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CME sets sights on CET 21

Klinkhammer sez co. 'will be debt free in eight days'

A correction was made to this article on August 8, 2003.

Ronald Lauder’s Central European Media Enterprises (CME) is again pursuing its former Czech broadcaster Nova through the courts.

It’s not content with winning an international arbitration against the Czech Republic for $359 million in May when a tribunal found the Czech Broadcasting Council had conspired to deprive CME of its exclusive service agreement with Nova TV in 1999.

On Wednesday it filed an arbitration in Vienna and the Czech Republic against CET 21, Nova’s license holder, asking for a further $275 million in damages to cover the wrongful termination of the exclusive arrangement between CET-21 and CME.

However, there is some good news for the hard-up Czech Republic, which exhausted all legal channels before handing over the cash.

If CME wins the arbitration, it will only keep $72 million of the award. The company has promised to return the rest to the Czech Republic.

“We believe we have a very strong case,” CEO Fred Klinkhammer told investors, while commenting on second-quarters results on Thursday.

Revs rose 18% to $32 million. Without the $359 million settlement CME received from the Czech Republic, the company would have posted a $27.8 million net loss. It remains uncertain if the settlement, received as compensation for failing to protect the company’s investment in Nova, will be taxed or the long-term income implications of the reward.

CME will retire all bonds on Aug. 15, a year ahead of schedule.

“CME will be debt-free in eight days,” he told investors, adding that the company would then be profitable by any standards.

CME operates six TV stations in Romania, Slovakia, Slovenia and the Ukraine.

Romania was singled out for its 60% rise in revenues to $13.8 million, which CME management called “a spectacular year” based on growth of the ad market and rising audience share at Acasa, its second channel there.

Slovakia’s Markiza TV showed a 31% rise in revenues to $14.7 million for the quarter. Markiza has a 48% market share among TV viewers.

Klinkhammer also repeated CME’s intent to acquire stations and licenses in the region. CME is targeting stations in Poland and Hungary, has applied for a license in Croatia, and is considering a move into Russia.

CME also intends to negotiate a majority stake in Markiza TV within the next months.

CME is also awaiting a ruling from Dutch tax authorities on whether it must pay taxes on the money received due to its victory in the Czech arbitration. CME estimated that it could take anywhere from one month to over a year to receive a decision.