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Central European Media Enterprises (NASDAQ:CETV)

Q1 2011 Earnings Call

April 27, 2011 9:00 am ET

Executives

Adrian Sarbu - Chief Executive Officer, President and Director

Daniel Penn - Executive Vice President, Secretary and General Counsel

David Sach - Chief Financial Officer and Executive Vice President

Romana Wyllie - Vice President of Corporate Communications

Anthony Chhoy - Senior Vice President of Strategic Planning & Operations

Analysts

Mitch Reznick - Fortis

Pavel Ryska - Atlantik Financni Trhy A.S.

Vijay Singh - Janco Partners, Inc.

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Laurie Davison - Deutsche Bank AG

David Kestenbaum - Morgan Joseph TriArtisan LLC

Andrzej Knigawka - ING Groep N.V.

Operator

Hello, my name is Kevin, I'll be your conference operator today. At this time, I would like to welcome everyone to the Central European Media Enterprises First Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, April 27, 2011. It is now my pleasure to turn the floor over to Romana Wyllie, Vice President of Corporate Communications. Ms. Wyllie, you may begin your conference.

Romana Wyllie

Good morning, good afternoon [French] to each of you, and welcome to CME's First Quarter 2011 Investor Conference Call. We are broadcasting this 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 the 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

[French] and good afternoon.

Romana Wyllie

Chief Financial Officer, David Sach.

David Sach

Good afternoon.

Romana Wyllie

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

Anthony Chhoy

Good afternoon.

Romana Wyllie

And our General Counsel, Daniel Penn.

Daniel Penn

Hello.

Romana Wyllie

Before I turn to Adrian, let me read the usual Safe Harbor Statement. Our presentation today will contain forward-looking statements. For 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.

During this call, we will refer to certain financial information that is not in U.S. GAAP. Please see the appendix of the presentation for a 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 U.S. dollars in our financial statements. Additional information on our segment data is provided in Note 17 of our financial statements on Page 30 of our 10-Q. And now over to Adrian.

Adrian Sarbu

Good afternoon, and good morning. A few months ago, on our fourth quarter 2010 earnings call, I pointed out that our priority in 2011 will be to deliver growth in revenues, OIBDA and positive free cash flow.

Today, I am pleased to announce that we are back onto growth. Our revenues increased by 20% and our OIBDA grew by 17x from $0.8 million to $14 million.

We also delivered positive free cash flow and are on track to meet our target for the full year. Our strong results are built on our continued audience and market leadership, rigorous cost control, the positive contribution from bTV in Bulgaria and growth in both Media Pro Entertainment and the New Media Division.

We also delivered against our task to reduce leverage. We bought back $24 million of debt and smooth out and extended maturities by refinancing $206 million of convertible notes due 2013.

Our liquidity today is a strong, exceeding $300 million. Back to growth, we agreed to acquire the Bontonfilm distribution platform in the Czech and Slovak Republic, which will add new streams of revenue in these two countries, and will have a positive impact on our bottom line.

And now over to David, who will review the macroeconomic situation in our region and our first quarter consolidated performance.

David Sach

Thank you, Adrian. Please turn to Slide 5. Our summary of the current macroeconomic situation in the region is as follows: The GDP of all countries has returned to growth, but this growth is still primarily export driven. Private consumption has lagged GDP growth, but is now stabilized in all countries. The TV ad market is following the trend of private consumption. The TV advertising market in Czech, Slovakia and Slovenia have returned to growth. But advertisers are waiting to see the impact of government austerity measures on private consumption before resuming their increased spending.

The TV advertising markets in Romania, Bulgaria and Croatia have not yet returned to growth, but the trending similar to consumer spending and should stabilize shortly. Overall, market growth was flat in the first quarter compared to the same period last year. Nonetheless, we are confident that consumer spending is on a growth trajectory.

Moving to Slide 6. Consolidated revenues for the first quarter increased by 20% at actual exchange rates or 18% on a constant currency basis to $173 million. All three segments increased revenues.

The Broadcast division benefited from the bTV acquisition in April last year. Media Pro Entertainment generated higher third-party revenues in distribution and production. And the New Media Division grew from significantly higher traffic on the websites, which we were able to monetize.

