Central European Media Enterprises Ltd. Q2 2010 Earnings Call Transcript

Jul.28.10 | About: Central European (CETV)

Central European Media Enterprises Ltd. (NASDAQ:CETV)

Q2 2010 Earnings Call

July 28, 2010 09:04 AM ET

Executives

Adrian Sarbu – President and Chief Executive Officer

David Sach – Chief Financial Officer

Anthony Chhoy – Senior Vice President, Strategic Planning & Operations

Peter Dvorak – Senior Vice President, Broadcasting.

Daniel Penn – General Counsel

Romana Tomasova – Vice President Corporate Communications

Analysts

Vivek Khanna – Deutsche Bank

Vijay Singh – Janco Partners

David Kestenbaum – Morgan Joseph

Ben Mogil – Stifel Nicolaus

Alexey Surkov – BNP Paribas

Robert Doucha – Sanning Capital

Jean-Yves Guibert –BNP Paribas

Operator

Greetings to each of you and welcome to CME's Second Quarter 2010 Investor Conference Call. We are broadcasting our earnings call via a video webcast to enable you to see the management team in action. You can join us via the link on our homepage www.cetv-net.com. There you can also download the presentation slides, which we will refer to during this call. You can find them on our homepage at the bottom-left corner.

The participants of today's call will be CME’s President and Chief Executive Officer, Adrian Sarbu.

Adrian Sarbu

Good afternoon. [inaudible]

Operator

Chief Financial Officer, David Sach

David Sach

Good afternoon.

Operator

Anthony Chhoy, Senior Vice President, Strategic Planning & Operations.

Anthony Chhoy

Good Afternoon.

Operator

And Peter Dvorak, Senior Vice President, Broadcasting.

Peter Dvorak

Good afternoon.

Operator

And Finally our General Counsel, Daniel Penn.

Daniel Penn

Hello.

Operator

Before I turn to Adrian, let me read the usual Safe Harbor statement. Our presentation today will contain forward-looking statements. Through these statements, we claim the protection of the Safe Harbor contained in the U.S. Private Securities Litigation Reform Act of 1995, and refer you to the forward-looking statements section in our Form 10-Q filed with the Securities and Exchange Commission earlier today for a list of such statements and the factors, which could cause future results to differ from those presented in this call.

We now evaluate the performance of our segments based on OIBDA or operating income before depreciation and amortization of intangible assets. OIBDA is calculated in the same way as EBITDA measures that we used previously. A detailed explanation is provided on page three of our presentation and in note 16 on page 32 of our Form 10-Q.

During this call, we will refer to certain financial information that is not in U.S. GAAP. Please see the appendix to the presentation for reconciliation to U.S. GAAP financial measures. In addition, our segment financial information that is presented in local currency is not in U.S. GAAP. We do not provide a reconciliation to these numbers as the U.S. GAAP amounts are expressed in US dollars in our financial statements. Additional information on our segment data is provided in note 16 to our financial statements on page 32 of our 10-Q.

And now, over to Adrian.

Adrian Sarbu

Good afternoon or good morning. In the second quarter 2010, our revenues reached $202 million and OIBDA $46 million, one year ago our reported revenues were $186 and OIBDA $29.7 million, since then we took important steps to reposition our operation in Central Eastern Europe, focusing on European Union and European Union accession countries.

We sold our Ukrainian business, integrated media brand entertainment and acquired a leading operations in Bulgaria bTV group. We addressed our operating cost without affecting audience leadership. We maintained or increased our advertising market share by various pricing initiatives and continued to build our brands today we are enjoying the first benefits.

In light of a 4% % TV advertising market decline in the second quarter. Our revenues increased on constant currency basis by 15% and our EBITDA by 6%. Today we are the leader in all our market. It is an important milestone our sixth quarter of crisis in the region.

No bad event which would happen in this market missed that since October 2008, every negative queue news coming from the U.S. and from Europe had even worst impact on our region. We had financial crisis, dramatic decrease in GDP consumption. We saw continues decreased in TV ad spending which amounted to $500 million.

We saw almost no government stimulus, high budget deficit, high unemployment and now our big spending cost and deprecation of our currency against U.S. dollar. Prices in America affected our region. Prices in Western Europe affected our region. Prices in Greece and Southern Europe affected our region, prices in any given country of our region is perceived as regional.

The real prices for us today is the prices of confidence and the capability of our region to catch up with Western Europe. We understand this feeling among investors and vendors. Being here for so many years, fighting with the crisis we feel today as confident in our future as would be two years ago. During the multiple shockwaves we did what we had to do. We invested in our people and product, repositioned our business, focused on a leadership and increased our market share. We prove that we are capable to perform better than our market. TV ad spending in 2010 did not match our expectations for recovery, therefore the whole year will be challenging.

