CENTRAL EUROPEAN MEDIA ENTERPRISES SELL

CENTRAL EUROPEAN MEDIA ENTERPRISES

19 April 2010

Close to bottom, waiting for growth US GAAP, kons. (USD m) Revenues y/y EBITDA y/y EBIT y/y Net income y/y

2008 1,020 22% 297 11% -128 n.a. -270 n.a.

2009 714 -30% 75 -75% -83 -35% -97 -64%

2010e 845 18% 197 163% 124 n.a. 203 n.a.

2011e 975 15% 260 32% 187 51% 43 -79%

Dividend per share (USD) P/E EV/EBITDA Source: CME, ATLANTIK FT

0.0 -5.5 11.3

0.0 -22.9 44.6

0.0 11.4 17.0

0.0 53.5 12.8

Summary and recommendation In our updated valuation we have included the sale of Ukrainian assets, the acquisition of bTV, higher interest expenses, new macroeconomic projections and a revised EUR/USD rate. The required rate of return declined to 12.13% from previous 13.76%, which is caused especially by a lower risk-free interest rate thanks to loosening conditions on financial markets. Based on the new projections, we expect 2010-12 revenues of USD 845/975/1,105m, compared to the previous estimate of USD 878/966/1,022m (difference: -4%/+1%/+8%). EBITDA should grow to USD 197/260/325m, compared to previously expected USD 155/217/260m (+27%/+20%/+25%). The company should benefit especially from the elimination of the loss-making Ukrainian business and the positive EBITDA of bTV. On the other hand, higher interest expenses are an adverse factor (a higher volume of debt and a higher interest rate).

SELL Target price: Market Price:

USD 28 USD 35

Basic info The company is a leading free-to-air TV broadcaster in six countries in CEE. Based on audience share it is the biggest player in the Czech Republic, Slovakia, Romania, Slovenia a Bulgaria (after acquisition of bTV). It has also a significant position on the market in Croatia. Other business includes production and distribution of TV and film content a operating internet business.

Key events Results 1Q 2010 (5 May) Annual General Meeting (15 June)

Basic data Bloomberg code: Reuters code: 52-week low: 52-week high: Market capitalization: Average daily volume: Shares outstanding: Free float: Key shareholders:

CETV US CETV.O USD 15 USD 38 USD 2.2bn USD 11m 64 m 49% Time Warner (30%) CME Holdco (5%)

Based on our updated FCFE-based valuation, we have raised a oneyear target price of CME’s shares to USD 28 from USD 18 (issued on 21 September 2009) and we keep long-term recommendation at Sell since a target price is 20% below the current market price. We reiterate our Neutral short-term outlook. In the short term investors will follow the news on ad market development and results for 1Q 2010 (5 May), when more details about the Bulgarian acquisition should be given. The ad market in Western Europe in 4Q09 showed signs of recovery, which could with some delay (approx. half a year) become visible in CEE. As a potential risk factor, we see a possibility of another slow-down of the economic growth (double dip) because the effect of fiscal and monetary stimuli is slowly subsiding. Overall, we expect a rather slow economic recovery, since consumer demand is negatively impacted by growing unemployment and greater cautiousness of banks in providing loans. CME said at the presentation of 4Q09 results that in 1H 2010 TV ad spending should remain flat or even fall in some countries as advertisers remain cautious and opportunistic. Therefore, the ad market growth should relate to 2H (especially 4Q) and the full-year growth should be low single-digit. It cannot be ruled out that in 2010 the ad market will further decline with respect to a possible economic slowdown. In our opinion, the tepid economic recovery will put further pressure on cost savings (including marketing). Possible weakening of the ad market would be then an unpleasant surprise for investors.

Performance (% change) CME Nasdaq Comp.