Total costs increased by 11% at actual rates or 10% on a constant currency basis. This increase was primarily driven by the bTV acquisition and investments in new channels and broadcasting and higher production costs.

All segments reported increased OIBDA in the first quarter, resulting in consolidated OIBDA of $14 million. This significantly higher OIBDA helped us achieve positive free cash flow, which I will discuss in more depth later. Adrian will now introduce the broadcast highlights.

Adrian Sarbu

I invite you to turn to Slide 7 of our presentation, highlighting the achievements of the Broadcast division. In the Czech Republic, we maintained undisputed audience and market share leadership.

Our evening news achieved 58% average audience share, and we successfully launched night news. Nova Cinema continued to grow, delivering average prime time audience share of 5%. Nova group delivered almost 60% of commercial GRPs on the market.

In Romania, we maintained prime time audience share and market share leadership. We delivered 40% of commercial GRPs on the market.

In Slovakia, we started 2011 with a spectacular average prime time audience share of 40%, and we increased our market share to 69%. The Markíza channel has delivered almost 60% of commercial GRPs on the market.

In Slovenia, we maintained unchallenged audience and market leadership. Our Slovenian channel has delivered almost 70% of commercial GRPs on the market.

Our Croatian business, Nova TV, strengthened its audience leadership in the market and increased market share by 7 percentage points to 49%. At the beginning of January, we successfully launched a new female-oriented channel, Doma, delivering average prime time share audience of 4%.

In Bulgaria, we are the undisputed leader with a fully developed multi-channel model. Our Bulgaria channel has delivered almost 55% of commercial GRPs on the market.

And now over to David, who will walk you through Broadcast financial.

David Sach

Thank you, Adrian. Please turn to Slide 8. In the first quarter, Broadcast revenues were up 16% or 14% in constant currency terms. Bulgaria was the primary driver of the division's growth as a result of the acquisition of bTV in the second quarter last year.

Local currency revenue growth was 8% in Croatia as a result of the much higher market share, which greatly benefited from the launch of our new female oriented channel, Doma. Growth was 5% in Slovakia following a 5 percentage point increase in prime time audience share to 40%.

And growth was also 5% in Slovenia, which rose mainly in line with the TV advertising market. Revenues in the Czech Republic were flat compared to last year. Our prime time audience share of 42% reflects the decision not to increase our programming investments. Even with flat investment, we produced over 30% more inventory than advertisers demanded.

Our market share was impacted because we chose not to discount heavily in the first quarter due to the risk of future price erosion.

In Romania, revenues fell 4% in line with the market. Broadcast costs increased by 12% or 11% in local currency terms due to the bTV acquisition and the impact of launching Doma in Croatia in January. Excluding these investments, costs decreased by 3%, which was a terrific start in our efforts to keep like-for-like cost increases flat for the full year.

Programming costs were even down or flat in constant currency terms in the Czech Republic, Romania, the Slovak Republic and Slovenia. Broadcast OIBDA for the first quarter increased by 47% to $26 million, an increase of 33% in constant currency terms. The increase was primarily a result of the bTV acquisition in Bulgaria.

Adrian will now present the Media Pro Entertainment highlights.

Adrian Sarbu

Let's move to Slide 9, and let me point to just a few highlights of our content division, Media Pro Entertainment. The content produced by Media Pro Entertainment is a key driver of success across our markets. It gives us the necessary brand power to maintain audience leadership, leverage market share and keep viewers loyal to our stations. This content also differentiates us from other players.

In the first quarter, Media Pro Entertainment delivered 271 hours of fiction and 317 hours of reality entertainment to CME broadcasters, generating spectacular audience share.

Let me point to a few best-performing shows. Rose Garden Medical in the Czech Republic, Best Years in Croatia, Romania Got Talent and Slovenia Got Talent. Media Pro distributions sold 281 hours of original Media Pro Entertainment fiction content to third parties worldwide, generating further revenue and OIBDA for the group.

Following our strategy to expand our distribution window in Czech Republic and Slovakia, we agreed to acquire Bontonfilm, a theatrical home entertainment, digital and television rights distribution company at a multiple of 4.5x 2010 OIBDA. Bontonfilm has a leading market position in both markets and it will boost our third party revenues and OIBDA. We expect to complete this acquisition in the second quarter.