Finally two of our market started growing Czech Republic and Slovenia. We expect continues improvement in this two markets and the possible restart of spending in the fourth quarter in Slovenia, Slovakia and Croatia. We had limited expectation for Romania and Bulgaria this year.

Overall the second half of the year will show positive trend but the take off will be slow. It is an near of ups and down. But we see second quarter as the beginning of recovery and now over to David who will give you an overview of quarter two macro economic indicators and our consolidated performance.

David Sach

Thank you Adrian please turn to slide five. As you will notice throughout the presentation we have changes format and we are now providing you with much more granularity than before. When assessing the outlook for our business the key macroeconomic indicators we look at a real GDP, private consumption, consumer confident and the TV ad market in our country. GDP improved in our all of our market during the second quarter. These improvements have mainly been export driven with the other GDP components lagging.

Advertisers in our market tend to increase spending when consumer confidence returns in anticipation of higher private consumption. We are already seeing growth in TV ad spend in Czech Republic and Slovenia and saw an improvement in Slovakia. However, growth in this market has been held back by its relatively high unemployment.

Consumer confidence and consumption in Romania, Bulgaria and Croatia are not as strong and consequently the TV ad markets in these countries continue to be challenging. On average TV ad spend in our market fell by 4% in Q2 compared to the second quarter last year.

Our consolidated operations are showed on slide six. Similar to the first quarter the prior period results have been restated to exclude the impact of that formal Ukraine operation and show this business at the discontinued operation. Excluding this restatement revenues increased by 8% and OIBDA increased by 56%.

This slide shows our consolidated results from continuing operations including the restatements. We have presented our results using bridge graphs to show the underlying movement excluding the impact of exchange rate fluctuation.

Our consolidated revenues from continuing operations grew 15% in constant currency. This significant increased was achieved despite an average 4% declined in our TV ad markets.

The drivers of this increased one of the growth in our broadcasting operations in the Czech Republic, Slovenia and Croatia and the incremental revenues from the acquisitions of bTv and Media Pro Entertainment. The only operations that did not have an increase in revenues were Romania and Slovakia, which face contraction of 10% and 5% respectively in the TV ad markets in Q2.

Our consolidating costs for the second quarter increased 80% in constant currency. The increase was a result of the bTV and Media Pro Entertainment acquisitions and our investments in content new television channel and new media. Our consolidated OIBDA, rose 6% in constant currency terms. The improvement is mainly driven by the acquisition of bTV that enabled us to completely offset the losses from our existing Bulgarian operations. In the second quarter we delivered positive OIBDA in Bulgaria of $1 million.

And now Adrian will share with you the broadcast highlights from the second quarter.

Adrian Sarbu

I invite you to turn to slide seven of our presentation highlighting the achievements of the broadcast division. In the Czech Republic we remained an undisputed leader of the market with prime time audience share of 47%. Our Nova cinema reached an average audience share of 3.7% and became a leader among Czech cable and satellite channels. In the second quarter Nova group delivered over 55% of commercial gross rating points available on the market.

In Romania we maintained leadership in a very competitive environment. We increased market share by 3 percentage point's year-on-year by supporting advertisers with attractive incentive packages. Our TV group delivered almost 40% of commercial of GRPs. In Slovakia, we maintained our leadership despite aggressive competition. Our female oriented channels TV DOMA remains the leader in each targeted audience.

Markíza group delivered 50% of commercial GRP’s on the market. In Slovenia, we increased prime time audience share to all time highest levels of 51% driven by success of local program. Our Slovenian channels delivered over 65% of commercial GRP’s.

Our Croatian business, Nova TV had another strong quarter. We increased revenues by 11% despite 7% decline in TV ad market. We achieved market share leadership which reached 38%. Nova TV delivered 40% of commercial GRP’s.

And finally in Bulgaria, our combined operation is the market leader prime time audience share of 48% driven by bTV. We are in a process of integrating bTV and Pro bg which we expect to finalize by default.

Our combine Bulgarian operations delivered almost 45% commercial GRP’s under market. Most important, all our broadcast operations delivered positive OIBDA in the second quarter.

And now over to David

David Sach

Thank you, Adrian. Please turn to slide eight. In constant currencies our broadcast revenues were 10% higher despite the 4% overall decline in TV add spends. The growth in broadcast revenues was driven by the contribution of the bTV Group in Bulgaria, the improving situation in the Czech and Slovenian TV advertising markets and our growing market share in Croatia.