1M 15.0 3.9

3M 29.2 7.5

Patrick Vyroubal +420 225 010 258 [email protected]

6M 23.8 14.2

12M 105 48.5

2  CONTENT PROS AND CONS

3

RESULTS FOR 4Q 2009

4

WORST IS OVER BUT CAUTIOUSNESS STILL IN PLACE

7

ACQUISITION OF bTV

9

CHANGE IN PROJECTIONS

11

OPERATING PERFORMANCE BY SEGMENTS AND COUNTRIES

17

VALUATION

19

SHARE PRICE PERFORMANCE

21

RELATIVE COMPARISON

22

RECOMMENDATION

23

APPENDIX: FINANCIAL STATEMENTS, RATIOS AND MULTIPLES

24

3  PROS AND CONS

 Focus on CEE region

In the long term, an economically faster developing region than developed countries.

 Potential of advertising market growth

Ad spending per capita in CEE is significantly lower than in Western Europe (convergence assumption).

 Leading or major position on TV market

According to audience share CME belongs to major players on TV market in most countries where it operates.

 Sale of assets in Ukraine for USD 308m

Ukrainian operations were loss-making on EBITDA level and had negative cash flow

 Acquisition of bTV group for USD 400m

The biggest TV on Bulgarian market (60% market share, EBITDA margin over 40%. Positive EBITDA will more than compensate loss of Pro.BG and Ring.BG.

 Acquisition of MediaPro Entertainment

Higher share of own production, distribution and sale of distribution of TV production. Synergy effects. Creation of vertical integration.

 Effort to be active on online advertising market

In the future the company intends to penetrate more to the online ad market, which is the fastest growing ad segment.

 Investment of Time Warner in 2009

Time Warner acquired 30% stake in CME in exchange for USD 242m. Lower concern related to liquidity. Acquiring a strategic partner, future cooperation (new channels, programme content).

 Strong dependence on economic cycle

Ad spending is more volatile than GDP development. Economic recession lead to a major decline in ad spending.

 Currency risk

In the past, the weakening of USD against local currencies was beneficial for the company’s financials. In the future we expect gradual strengthening of the dollar, which would have an adverse effect on the financials.

 No dividend payment

Reinvestment of profit, no change in the dividend policy expected in the near term.

 Lowering of rating

Rating agencies (S&P and Moody’s) have lowered CME’s rating several times due to deterioration of operating performance (impact of recession), rising indebtedness and decreasing liquidity. The lowering of rating does not have an impact on early repayment of debt.

 Negative cash flow operations (Bulgaria)

in

developing

Higher investments in programming costs bring a loss on EBITDA level. CME expects positive EBITDA in 2010 thanks to the consolidation of bTV group.

 Majority shareholders

The family of R. Lauder with Time Warner control over a half of voting rights. A potential risk of unfavourable decisions detrimental to minority shareholders.

 Renewal of broadcasting licences

Broadcasting licenses need to be regularly renewed. There is a risk that a regulator will not renew a licence.

 Digital broadcasting

Higher competition after the launch of digital broadcasting, market fragmentation.

 Seasonal character of business

2Q and 4Q are seasonally stronger periods.

4  RESULTS FOR 4Q 2009 On 24 February CME released results for 4Q09 that beat the company’s guidance and analysts’ expectations on the operating level. As regards the company’s guidance, the difference stems mainly from lower costs in Ukraine and Bulgaria, while in Romania costs increased. Other countries did not bring much surprise. The net loss was deeper than expected (FX effects and tax). At a conference call CME said it expects ad market recovery in the second half of 2010. In 1H the ad market should stagnate but some markets could see declines because advertisers remain cautious. The ad market in 2010 should see a single-digit full-year growth. This commentary is in line with previous statements of the company. The only issue that could take some investors by surprise is a possible decline in 1Q or 1H. Overall, ad market should stabilise and gradually return to growth as the economy will recover. Nevertheless, a risk of another economic decline cannot be ruled out. CME further said that more information about Bulgarian acquisition will be brought after the transaction has been completed (with the release of 1Q 2010 results). The completion of transactions will help the company meet its target of positive EBITDA in 2010, as Bulgarian operations are currently loss-making. CME would consider a possible repurchase of its debt only after the completion of the transaction in Ukraine and Bulgaria. The main goals in 2010 include the strengthening of the leading position on the market with respect to market share, cutting down costs, improving profitability and diversifying of revenues. In key markets (besides Ukraine and Bulgaria) costs in 2009 stagnated despite the previous statements of costs reduction (probably due to an attempt to increase market share), and therefore we consider the cost reduction feasible.

