Internationalization has utmost priority: Bertelsmann CEO Thomas Rabe (2nd from right) and staff of the new Bertelsmann Corporate Center in Delhi.

German media giant aims to become more international and more digital – By Thomas Schuler

Thomas Rabe wanted to send a clear signal when he took over at the top of Bertelsmann at the beginning of the year. When he traveled to India in February to open a new regional headquarters for Asia in New Delhi, the press release from Bertelsmann was accompanied by an image of a smiling CEO together with the regional office manager and his entire staff of four, a number slightly at odds with the office’s somewhat grandiose title “Corporate Center.” Still, it has become clear that the opening of the office is symbolic of Rabe’s efforts to realign Bertelsmann and to seek growth, particularly on an international level. The message behind the photo: Internationalization has utmost priority.

The Luxembourg-born Rabe, who in his younger years played in a punk band, studied economics and has worked for the EU as well as the RTL television group, among others. The 46-year-old took over as chief financial officer for Bertelsmann in 2006, but he always wanted to be more than an accountant and made headlines when the competition tried to lure him away from the company. He speaks several languages and lives not only in Gütersloh, where Bertelsmann headquarters are located, but also in Berlin. That, too, can be seen as a signal.

Rabe wants to increase control over the more than one thousand individual companies that belong to Bertelsmann. The New Delhi office is Bertelsmann’s second Asian regional headquarters; the company has been represented in China since 2006. The other corporate centers are at the German head office in Gütersloh as well as New York. Rabe wants to focus his Indian expansion plans on digital media and the field of education.

Bertelsmann estimates the global education market to be worth more than one trillion dollars. The company is setting up a new $100 million fund to increase its access to the sector. Eight to ten investments are planned, two of which are already underway: The company is setting up online degree courses in cooperation with a number of universities. It is also working with the non-profit Brandmann University in the United States to offer bilingual study courses, starting this August, aimed primarily at the Spanish speaking population. Other projects are planned for India and Brazil.

Each of Bertelsmann’s divisions already has a presence in India. The RTL Group is currently setting up two TV channels with a national partner. Fremantle Media, RTL’s production arm, produces “Indian Idol,” “The X Factor” and “Got Talent.” Book-publishing subsidiary Random House India has been operating in the country since 2005. In 2011, Gruner + Jahr acquired a majority stake in the Indian magazine publishing house Maxposure. Arvato India has been active in customer and marketing services as well as in E-commerce since 2003. All the companies have announced plans to “significantly” expand business there.

The trip to India is part of a wider strategy. In March, Rabe announced a “long-term restructuring of the group” over the next five to ten years. Unveiling the company’s annual results press conference in Berlin, Rabe said the goal was to “grow the company faster, and make Bertelsmann more digital and international.” He went on to explain that because “Europe won’t see strong growth in the longer-term either,” Bertelsmann intends to focus on expanding in China, India and Latin America. A fifth corporate center is already in the pipeline, this time in Brazil.

In order to finance the growth, Rabe wants to alter the company’s legal form from Aktiengesellschaft (stock corporation) to an SE (Societas Europaea) and Kommanditgesellschaft auf Aktien (KGaA; partnership limited by shares). The aim is to enable Bertelsmann to tap into the private equity market with a public share offering and raise large amounts of capital without putting the controlling Mohn family in fear of outside influence.

Considering an IPO so early in his term as CEO in Gütersloh is a bold step by Rabe. When Bertelsmann appeared about to go public ten years ago, its then-CEO Thomas Middelhoff painted a wonderful sounding scenario and talked up Bertelsmann’s position as the most international of the big media companies. The planned IPO didn’t go ahead because the owners, the Mohn family, were fearful of the influence of foreign investors.

But what of the claim to be the most international media company? The answer depends on your perspective: Bertelsmann generates its revenue in Europe in the same way that Time Warner, Viacom and Disney mainly have a strong presence in the USA. But because Europe is made up of many countries, its core business is distributed throughout more countries than that of its competitors in the USA. As Rabe reiterated, Bertelsmann still makes 80 percent of revenue in Europe. However, he gave the impression that he thought this was less a sign of strength than one of weakness.

Rabe knows the weaknesses of the company, which is still saddled with debts of more than four billion euros, stemming from a decision by owner Liz Mohn in 2006 to buy back a 25.1 percent share in the company from Belgian shareholder Albert Frère for €4.5 billion ($5.9 billion). And now, as then, it’s the profits made at the television group RTL from which Bertelsmann is living.