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CTC Media Financial Results For The First Quarter Ended March 31, 2013

Total operating revenues were up 2% year-on-year in US dollar terms and up 4% year-on-year in ruble terms in the first quarter. This primarily reflected the net effect of growth of the Russian television advertising market, resulting in higher pricing and sellout levels, offset by lower year-on-year target audience shares of all CTC Media's channels and decreases in sublicensing revenues.

Advertising revenues accounted for approximately 97% of total operating revenues during the first quarter of 2013 (Q1 2012: 95%) and were up 5% year-on-year in US dollar terms and up 7% year-on-year in ruble terms. Sellout of CTC Media's Russian TV channels' national inventory was higher year-on-year in the first quarter at 100% (Q1 2012: 95%).

Sublicensing revenue was down 58% year-on-year in the first quarter in US dollar terms, primarily due to the timing of sublicensing sales to broadcasters in Ukraine.

Other revenue was up 12% year-on-year in US dollar terms in the first quarter 2013, primarily reflecting sustained revenue growth from CTC-International.

         
  Three Months    
  Ended March 31,    
      Change
(US$ 000's) 2012 2013 in USD in RUB
         
         
Operating revenues by segment:        
CTC Channel $142,173 $139,244 -2% -1%
Domashny Channel 26,436 29,580 12% 13%
Peretz Channel 17,002 20,551 21% 22%
31 Channel 4,127 4,154 1% 3%
All Other 2,196 2,432 11% 13%
Eliminations (814) (674)    
Total operating revenues $191,120 $195,287 2% 4%

CTC channel's total operating revenues decreased year-on-year in the first quarter by 2% in US dollar terms and by 1% in ruble terms due to the year-on-year decrease in the audience share and sublicensing sales, partially offset by the overall increase in advertiser demand, largely reflecting the estimated increase in the overall Russian television advertising market of 11-12% in ruble terms.

Domashny channel's revenues increased year-on-year in first quarter by 12% in US dollar terms and by 13% in ruble terms, principally due to the overall increase in the television advertising market, increased sellout of the channel's inventory and increased sponsorship revenues, partially offset by decreased audience share.

Peretz channel's revenues increased year-on-year in the first quarter by 21% in US dollar terms and by 22% in ruble terms, principally due to the overall increase in television advertising market, increased sellout of the channel's inventory and increased sponsorship revenues, partially offset by decreased audience share.

Channel 31 in Kazakhstan reported 1% year-on-year increase in revenues in US dollar terms, primarily reflecting higher sellout levels.

All Other revenues in the first quarter of 2013 primarily represent revenues of $1 million from CTC-International (Q1 2012: $0.8 million) and revenues of $1 million from our digital media projects (O1 2012: $0.7 million), most of which related to advertising sales on Videomore.ru video portal.

Expenses

Total operating expenses were up 8% year-on-year in US dollar terms and up 10% in ruble terms in the first quarter. This primarily reflected the year-on-year increases in programming expenses and depreciation and amortization expenses, though these increases were partially offset by the year-on-year decrease in direct operating expenses, selling, general and administrative expenses and stock-based compensation expense.

     
  Three Months Change
  Ended March 31,    
(US$ 000's) 2012 2013 in USD in RUB
         
Operating expenses:        
Direct operating expenses $11,859 $11,443 -4% -3%
Selling, general & administrative expenses 42,728 40,765 -5% -3%
Programming expenses 78,494 91,092 16% 17%
Stock-based compensation expense 2,911 1,338 -54% -52%
Depreciation & amortization 5,157 8,465 64% 65%
Total operating expenses $141,149 $153,103 8% 10%

Direct operating expenses were down 4% year-on-year in US dollar terms and down 3% in ruble terms in the quarter, largely as a result of decreased salaries and benefits costs due to a decrease in headcount, partially offset by increased transmission costs relating to annual price raises and increased cable connections, and increased maintenance costs for the Company's new digital broadcasting facility from July 2012.

In connection with the planned digitalization of broadcasting in Russia, CTC Media group entered into 10-year transmission agreements with the Russian Television and Radio Network (RTRS), a transmission provider, for digital transmission for the CTC and Domashny channels. In 2013, CTC Media group is required to pay approximately $3 million in digital transmission fees for each of these two channels.

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