Exhibit 1: P&L for 4Q 2009 US GAAP, cons. (USD thousand) 4Q09 4Q08 Revenues 252,090 291,501 Total operating cost and exp. 207,964 211,728 EBITDA 44,126 79,773 EBITDA margin 17.5% 27.4% EBIT 23,049 -279,169 EBIT margin 9.1% -95.8% Financial result -68,307 -32,100 Pre-tax loss -45,258 -311,269 Net loss after minorities -55,250 -328,127 EPS (USD)* -0,9 -7,8 Source: CME, ATLANTIK FT; * based on different number of shares

y/y -14% -2% -45% -9.9pps n.a. n.a. 113% -85% -83% -88%

eAFT 239,800 207,210 32,590 13.6% 14,290 6.0% -57,890 -43,600 -28,765 -0,5

eMarket 242,800 36,900 19,000 -7,300 -

In 2009 revenues contracted by 30% y/y to USD 714m and EBITDA fell by 75% y/y to USD 75m, and the company therefore beat its guidance issued in October 2009 (revenues of USD 702-710m and EBITDA of USD 60-70m). We had projected revenues of USD 702m and EBITDA of USD 63m. A net loss decreased to USD 97m from USD 270m in 2008, when both years were impacted by the booking of the impairment of goodwill and intangible assets (USD 82m and USD 337m, respectively).

Exhibit 2: P&L for 2009 US GAAP, cons. (USD thousand) 2009 2008 Revenues 713,978 1,019,934 Total operating cost and exp. 639,075 723,041 EBITDA 74,903 296,893 EBITDA margin 10.5% 29.1% EBIT -83,180 -127,797 EBIT margin -11.7% -12.5% Financial result -27,558 -101,372 Pre-tax loss -110,738 -229,169 Net loss after minorities -97,157 -269,546 EPS (USD)* -1,6 -6,4 Source: CME, ATLANTIK FT; * based on different number of shares

y/y -30% -12% -75% -18.6pps -35% n.a. -73% -52% -64% -75%

eAFT 701,688 638,321 63,367 9.0% -91,939 -13.1% -17,141 -109,080 -70,672 -1,2

CME Guidance 702,000 - 710,000 60,000 - 70,000 -

5

Revenues Revenues in 4Q09 declined by 14% y/y to USD 252m, slightly beating both market and our expectations (USD 240m and USD 243m, respectively). 4Q09 revenues were adversely affected by an ad market decline (by 10-20% y/y; the impact of economic recession), which was partially offset by the appreciation of local currencies against the dollar (approx. 10% y/y). In 2009, ad market in CEE slumped by 30%. The first contribution of Media Pro Entertainment in Romania (consolidated for less than a month), a producer and a distributor of TV content, brought in approx. USD 3m in revenues and USD 0m in EBITDA.

Exhibit 3: Breakdown of revenues USD m 4Q09 4Q08 y/y Czech Republic 94.4 105.8 -11% Romania 55.9 77.5 -28% Slovakia 39.3 44.6 -12% Ukraine 17.7 24.0 -26% Slovenia 23.0 22.3 3% Croatia 17.9 16.5 9% Bulgaria 1.1 0.8 40% Celkem 249.3* 291.5 -14% Source: CME, ATLANTIK FT; Note: without MediaPro Entertainment (USD 2.8m)

eAFT 92.5 57.5 36.6 13.1 22.0 16.5 1.6 239.8

Proportion 4Q09 38% 22% 16% 7% 9% 7% 0% 100%

Exhibit 4: Growth of revenues in local currencies Czech Republic Romania Slovakia Ukraine Slovenia Croatia