Broadcast cost rose 12% in constant currencies. This increase was primarily due to the addition of the bTV group in Bulgaria, an investments to maintain our audience leadership and develop new channels including MTV in the Czech Republic, DOMA, in Slovakia and Pika in Slovenia.

Aside from critical investments in our programming schedules, we have continued to aggressively cut cost wherever possible. It can be seen in the MD&A section of the 10-Q operating, selling, general and administrative cost are lower in almost all of the operations.

Broadcast OIBDA was 6% higher in constant currencies. The increase was primarily driven by the acquisition of bTV. OIBDA was 8% higher in the Czech Republic but was down in Romania and Slovakia.

In Romania, we are looking to recapture the slight decrease of audience share in our second channel to have increased our programming investments. In Slovakia, we are facing unusually strong competition from the number 2 broadcaster and needed to strengthen our spring programming schedule. As Adrian mentioned all of our broadcast operations reported positive OIBDA in Q2.

And now back to Adrian

Adrian Sarbu

Let’s move to slide nine and let me point to adjust the few highlights several content division, Media Pro Entertainment. During the second quarter Media Pro Entertainment delivered 248 hours of press release section to CME broadcasters, driving their audience leadership. In the second quarter Media Vision, our reality and entertainment unit produce 620 hours of programming boosting our ratings of CME channels.

We have our new original blockbuster format Talentmania – Talentmania in development for the Czech and Slovak markets and we are planning to produce it for all CME countries in the future. We completed the integration of production services in all CME countries.

We’ve benchmark production services and established cost control tools across CME markets. The distribution exhibition business generated $4.3 million in revenues coming from third parties.

Now over to David who will give you Media plan entertainment financials

David Sach

Thank you, Adrian. Please turn to slide 10, which shows a summary of the financial results of our content division. The Media Pro Entertainment segment comprises the now integrated production assets of CME and the acquired media PRO entertainment business.

The 2009 revenues and cost represent the production activity that existed prior to the acquisition of Media PRO Entertainment in December last year. Our content division reported total revenues of 38 million for the second quarter. The increase was mainly attributable to the revenues of the operations that were acquired, which consisted out the Romanian fiction operations and the production services in distribution and exhibition businesses.

Media PRO Entertainment incurred cost of 38 million in the second quarter. Likewise, this increase was also attributable to the operations acquired as part of Media PRO Entertainment. The second quarter OIBDA was $0.2 million. The decrease in OIBDA from last year is due to the cost of integrating and building this new division.

Adrian will now the highlights for the new media division.

Adrian Sabru

Thank you, David. Please turn to the slide 11. Our new media audience continues to grow. In the second quarter we attracted over 2.1 million unique visitors per day, which represents 39% year-on-year growth. We launch 9 new sites in key product segment and we're preparing the launch of CME video and TV entertainment portal and play in the third quarter.

We restructured and centralized our technical development function. We increased our revenues by 31% and the number of online plans by 35%. We are gradually increasing our internet advertising market share in region with Slovenia in the lead with 28% market share.

Now, over to David.

David Sach

Please turn to the slide 12. Revenues were up 31% in constant currencies in our new media division. This reflects the continuing improvement in the number of unique visitors and video downloads across all markets and the acquisition of the bTV website in Bulgaria.

New media cost increase 29% in constant currencies. This increase is mainly due to investments in sales and marketing, which were expected to deliver increase revenues and market share in the second half of the year.

The second quarter OIBDA loss to the new media division was $1 million similar to last year. We are continuing to invest in these businesses. We have established a dedicated sales team, restructure the technical development function and launched 13 new products.

Please turn to the slide 13. Our liquidity as a June 30th 2010 amounted to $336 million, a decrease of a 134 million from the beginning of the year. This reflects our negative free cash flow of $40 million for the first six months of the year due to investments in our programming library and CapEx and the acquisition of bTV for $413 million offset by the sale of our Ukraine operation for a $308 million.

During the quarter we drove an additional $72 million on our Earthsave [ph] facility in the Czech Republic and repaid the full outstanding balance of $30 million of our Slovenian revolver. We close the quarter with just over $1 billion of net debt and now back to Adrian.

Adrian Sabru

Before talking about the second half of the year and the future. We would like to address a number of hot topics raised by analyst and investors in the last few months. Romana.

Romana Tomasova

Okay Adrian, can you explain us why CME continues investing in audience share if we still don’t see any major recovery in the CME's markets?

