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Central European Media Enterprises' CEO Discusses Q2 2011 Results - Earnings Call Transcript

We delivered positive free cash flow in the first 6 months of 2011 and we are on target to deliver positive free cash flow for the full year. We also completed the acquisition of Bontonfilm, a leading theatrical and home entertainment company in the Czech Republic and Slovak Republic, which will have a positive impact on our operating results in the future.

For the second half of the year, we foresee a growth trend in all our TV advertising markets based on continuing improvements in macroeconomic indicators. CME is best positioned in the region to take advantage of this trend and deliver growth in revenues, OIBDA and cash flow. And now, over to David who will review the macroeconomic situation in our region and our second quarter consolidated performance.

David Sach

Thank you, Adrian. Please turn to Slide 5. All six of our markets experienced GDP growth in the second quarter averaging 2% in aggregate. GDP growth continues to be driven by manufacturing and exports but we are now seeing marked improvements in indicators such as wages and employment. As a result, private consumption is now estimated to be positive in our countries although continuing to lag GDP growth.

Despite the return to growth of private consumption, our TV advertising markets declined in aggregate by 3% in the second quarter, reversing the positive trend of the first quarter. There was a noticeable and significant drop in spending in the 6 weeks following Easter in most countries when most markets returned to growth in June, and have continued to grow in July.

Although advertisers continue to be cautious in their spending due to negative sentiment surrounding local government austerity measures introduced during the past year in our countries, and the sovereign debt crisis in western Europe, we believe that sustained improvement in the macroeconomic indicators will encourage advertisers to spend more, leading to market growth in the second half of the year.

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