2008 15% 32% 5% -23% 9% 36%

1Q09 -17% -18% -17% -79% -15% 6%

2Q09 -22% -20% -16% -90% -16% -9%

1H09 -20% -19% -17% -85% -15% -4%

3Q09 -19% -25% -19% -47% -17% -14%

9M09 -20% -21% -14% -69% -16% -6%

4Q09 -17% -27% -22% -5% -8% -1%

2009 -19% -23% -17% -50% -13% -4%

Source: CME

Operating level Total operating costs and expenses contracted less than revenues (-2% vs. -14%); therefore, EBITDA weakened by 45% y/y to USD 44m, beating market expectation (USD 37m) as well as our estimate (USD 33m). EBITDA margin fell to 17.5% (-9.6pps y/y; exp. 13.6%). Cost savings were not very large in an effort to maintain the market share and also due to higher expenses in Bulgaria (at development stage). Operating profit reached USD 23m, beating our projection (USD 14m) as well as market expectation (USD 19m) thanks to higher-than-expected EBITDA. The operating loss of USD 280m in 4Q08 was caused by impairment of goodwill and intangible assets (USD 337m).

Exhibit 5: Breakdown of EBITDA USD m 4Q09 4Q08 y/y eAFT Czech Republic 47.3 62.2 -24% 45.6 Romania 9.3 30.0 -69% 13.9 Slovakia 7.2 21.3 -66% 4.1 Ukrajina -0.3 -21.9 -99% -7.4 Slovenia 8.7 8.1 8% 8.2 Croatia 1.6 1.0 53% 0.4 Bulgaria -15.1 -7.1 113% -20.6 Corporate costs -14.0 -13.8 1% -11.6 Total 44.7 79.8 -44% 32.6 Source: CME, ATLANTIK FT; Note: without MediaPro Entertainment (USD -0.6m)

Margin 4Q09 50% 17% 18% -2% 38% 9% -1342% -100% 17.9%

Margin 4Q08 59% 39% 48% -91% 36% 6% -884% -100% 27.4%

6

Net income Financial expenses grew to USD 68m (exp. USD 58m), affected by higher interest expenses (a higher volume of debt and higher interest rates) and currency losses (due to intercompany loans). Interest expenses increased by 111% y/y to USD 44m (USD 21m in 4Q08), in line with our estimate of USD 42.5m. The growth is connected also with one-off expenses from debt redemption. FX losses amounted to USD 31m (exp. USD -23m; USD -32m in 4Q08); to a greater extent they were related to the revaluation of intercompany loans (USD -50m; exp. USD -40m). The revaluation of debt brought in an FX gain of USD 7m (exp. USD 19m). Profit from the revaluation of derivatives amounted to USD 6m (exp. USD 7m). Overall, net loss amounted to USD 55m, higher than our projection (USD -29m) and also market expectation (USD -7m), mostly due to higher-than-expected tax expenses (provision for income taxes of USD 13m vs. exp. tax credit of USD -11m). There was also a slight impact of higher-than-expected financial expenses (by USD 10m), which were, however, offset by better-than-expected operating profit (by USD 9m).