Adrian Sabru

Our key assets Romana are audience and market share leadership, that positions us for a strong growth when the markets recover. We managed our broadcasting programming schedule to limit programming cost while maintaining our high audience share and brand strengths.

Romana Tomasova

Okay. And we heard here about competitions, so can you tell us whether there have been any changes in the competition environment?

Adrian Sabru

We're successfully facing competitions in all our markets. We have not yet seen any signs of reduction of investment in programming by our competitors in any of our markets. Our key strategy is to protect out audience leadership and brands at the lowest possible cost.

Romana Tomasova

And now want to David, our investors want to hear more about Bulgarian operations and tell how is the integration going on and tell what they can expect in terms of future growth.

David Sach

Okay in terms of the integration we're in the process of that integration and expected to go on until September. You could already see the first benefits of that integration in terms of the million dollars of EBITDA we had in Q2. Going forward TV business tend to have a low season in Q3, so one would expect Bulgaria to have EBITDA losses in Q3 but then Q4 we would expected to return to even our break-even position or slight EBITDA positive.

Romana Tomasova

Okay. Thank you. Adrian, what about prices, what is our pricing strategy for the rest of the year?

Adrian Sarbu

Prices are driven by advertisers demand and the availability of inventory in the market. Our audience leadership generates significantly higher GRP output compared to our competitors. We are pro active in pricing and this is reflected in our high market shares. In market that our showing recovery we are prepared to increase prices in the second quarter 2010.

Romana Tomasova

Okay. lets move to content because that’s another very frequent question, people would like to know more about our strategy for Media Pro and how big contribution Media Pro will have in the future to our revenues?

Adrian Sarbu

Media Pro Entertainment is record of CME, one content multiple distribution of rating model. It develops and produces for CME broadcaster's high rated low cost local content, which brings a unique competitive advantage in each market. So we see ethic on our home leader distribution business Media Pro Entertainment adds new distribution windows for own and acquired content. Third party revenues of Media Pro Entertainment from international sales distribution and production services are expected to account for 50% of all CME revenues by 2015.

Romana Tomasova

Thank you, and my last question to David, what is CME strategy for elaborating and how you going to buy some debt back?

David Sach

Well, our priority of that is to maintain on the liquidity, that’s the number one priority. In terms of deleveraging the best way obviously to deleverages increases OIBDA. Okay and that will be doing by investing in our existing business. We will look at acquisitions but that only when was free cash flow positive. The bank bad debt is an option that only if financial beneficial and an obviously can – cannot effect our liquidity.

Romana Tomasova

Okay. Thank you David and now lets move to more details on the second half of 2010. So over to David again.

David Sach

Please turn to slide 16, for review of our market projections in the second half. We expect that TV advertising spend on average will decline by between 2 and 4% for the full year, compared to our previous guidance during the first quarter call of flat markets for the full year.

We have reduced our full year estimate because advertisers have become more cautious about spending in our markets particularly during Q3. They all are concerns the great and fix prices will spill over into our markets impacting exports and liquidity. There are concerns of the euro will continue to weaken and that the recently announced security measures by many European governments will result in further declines in GDP. Well, these concerns are impacting the speed of the recoveries in our markets, we continue to believe that these factors are temporary.

As shown on this slide, there is significant variations in the expected TV ad market growth rates amongst that countries for the second half. This is making even more difficult to accurately predict the full year CME average. The TV ad markets in the Czech Republic Slovenia, Slovakia and Croatia are expected to grow in the second half while Romania and Bulgaria are like to contract.

Please turn to slide 17, for our revised guidance. Our previous guidance was based on two critical assumptions firstly that our TV ad markets will be flat for the full year and secondly, that local currency’s would stay constant in Malaysian to the U.S dollar.

As discussed on the previous slide, we now estimate the TV ad spend in our markets will decrease by 2 to 4% for the full year reducing both our revenue and OIBDA guidance by between $15 million and $30 million.

Local currencies have depreciated against the U.S dollars since our previous guidance based on the exchange rates in effect that July, 12 our revenue guidance is reduced by $50 million and our OIBDA guidance by $17 million.

We now expect revenues to be between $710 and $725 million and our OIBDA to be between 100 and $115 million for the full year.

And now back to Adrian for final remarks.

Adrian Sarbu

Thank you, David. I think about the future and why we believe we are company that is able to generate shareholder value for you our investment. Please turn to slide 18 you know that our markets are proven opportunity we have a history about performing the market and we did it in quarter two. We are uniquely positioned take advantage of recovery which just started in our region. We are the stronger team of media professional in the region. Our leadership position in broadcasting provide high operating leverage our vertical integrated operation model provides or diversify revenue and will be more resilient to the future challenges in our industry.