Now, over to David, who will give you Media Pro Entertainment financials.

David Sach

Thank you, Adrian. Please turn to Slide 10. In the first quarter, Media Pro Entertainment revenues increased by 43% in both actual and constant currency terms to $40 million.

The increase in revenues reflects an almost doubling of third-party revenues and a 40% increase in fiction production sales to our broadcasters. 32% of revenues were generated from third parties compared with 23% in the same period last year.

Cost increased by 31% or 30% in constant currency terms as a result of the higher level of revenues, offset by an end to the one-off integration costs incurred last year.

Media Pro generated positive OIBDA of almost $1 million in the first quarter compared to a loss of $2 million last year. We are still targeting positive OIBDA in Media Pro for the full year.

Adrian will now talk about our New Media highlights.

Adrian Sarbu

Thank you, David. Please turn to Slide 11.

Our new media audience continue to grow in the first quarter. We focused on strengthening the core products of our portfolio, news quarters, niche website and television-related websites. Overall traffic grew by 35% year-on-year and reached 11 million average monthly non-duplicated unique visitors.

We continue to see increases in traffic in our paid content portals VOYO in the Czech Republic and POPPLUS in Slovenia. We are prepared to launch VOYO in all our countries in 2011.

We see VOYO as the future of our Internet distribution. It enables us to monetize own produced or aggregated content by distributing it in most windows, either live or on-demand, paid or advertising support. Now, over to David again.

David Sach

Please turn to Slide 12. In the first quarter, our New Media segment increased revenues by 30%, mainly due to increases in our web portfolio and the growth in unique users and video views.

Due to the restructuring activities that we undertook in 2010, we were able to reduce our New Media cost base by 22% in the first quarter compared to last year. Overall, we limited our OIBDA lost to $1.6 million for the first quarter, an improvement of 53% or 54% on a constant currency basis compared to the same period in 2010.

Now, please move to Slide 13. In the first quarter, we return to positive free cash flow territory, ahead of our full year target. The free cash flow for the first three months was $25 million, an improvement of $59 million over the same period last year, as a result of the higher OIBDA, and a significantly improved change in working capital, partially offset by a higher net investment in program rights.

The substantially better working capital movement included $47 million from an advance collection plan that we initiated in the first quarter.

Moving to Slide 14. We ended the first quarter with liquidity of $328 million, including $217 million of cash. The strength of our liquidity during the quarter allowed us to enter into the purchase agreement to acquire Bontonfilm, refinance $206 million of convertible notes due in 2013, further improving our maturity profile, and buyback $24 million of our fixed rate notes due in 2016.

We have no major maturities until 2013. We will use our liquidity for smaller, accretive acquisitions such as Bontonfilm and to continue to repurchase our indebtedness if and when attractive opportunities arise. And now, over to Adrian for closing remarks.

Adrian Sarbu

Let's turn to Slide 15, and let's talk about our current view of 2011. In the last two quarters, we have seen an improvement in the macroeconomic indicators. GDP grew and private consumption stabilized. The TV advertising markets are responding.

In the first half of 2011, we expect TV advertising spend to be flat or slightly positive. We foresee that spending to pick up in the second half of the year. And we remain confident that all our TV advertising markets will grow in 2011.

Our new business model, built on a strong content engine with multiple distribution platforms in each country of operation, will enable us to diversify revenues from advertising to paid and subscription windows. Our focus in broadcasting is to maintain our audience and market leadership and expand the margins through pricing initiatives and disciplined cost approach. We will continue to invest in content development and expansion of distribution in Media Pro Entertainment and New Media Division seeking quick monetization of these investments.

Free cash flow remains the main priority of CME in 2011. And in the environment of overall low single-digit market growth, we are targeting a double-digit increase in our revenues, in constant currencies with significant expansion of OIBDA margin.

We are not giving you now specific numeric guidance, but we are comfortable with current analyst consensus for the full year of approximately $810 million for revenues and $165 million for OIBDA. We are planning to give you the full year guidance at the next earnings call.

And now, I'll pass it back to Romana.

Romana Wyllie

Thank you, Adrian, that concludes the formal presentation. We are now opening the floor for questions. So operator, can you please open the lines?

Question-and-Answer Session

Operator

[Operator Instructions] I'll hand it back to Ms. Wyllie.

