CETV

Central European Media Enterprises Ltd. (CETV)

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Central European Media Enterprises Ltd. (CETV)

Q4 2009 Earnings Call Transcript

February 24, 2010 9:00 am ET

Executives

Romana Tomasova – VP, Corporate Communications

Adrian Sarbu – President & CEO

Charles Frank – CFO

Petr Dvorak – SVP, Broadcasting

Anthony Chhoy – SVP, Strategic Planning & Operations

Analysts

Dmitry Zhuk – Citibank

Ben Mogil – Thomas Weisel Partners

Laurie Hill – Goldman Sachs

Matt Walker – Nomura

Vijay Singh – Janco Partners

Robert Doca [ph] – Saning Capital [ph]

Gavin McKeown – Pioneer Investments

Alexey Surkov – D&T

Margaret Kalvar – Harding Loevner

Leszek Iwaszko – KBC Securities

Andrzej Knigawka – ING

Dave Kestenbaum – Morgan Joseph

Scott Kinam [ph] – O’Connor [ph]

Mark Kuduroni [ph] – Credit Suisse

Vivek Khanna – Deutsche Bank

Presentation

Operator

Hello, my name is Missy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Central European Media Enterprises full-year 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator instructions) As a reminder, this conference is being recorded today, February 24th, 2010.

It is now my pleasure to turn the floor over to Romana Tomasova, Vice President of Corporate Communications. Ms. Tomasova, you may begin your conference.

Romana Tomasova

Thank you. Good morning or good afternoon to each of you, and welcome to CME's fiscal year 2009 investor conference call. For the first time, 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; and CME’s Chief Financial Officer, Charles Frank who will give you the formal presentation. We are also joined today by Petr Dvorak, Senior Vice President, Broadcasting; Anthony Chhoy, Senior Vice President, Strategic Planning & Operations; and our General Counsel, Daniel Penn.

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 US Private Securities Litigation Reform Act of 1995, and refer you to the forward-looking statements section in our Form 10-K 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 US GAAP. Please see the appendix to the presentation for a reconciliation to US GAAP financial measures. In addition, our segment financial information that is presented in local currencies is not in US GAAP. We do not provide a reconciliation to these numbers as the US GAAP amounts are expressed in US dollars in our financial statements. Additional information on our segment data is provided in note 19 to our financial statements on page 172 of our 10-K.

And now, over to Adrian.

Adrian Sarbu

Good afternoon or good morning. In 2009, an unprecedented economic crisis hit our region and reset TV ad spending levels to 30% below those we saw in 2008. $800 million of TV ad spend vanished in one year from our markets. Facing an event of such magnitude, we responded. We focused on defending our audience leadership in our core markets. We gained market share at the lowest cost possible. Inevitably, our revenues suffered. Our EBITDA for the full year was only $75 million.

Today, we face questions with difficult answers. When will our markets start recovering? How fast will TV ad growth return? When will Central Eastern Europe convergence with Western Europe resume? Here are the answers.

We expect recovery of our TV ad spending in the second half of 2010. In the first half of 2010, our markets will be flat. Advertisers will remain cautious and opportunistic. At the beginning of this year, we have made the necessary corrections to our portfolio to achieve positive EBITDA in all our operations in 2010. We have agreed to sell our Ukraine operations for $300 million. We have agreed to acquire a market leader, bTV in Bulgaria for $400 million. We expect that these changes will bring significant benefits to our bottom line in 2010 and beyond.

And now, our strategy is to focus all our energy on increasing profitability in broadcasting, on growing and monetizing internet audiences, on growing MediaPro, and on diversifying our revenue sources. CME today is reloaded with energy, self confidence and cash. Our track record demonstrates that we will achieve our goal, to outperform the markets.

I invite you to turn to slide 5 of our presentation. In 2009, we accomplished a number of actions. We attracted Time Warner investments of $240 million. It endorsed our capabilities to operate successfully in our markets. We strengthened our operations by maintaining audience share leadership and increasing market share. We increased our liquidity to $500 million and extended debt maturities beyond 2013. We acquired MediaPro Entertainment and now we are redefining ourselves from a broadcaster to a vertically integrated media company in order to face the challenges of our industry in the future.

We laid foundations for revenue diversification, advertising, channel subscription, content, new media and management services. We agreed to buy bTV in order to achieve positive EBITDA and a leading position in Bulgaria in 2010. We decided to sell cash negative Ukraine for $300 million. We preserved the power of our brands, product and spirit of our people.

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