We are building leadership in content and internet to organic growth. We have restructure CME to a very volatile barrier and have some out stronger. We still believe that add in density in our market the relationship between expense of capital and GDP growth capita. We will continue to convert with U.S. and Western Europe. We still believe that it will be the dominant form of advertising in our market for the foreseeable future because of its unparallel ability to reach overall audience. This factors will drive significant growth in TV expense as soon as our marker return to historical level the consumer less GDP growth.

Now I back to Romana.

Romana Tomasova

Thank you Adrian. Operator can you please remind listeners on the phone how to ask questions.

Question-and-Answer Session

Operator: (Operator Instruction). Question from Vivek Khanna from Deutsche Bank. Vivek

Vivek Khanna – Deutsche Bank

Hello, good afternoon everyone. Sorry just a one quick question on clarification I appreciate you don’t want to give guidance on our by divisional basis but just with regards to Bulgaria because clearly there is legacy business and the acquired business what would you suggested the good ballpark number of BEITDA for Bulgaria for the full year and other terms? Please thank you.

Romana Tomasova

David.

David Sach

Yes, we’re not giving – we’re not giving full year guidance for Bulgaria. You know what the Q1 EBITDA losses were obviously what Q2 is based on this call. I just gave you some guidance on Q3 we'd have an EBITDA loss in Q3 because it’s a seasonally low period for us. And then in Q4 we expected to be break-even or slightly positive. So, you just can after put that together for yourself. Hopefully that was helpful.

Vivek Khanna – Deutsche Bank

Okay.

Romana Tomasova

Yes, Vivek, any other question.

Vivek Khanna – Deutsche Bank

That's enough for now. Thank you

Romana Tomasova

Okay, thanks.

David Sach

Okay. Thank you.

Romana Tomasova

Next question comes from Vijay Singh from Janco Partners. Hi, Vijay.

Vijay Singh - Janco Partners

Hi good morning. Just a quick question on the cost reduction and you’ve all obviously done a very good job on the cost reduction side because the way I’m looking at 2010 versus 2009 our OIBDA margins are probably going to be about at the midpoint of the guidance about 500 basis points higher despite flat revenues. I’m just wondering if you could give us little color on how much more room do you have in terms of cost controls and cost reductions as you continue to wait through the overall market conditions?

Romana Tomasova

Adrian will you take that question

Adrian Sarbu

Yeah, I think, Vijay, let me just remind you the – our key strategy at least to protect them our audience leadership and also the brands of the lowest cost. So what we've done is that we've manage broadcasting programming schedule to limit this while maintaining audience share and also the branching, but this is very much dependence on what our competitors do. For example in Slovakia and also in Romania, we haven’t seen any science that they've reducing their investments in local programming whatsoever so I think with this in mind we need to protect this and because that’s going to give us a stronger position for strong growth as the market recovers. Does that answer your questioned you have Vijay?

Vijay Singh - Janco Partners

Yeah, it does. I was just hoping for a little bit more granularity in terms of particularly operating cost which were lower that relative the revenues and programming cost – we have addressed the programming of that but I was wondering if you could just maybe address the operating cost and what’s driving as the percentage of revenue, what’s driving the reduction there.

Adrian Sarbu

As Dave has already mentioned in his, I think in the presentation that I think other than programming cost and all the other cost managed to reduce this.

David Sach

Yes, he, is asking why we are going to do that and obviously we just, we’re aggressively managing our cost base and you saw in Q2 the revenues were up and we get tremendous operating leverage from our business model, so the increased revenues help in terms of the relationship between cost and revenue.

Romana Tomasova

Adrian wants to add something.

Adrian Sabru

Vijay, let’s remind ourselves when we talk about programming costs that in an emerging market the average increase of programming cost year-by-year is double-digit in the last three years 2009 and 2010, with the exception of new operations, new channels we succeeded to maintain programming cost increases in the low single-digit when our competitors invested more and when we maintained or increased our audience shares. For us this is a key indicator, can we maintain an audience or minimum maintain the audience share with the same programming cost invest on the previous year we’ll do it, should the investor a bit more will do it but the real understanding of programming cost cut comes from plus double-digit to plus low single-digit.

Vijay Singh - Janco Partners

Okay. Thank you. And lastly I know you’re not talking about Bulgaria in terms of the guidance, but I was wondering when do you think in terms of rough timing that you could reach the run rate of EBITDA or EBITDA in the Bulgaria and business perhaps going into 2011 or is it too early to tell.

Romana Tomasova

Anthony.