Romana Wyllie

Thank you. So the first question comes from David Kestenbaum from Morgan Joseph.

David Kestenbaum - Morgan Joseph TriArtisan LLC

I guess, the first question, can you just talk about Bulgaria, what is the growth organically in the first quarter?

Romana Wyllie

Okay, Anthony?

Anthony Chhoy

Bulgaria, I think we can't comment on the organic growth because -- since the acquisition of bTV, we develop a fully multichannel operation. So I think the benefit that you're seeing in Q1 in 2011 is as a result of that successful integration we have, and also with the operation model that we have. We effectively have undisputed leadership there, 51% audience share, and also we are growing our TV ad market share to 65%. So I think that's a very, very strong performance from our management team in Bulgaria.

David Kestenbaum - Morgan Joseph TriArtisan LLC

Okay, and then on free cash flow, a really strong growth obviously in the free cash flow. You benefited from programming rights in the deferred revenue, will that reverse during the year? Or is that sustainable?

Adrian Sarbu

Say again, David, what's that?

David Kestenbaum - Morgan Joseph TriArtisan LLC

The free cash flow, you benefited a lot from the programming rights and deferred revenue, is that going to reverse later in the year or will that -- you'll be able to maintain that type of working capital?

Adrian Sarbu

Yes, our challenge, David, is to obviously to maintain that level throughout the year. You know we are targeting full year free cash flow to be positive. So I think we view this as the first step in our aggressively managing working capital in order to hit that target.

David Kestenbaum - Morgan Joseph TriArtisan LLC

Okay. And then finally, on the convertible debt, you didn't refinance all of it. Can you just talk about what your intentions are with that, that half?

Adrian Sarbu

We are comfortable with our maturity profile, as you know, there's nothing to be paid before 2013. And in 2013, we have the $230 million, $240 million of the convertible notes. So we'll continue to look at our cash flow and depending upon our cash flow and our liquidity -- our liquidity is currently $328 million. So depending on the balance between the liquidity and the cash flow, we'll look to either partially refinancing that or possibly looking at refinancing the whole thing a little later as we go through this year and into next.

Romana Wyllie

Next question comes from Laurie Davison from Deutsche Bank. Laurie?

Laurie Davison - Deutsche Bank AG

There's no questions from my side.

Romana Wyllie

Laurie, no questions from you?

Laurie Davison - Deutsche Bank AG

No.

Romana Wyllie

We have next, Vijay Singh from Janco Partners. Vijay?

Vijay Singh - Janco Partners, Inc.

A couple of questions. One is on the PRO saving selling its assets and to deleverage their balance sheet. Is there any indication they will do so in Central and Eastern Europe? And if so, would you be interested in those assets, and would it fit your overall strategy? That's question number one. The second one is I wanted to just get the numbers for the ad sellout in the Czech Republic and the price relative to similar period last year.

Romana Wyllie

Adrian, do you want to talk?

Adrian Sarbu

Yes, we have no signal that PRO TV intends to sell these assets in Central, Eastern Europe, Vijay. The moment they will announce this, we will announce our intention. Until then, I think it's not -- it doesn't make sense to express an interest, Generally, we are looking for growth this year, and I think I outlined the way we want to generate growth this year. First, free cash flow then organic then those types of acquisitions, which are accretive and those type of investments which have a very quick return. This is for this year.

Romana Wyllie

And the second question is about the sellout ratio in the Czech Republic and about the pricing, Anthony?

Anthony Chhoy

I think the sellout rights in Czech Republic on our main channel Nova in terms of prime time -- I think it's still -- in this very low season, it's still quite healthy at some just over 70%. That's in for the first quarter. Now to answer your question on the pricing, again, we -- and you noticed that our main competitor, I think, undercut their price significantly and in the first quarter and more than what we are willing to do, and David touched on that in his speech. We have a pricing strategy in the Czech Republic. We expect them, the prices to return to 2008 levels within the next two years, but that's a deliberate action of ours.

Romana Wyllie

Next question comes from Stifel, Nicolaus, Ben Mogil.

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

One quick question, I know you're not going to give guidance, and I certainly respect that. Just as you said in the beginning or almost the beginning of May, and you're looking to sort of the next two months of the quarter, do you expect growth in the second quarter to accelerate from that in the first quarter?

