity in the fields of the press and the media does not lead to the prevention, restriction of the freedom of competition, and the prohibition of monopolistic practices in accordance with the rules it establishes.

Article 5 also stipulates that the Supreme Council, in order to achieve its objectives, shall exercise all the necessary actions for this purpose. In particular the following:

– To verify the sources of funding for the press and media institutions, and to ascertain their economic bases and profits, in accordance with the rules, procedures and exceptions that it approves.

– Monitoring the press and media performance, preparing periodic reports on the multiplicity and diversity of media institutions, and monitoring monopolistic practices and taking the necessary actions to prevent them.

In order to achieve the above, the composition of the Supreme Council -provided for in Article 6 of the same law- included the membership of the President of the The Authority for the Protection of Competition and the Prohibition of Monopolistic Practices.

After reviewing the functions of the Supreme Council for Media Regulation it seems that it has disregarded its responsibility to prevent monopolistic practices and control the sources of media funding. This does not only reflect a failure in performing a fundamental task, but it also reflects the inclination of the Council in its current form to limit its role to the practice of censorship of media, while its regulatory roles are declining.

This is evident from the Council’s preoccupation with the imposition of disciplinary sanctions on newspapers and the media for violating what it calls the ethics of the profession, and the requirements of national security. It is also clear from its concern with the formation of committees to monitor and follow up TV series for the coming month of Ramadan, and a committee to follow up sports programs. It is also preoccupied with its partnership with Nasser Academy to train editors in chief and heads of departments in Egyptian public and private newspapers on the concepts of national security and the wars of the fifth generation. Meanwhile, the approval of the Press Law and the Law on the Freedom of Information Circulation has been delayed for at least a full year; the laws that the Supreme Council was supposed to play a major role in bringing out to light (as stipulated in the law establishing it) .

On the other hand, the formation of the Supreme Council for Media Regulation makes it dominated by the head of the executive authority (President of the Republic), which affects the independence of the council, and makes its policies dependent on the directions of the President.

Conclusion

Such big transfers of ownership in the Egyptian media market should have attracted the attention of the Supreme Council for Media Regulation, even at the level of the verification of the sources of funding for such deals, and to confirm the absence of any monopolistic practices or measures that would harm the freedom of competition, diversity and multiplicity. The Supreme Council must assume its responsibilities stipulated in the Council’s Law and Executive Regulations. It must establish and apply a system for monitoring the sources of funding in media and press institutions, in a manner that ensures the transparency and integrity of this funding, and to monitor its implementation in partnership with the concerned bodies and agencies.