Anthony Chhoy

Again and with the audience and also market leadership as the market recovers in Bulgaria to the levels that we're seeing back in the pre classes levels we expect to deliver if the margin of over 40% that really our target.

Vijay Singh - Janco Partners

But you are not sure about the timing yet.

Anthony Chhoy

No, the timing, Vijay will be timing of recovery in Bulgaria the actual set up of our operations was leadership in all market, strong audience share, strong sales strategy in our flexibility in pricing initiative that single movement of recovery of the market -- is a follow with the correction in our pricing and sub sequentially would increase revenue. Normally market Bulgaria should reached in the movement they will recover this 40% EBITDA margin which is in a way our target for all this type of leaders.

Vijay Singh - Janco Partners

Okay. Very well, thank you.

Romana Tomasova

Okay. Thank you Vijay. Next question comes from David Kestenbaum from Morgan Joseph. David?

David Kestenbaum - Morgan Joseph

Yeah, Thanks. Can you talk about the inventory available on the fourth quarter in the Czech Republic, my understanding is you have quite a bit available why your competitor might have sold out and closed to so now?

Romana Tomasova

Okay Peter Dvorak.

Peter Dvorak

Okay. In the Czech Republic we’re able to increase year-on-year in Q2 which give us positive signals toward the Q4 which is the highest cold season our sale out was higher and we were expected in the previous year but it was a part of our sales strategy. We expect ourselves sellout to be somewhere between 80 to 90% in the fall and we feel that the clients will come and they will have some additional spending in Q4.

David Kestenbaum - Morgan Joseph

So where you now, you said 80 to 90% the fall are you anywhere near that or you still finding that inventory at this point?

Peter Dvorak

Excuse me can you repeat the question, David.

David Kestenbaum - Morgan Joseph

You said 80 to 90% sale in the fall but where you now as far as in retail it inventory sell out for the fourth quarter in the Czech currently?

Peter Dvorak

Our sellout for Q2 was somewhere around 80%.

David Kestenbaum - Morgan Joseph

Okay. Can you talk about the expenses in the Media Pro business obviously grew fast in the revenues this quarter and step out where you see that growing in the back half I mean pretty good top line growth at least in that business?

Romana Tomasova

Anthony.

Anthony Chhoy

I think, it’s again the what media PRO, the main [inaudible] to produce some earning from, the CME and broadcast is our write and also like cost content and which brings a unique competitive advantage in each of the mark but also through a distribution – distribution also [inaudible] ] distribution it has some new distribution windows well on and also content. The majority of third party revenues come from international sales distribution the production service I can get them in the second quarter we delivered over $8.5 million which represents just 25% of the Media Pro Entertainment and revenue Q2.

Romana Tomasova

David.

David Kestenbaum - Morgan Joseph

Okay. And then finally can you talk about was there any impact from the world cup in the second quarter?

Romana Tomasova

Peter

Peter Dvorak

Not really Because in the major part of our countries the world cup broadcast by the state TV’s and we face the same situation like we face in the past so Okay our audience share went down a little bit mainly in the countries where the team represents in the South Africa but immediately when its finished we came back to the previous level.

David Kestenbaum - Morgan Joseph

Okay. Thank you.

Operator: Thank you David next questions comes from Ben Mogil from Stifel Nicolaus. Ben?

Ben Mogil – Stifel Nicolaus

Hi, good morning. Thanks for taking my question. Very quick question when coming up with your guidance through beyond the microenvironment of how you should your TV market unfolding, did you have any sort of material changes in the competitive pressures or sort of what your market share expectations are in each of the countries in the second half of the year that compare to last year or even the first half of this year?

Romana Tomasova

Adrian

Adrian Sarbu

We expect higher pressure form our competitors in Slovakia, Romania but possible also in Czech Republic and in Croatia.

Ben Mogil – Stifel Nicolaus

And presumably that is factored into your guidance or is that potentially something that’s additionally could come to play?

Romana Tomasova

Is it factored?

David Sach

On the most part Ben that’s impacted in we have always stay strong competition in the and we assume that’s going to happen and therefore we make sure that we have the program in schedules to deal with strong competition in all those marketplaces but again if its competitions does something unexpectedly different then we need to react this April 31st.

Ben Mogil – Stifel Nicolaus

Great thank you. I am sorry.

Adrian Sarbu

And is not reacted Ben we have to –we have to core CDs for CDs these action and be able to act even before the competition getting results following their investment. I will also add some pressure expected in Bulgaria.

Ben Mogil – Stifel Nicolaus

Okay. Great thank you very much.