Romana Wyllie

Anthony?

Anthony Chhoy

We don't have the TV ad market or...

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Yes, I mean, obviously TV is going to be the bulk of revenue anyhow.

Adrian Sarbu

Ben, can you repeat the question? Because do you refer to the second quarter or the second half of the year?

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Sure. Just the second quarter. Like as you said, you got one month of the quarter already under your belt and you've got obviously decent visibility for the rest of the quarter. Do you expect growth in the second quarter to be higher than that in the first quarter?

David Sach

In terms of the TV ad markets, we said, for the first half, we expect them to be flat or slightly positive. In terms of our own performance, we'll continue to have some benefits from bTV in Bulgaria, which will help us and MPE in new media are obviously driving growth as well for us. And we would expect to take a little bit of share in Q2 as well. So yes, we will continue with our growth trajectory.

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Okay, and then just the second question, I think you mentioned one of the reasons behind the free cash flow growth was sort of an advanced collection plan, if I heard you correctly. Are you doing that under sort of concerns about the credit quality of some of your advertisers? Or was this sort of -- I mean, maybe you can talk about that program in general.

David Sach

Sure, no concerns at all, Ben, it was a matter of just incentivizing some of those advertisers to pay us early, which is obviously good business practice. So we did have some excess inventory in some of the companies, which we were able to give as incentive and other incentives that just got them to pay early. So we will obviously try to keep that program in place throughout the rest of the year to ensure we meet our full year free cash flow target.

Romana Wyllie

Our next question comes from Andrzej Knigawka of firm ING -- ING Groep.

Andrzej Knigawka - ING Groep N.V.

I had a question on second quarter in the Czech Republic. Specifically, what do you see there in terms of ad spend because there were reports of some softness or unexpected softness on the German advertising markets in the first quarter, second quarter, too, do you see any read across the fact on Czech advertising marketing the second quarter from that? Or any other factor out there?

Romana Wyllie

David?

David Sach

In terms of the Czech market, as you saw, it grew 5% in Q1, we do expect that Czech market to continue growing. Advertisers have, as I mentioned in my speech, the advertisers have taken a pause as they look to see what happens with the government austerity measures that has been put in place in Czech and Slovakia and Slovenia. I think you know there's been some VAT increases and some public spending cuts in Czech and other places. So I think the market will take a little pause and will continue with its current growth trajectory in the Czech marketplace.

Romana Wyllie

The next question comes from Mitch Reznick from Hermes Fund.

Mitch Reznick - Fortis

I think in the last call, Adrian, you mentioned there were certain dynamics in the market, so which resulted in market itself, something like that would show some sort of improving in pricing in the next several months. Can you talk about, typically, what those dynamics were -- so like last call, you couldn't talk about it, but maybe you can now, and sort of what that portends for 2011?

David Sach

You just got that example in the first quarter in Czech Republic, Mitch. I call them dynamics not to say pensions. But in fact, after two years of supporting the advertisers with a free inventory and where the market not accelerating its growth, we have on one side advertisers willing to be, let's say, favored or supported or spoiled or call it as you want, with the inventory. And on the other side, our need to bring the prices in the right dimension. So this will be a process which we as leaders will drive in line with the growth of the market. And in this process, on a short period of time, you may see as you saw in Czech Republic the decrease -- the small decrease in market share. That doesn't mean that our ability to drive this market is diminished. It's just about how the strategies of our advertisers, their need for inventory, their sales, their projected -- their projected sales are, in a way, in line with our strategy. So in one moment in time, in the next month, we will see advertisers being interested in spending more because the market will respond. In that moment, our continuous intent and attempts to appreciate the prices will be successful. But again, we think we can drive this process as much as the market will allow us. And as you could see in Czech Republic, we gave up just 2% of our prices in the first quarter when others gave up double digits. These type of dynamics will be seen -- or turbulences or bumpy, bumpy relationship, bumpy prices will be seen along the whole year 2011. Depending on the market.

Mitch Reznick - Fortis

I think like I mentioned forward [ph] explains the sort of like-for-like decline in OIBDA, and a little bit give up in the margin that we saw in the first quarter.