Operator: Thank you Ben. Next question comes from Alexey Surkov from BNP Paribas

Alexey Surkov - BNP Paribas

Yes, good afternoon. The question is really on outlook for the second half of the year. I looked to slide 16 and it seems that the market is gradually turning in a places like Slovakia and Croatia you expect second half to be better than the first half based on the full year target and pretty much the same applies to Romania and then Bulgaria. Just qualitatively where you see the front markets going if my understanding is correctly and also and obviously there was a revolution in EBITDA guidance there seem the risks further risks are on the downside so you may look at Q3 and turn it down further or not or do you think that there is – there may be a positive surprise in where that risks balanced on the downside or upside?

Romana Tomasova

David.

David Sach

Okay. Look obviously we could only guide based on the current market conditions. So obviously back in our first quarter call we guided on the information that we had back then and since then you’re seeing quite a few things like the Greek crisis the big crisis euro so one and so forth, so given what we see today we’re seeing an improvement that you saw in those slide in terms of the customers confidence and the private consumption statistics are starting to improve and therefore that tends to get the advertisers back in the market place because they foresee consumer activity picking up and when you get slightly ahead of that curve, so if those trends that enabled us to give this forecast, if those conditions change therefore whatever reason and become, we’re slight into a double-digit recession whatever, obviously that could change our current outlook, but based on what we note today this is – this is our best projections.

Alexey Surkov - BNP Paribas

Right and in general, do you think given the volatility do you think it make sense to be affect in more generic guidance rather than quantitative one however helpful it might be for us to calibrate your financials - that’s a full – question more than?

David Sach

Sure, sure I’d love to be in a position of giving more guidance and the first quarter call we fell propose to give guidance because analyst expectations were all over the place so because of the strategic actions that we have taken into by bTV and Saudi and Ukraine there was very difficult for people to get accurate guidance so we’re so compelled to put some guidance in the market place again we get the best guidance we could at that time and changes in the market and the currency in the markets as well and changes in macro assumptions have led us to provide their guidance and again, most preferred to be in a position by having to give any but we felt that this is the right thing to do, through as the current situation.

Alexey Surkov - BNP Paribas

So going forward come back from our first question we're still on the downside your account rather than other?

David Sach

I wasn’t helping around the upside well, again we're giving the best guidance we can and what we know today and we will see what happens in the future none of this can predict future microeconomic trends. So all we can do is Adrian has said it's managed the businesses best we can during this difficult time.

Alexey Surkov - BNP Paribas

So in advance term this dollar – our guidance is related to the actual market facility, should micro change, we'll try to offset negative changes or get the positive one but in this range.

David Sach

Right.

Alexey Surkov - BNP Paribas

Okay. Thank you.

Operator

Thank you Alexey. Next question is from Robert Doucha. from Sanning Capital.

Unidentified Analyst

Hi this is actually [inaudible] Robert. Question about Media Pro. It sounds like is doing very, very well on revenue not so well on OIBDA. The question is how important for that business is that first party revenue which mentioned it’s i.e., for it to become sort of independent profits on charity. Meet more third party revenue need plan to have more of it because it seems like a nice revenue growth engine. But do you expect on the composition of the revenue debt?

Romana Tomasova

Okay. Adrian will answer.

Adrian Sarbu

I’ll start with the answer then may Anthony wants to add. I think we address this issue in our discussion with Romania the Media Pro today is for CME important for developing and producing high ratings local content at controllable low cost. Also is important because it’s a operating model covers all distribution windows and its content its sellable internationally and in region through all distribution windows the [indiscernible] and so on. For us the future is definitely a future when third party revenues will increase because Media Pro has a much higher potential than CME broadcasting division and internet division has have to absorbed its product and service.

Unidentified Analyst

Good. Do you expected to glow beyond let’s say 50% third party is better target or it still any target?

Adrian Sarbu

Robert at the moment it’s around about 25% of the division the third party reference 25% of the divisions and revenue. So for our target is to boost that to 50% 315 that’s our target and the answer for you is we have potential to go beyond 50% but today when the prices is not over in our region when we focus on cost control when we have to focus on other immediate start to talk about other targets than 50% it’s a little let’s say about dreaming. We have potentially Media Pro to go beyond and we expanded as we guided the market imperial meeting to become one of the largest contain providers is Europe.

Unidentified Analyst

Very good. Thank you.

Romana Tomasova

Okay. Thank you. Over to operator can you remind to our participants how to ask questions before I take an other one.

Operator: Absolutely. (Operators Instructions)

Romana Tomasova

Thank you so next question comes from Jean-Yves Guibert from BNP Paribas.