Adrian Sarbu

Yes, we made some of that, and we discover that the value of our inventory, especially in prime time, it's not properly appreciated. And that's why we do every single month, week, attempts to bring this value at the right level.

Mitch Reznick - Fortis

Thank you, and then just one housekeeping question. Earlier there was a question about the -- I think it was the converts. I just want to confirm with converts. You mentioned that depending on free cash flow, excess cash liquidity, et cetera, you'd look to continue to take some of those as a market possibly doing a full refile. Is that in reference specifically to the converts or you also thinking other bonds in the cap structure, for example, DFRN [ph]?

David Sach

Yes, you saw that we took some of the $2,000 and $16,000. So we took $24 million out in this quarter because they were the most economically advantageous to take out. But obviously, as we start progressing towards 2013, whether we have the cash or not, we're going to have to decide whether to refinance those converts. So I would imagine as we get closer to 2013, then it will be a higher priority to buy those out versus some of the other debt. But we're going to make a decision to buy based on the economics and how close we get to that maturity profile date.

Mitch Reznick - Fortis

That is an interesting point because the bonds you bought back [ph] are trading well above par. Obviously, they are high-coupon bonds. So is that -- was the decision to take out some of the high -- reduce the cash interest versus the hit to equity of buying bonds, particularly above par because there are some bonds that are below...

David Sach

Yes, obviously, if there was an interest benefit and also an economic benefit of taking out the higher interest instruments, which is what we did. So we will continue to look at those dynamics.

Romana Wyllie

Before we go to the next question, I would like to ask Kevin to prompt for questions again.

Operator

[Operator Instructions]

Romana Wyllie

Thank you. So next question comes from Pavel Ryska from J&T Bank.

Pavel Ryska - Atlantik Financni Trhy A.S.

I have just one question this time. The question is for the last two quarters, we've seen some disappointment when it comes to the OIBDA margin. It was lower than the usual expected. Is the right interpretation that the competition on your core market is forcing you to have higher costs to achieve a certain level of revenues -- or is this just cyclic committing [ph] , and a related question to that one, why do you see such a strong expansion in the OIBDA margin in the rest of this year that you are referring to in your presentation?

Romana Wyllie

Thank you, Pavel. Anthony, would you like to talk about the competition?

Anthony Chhoy

Well, I think, in terms of the competition, there is a market by market, and we are in a dominant position still -- leadership position in all our markets. So they will obviously naturally try to invest in the like of productions to try to claw back some of that leadership, but we've been successful to get some [ph] maintain and also strengthen our audience leadership by restricting cost to, I think in our case, in the first quarter 2010 who was like for like less than 2010. So I think that's the situation that we're in. But in terms of OIBDA margin expansion, David, you want to take that answer or...

David Sach

Yes, as we said, we believe there's going to be growth in our TV market in the second half. And you couple that with growth in MPE and growth in New Media and that's obviously the key to us growing those OIBDA margins, is getting revenues to be growing ahead of the cost. So growth in the TV ad markets will be a big factor in driving that significant OIBDA expansion.

Romana Wyllie

And Adrian wants to add something.

Adrian Sarbu

I want to remind you that price of leadership is a price of leadership. When the markets go down, your OIBDA margin are going down much faster when they go up. It's the reverse, and we pointed out in the last quarters that we are building, and we built a very strong operating leverage. So that's the reason we believe that we can expand quite fast the margins as the markets will grow. In respect to the last two quarters, and especially in the first quarter, I remind you that the first quarter is the lowest quarter, the second lowest quarter of the year. So generally, the margin broadcasting operation in the first quarter are low even in a normal year.

Romana Wyllie

Thank you, Adrian. Pavel, do you have any other questions? So we do not have any more questions in the queue. So let me wrap up by inviting you to join us for our Investor Day, which we will hold this year in Central London on September 21. Please save the date in your diaries and look for more information on our website in the coming weeks. Thank you very much for joining us today. I hope that you enjoyed our video webcast, and we welcome your feedback and comments. I'd also like to remind you that you can keep up to date and follow our progress between the earnings calls on our website, www.cetv-net.com, or as always, I'm available for additional questions any time. We look forward to seeing you all shortly. Goodbye.

Operator

Thank you. This does conclude today's Central European Media First Quarter 2011 Earnings Conference Call. Please disconnect your lines this time and have a good day.

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