Jean-Yves Guibert - BNP Paribas

Taking my question. Coming back on your guidance I mean we appreciate that you provide guidance so thanks for your effort. However I have got the question on the 30th of June 2010 so I just 28 days ago you change your guidance for your TV ad market for 2010 from flat to minus 1% and now you change that again to minus 3% so which indicate the difference as far as [inaudible] confirm from expectation as form plus 6% to now between 2 and 3% what were is the main drivers behind such significant guidance in early 28 days? Thank you very much.

Romana Tomasova

David.

David Sach

Yeah, the reduction in guidance is obviously our operating companies trying to digest all the changes that have been announced in their market. There has been significant austerity measure that we were announced in Romania as you know well there is the government is to actually need salaries of the public workers and taking up the VAT Bulgaria has announced that just very recently there is going to be authority measures and they are trimming the public workforce and going to take a hedge to public spending in Bulgaria. All these actions are going to have an impact on consumer spending. So its really just a matter of trying to digest all these latest information may be some of that was available before that presentation and therefore we tried to take as much as possible into account at that time. But certainly our company haven’t had the chance to go through their reforecasting process that they do at the half year. So it’s just a matter of digesting all that and coming up with much more accurate information on that.

Adrian Sabru

Also we should notice run if that in the last quarters our methodology I have tracking the markets quarterly or monthly proved not to be useful enough and now we are tracking them all the markers weekly. And this is a reaction to the behavior of advertisers who are changing their forecast who are changing their view about the market in line with the quiet significant changes in seven countries in respect of evolution of consumption, so you have a guidance change, in respect of the evolution of the markets after six weeks not because within have it properly then but because it’s changed. And if it will change we will be able to track within this is in the benefit of the way we run the business.

Jean-Yves Guibert - BNP Paribas

Okay. Thank you. And just a quick housekeeping question. On to that bTV consolidated revenue for 16.8 or 16.9 million and over the period since the competition of the acquisition, do you have the pro forma figure just for Q2 I know that you – you provided for H1, but for Q2 only. I mean, on the pro forma basis if the assets were consolidated since the 1st of April?

Romana Wyllie

David Sach

David Sach

Well I – sorry I couldn’t understand that question, it’s difficult to hear you.

Jean-Yves Guibert - BNP Paribas

My question is that bTV started to be consolidated from competition date, so it was a [inaudible]

David Sach

Correct.

Jean-Yves Guibert - BNP Paribas

And I thought that you’re finding bTV revenue and in bTV consolidated $16.8 million in term of revenue in your Q2 figures. So could you provide with revenue figures, the revenue of bTV over a full three months period from April Q2 end of June?

David Sach

If you’re asking us to split bTV from PRO.BG – I’m not going to do that that the – you were integrating those two businesses and therefore that just got to be one operation going forward. So what did…

Jean-Yves Guibert - BNP Paribas

Okay. So are you having the number – don’t you provide a 16.8 million revenue contribution from bTV.

David Sach

Our Bulgarian operation had revenues of 17.8 million for Q2. So…

Jean-Yves Guibert - BNP Paribas

Yeah. Understand that in your filing on the SEC. You indicate that in your however Q2 period bTV contributed for 16.8 million U.S dollars revenue of over period since completion on the acquisition?

David Sach

I think the most important things to note here is that in Q2, our Bulgarian operation delivered $1 million EBITDA, I think that’s the biggest thing to take note of.

Adrian Sarbu

To comment you know that’s obviously putting the two together, so, yes, obviously that Pro.BG business is getting integrated with bTV both Pro. BG obviously lost some money, bTV obviously made money but we're not going to give those figures out going forward because we're going to if this all get merged and we’re in the process of better integration.

Jean-Yves Guibert - BNP Paribas

Okay. The positive contribution from bTV from the 19th of April

Adrian Sarbu

Yes.

Jean-Yves Guibert - BNP Paribas

I correct.

Adrian Sarbu

Yes.

Jean-Yves Guibert - BNP Paribas

Okay.

Adrian Sarbu

Thank you.

Jean-Yves Guibert - BNP Paribas

Thank you very much.

Adrian Sarbu

Your welcome.

Romana Wyllie

Okay. Thank you. As we do not have any other questions in the queue. So let me thank you for joining us today. We had more than 85 people on the call in addition to our webcast viewers. I hope that you enjoyed our video webcast and we welcome your feedback and comments. I’d would like also to remind you that you can keep up today and full our progress between earnings call on our website www.cetv-net.com or as always I am available for any additional question anytime. We look forward to seeing you shortly. Goodbye.

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