7  WORST IS OVER BUT CAUTIOUSNESS STILL IN PLACE Year 2009 was a difficult year for CME, because the deep economic recession led to a significant decline in ad spending in Central and Eastern Europe. In most countries, TV ad spending in local currencies fell by 20-30%, which had an impact on the company’s revenues. The major fall in ad spending is given by its greater cyclicality compared to GDP development (on average 3-times higher volatility). According to CME, TV ad market lost USD 800m in the region. Last year CME managed to successfully increase its market share, which resulted in a lower fall in revenues than the market recorded as a whole. The decline in ad spending is related to attempts of companies to cut costs to at least partially offset the adverse impact of the economic recession on revenues. Marketing costs are among the first that are reduced, as one of the main priorities of companies in a crisis is to survive and operate on minimum expenses. Therefore, investments in future growths usually become less important. The ad market in Western Europe in 4Q09 showed signs of recovery, which could with some delay (approx. half a year) become visible in CEE. Judging by the standard behaviour of international advertisers, marketing budgets should be expanded first in Western Europe (the most important market) and only then we should see recovery in ad spending in CEE. It can be also expected that the recovery in ad market will lag behind the real economy development. With the restoration of the economic growth it will be important to monitor especially the development of consumer demand, which is the main driver of GDP. Advertisers will wait for the recovery in consumer demand to make sure that their expenses are used effectively. As a potential risk factor, we see a possibility of another slow-down of the economic growth (double dip) because the effect of fiscal and monetary stimuli is slowly subsiding. If the economy slowed down again, we would expect investors to switch from cyclical stocks, such as CME. Investors’ perception is currently oriented toward expectations of recovery and a comeback to pre-crisis levels. Overall, we expect a rather slow economic recovery, since consumer demand is negatively impacted by growing unemployment and greater cautiousness of banks in providing loans. A growth in loans was one of the factors in the fast economic growth seen in previous years, when the credit expansion was boosted by a period of low interest rates. CME said at the presentation of 4Q09 results that in 1H 2010 TV ad spending should remain flat or even fall in some countries as advertisers remain cautious and opportunistic. Therefore, the ad market growth should relate to 2H (especially 4Q) and the full-year growth should be low single-digit. It cannot be ruled out that in 2010 the ad market will further decline with respect to a possible economic slowdown. In our opinion, the tepid economic recovery will put further pressure on cost savings (including marketing). Possible weakening of the ad market would be then an unpleasant surprise for investors.

Assets restructuring This year the company has announced two major transactions, which will be value-accretive. CME sold Ukrainian assets (Studio 1+1) for USD 308m (USD 5 per share), which we consider positive because we see a favourable impact on the overall performance of CME. The Ukrainian assets were loss-making (2009 EBITDA: USD -40m) and represented negative cash flow. The transaction was completed in April. In February the company announced the acquisition of Bulgarian group bTV (News Corp.) for USD 400m (USD 6/share), which is also value-accretive. bTV is the biggest TV on the Bulgarian market (with over 50% ad market share). Thanks to this acquisition, CME will become a dominant player there, just like it is in most countries. The company hopes to be in the black in Bulgaria already in 2010, which we consider realistic, since we expect a profit in EBITDA of USD 3m. CME said that in the fiscal year ended June 2009, bTV booked EBITDA of USD 45m. This profit-making business will help to compensate for the losses of two smaller TVs, which CME already owns (Pro.BG, Ring.BG; 2009 EBITDA: USD -45m USD). Both transactions will help the company restructure existing operations and improve the overall performance and cash flow. The acquisition in Bulgaria can be perceived as a trade-off of the Ukrainian assets. Despite the high potential of the Ukrainian market, CME wants to focus now on EU member states (note: Croatia is a candidate for EU membership). The transactions motivated Moody’s at the beginning of March to change the outlook on CME’s rating to stable from negative. CME’s rating was affirmed at B2. According to Moody’s, both transactions are expected to improve the company's business risk profile and increase consolidated EBITDA. The rating agency further noted that if the sale in Ukraine were not completed, another lowering of the rating would be likely because the liquidity would get under pressure.

8 However, a possible lowering of the rating would not result in early repayment of debt or change in the price conditions of any drawn debt. On the other hand, it could lead to higher expenses and make access to new credit more difficult, or it could complicate the refinancing of the existing debt. We assume that the rating has stabilised after having being lowered several times in 2009 by both Moody’s and Standard & Poor's. As the overall performance of CME gradually improves, the rating could be raised again. Rating agencies focus in particular on liquidity (requirement to have at least USD 100m in cash) and relative indebtedness (ratio of net or gross debt to EBITDA). With increasing EBITDA, the relative indebtedness should go down in the future (with the same volume of debt).

9  ACQUISION OF bTV On 18 February, CME announced that it had entered into an agreement with News Corp. to purchase bTV group for USD 400m in cash (on a cash-free and debt-free basis). The previously speculated purchase price was EUR 500m (USD 700m). CME has already obtained the approval by Bulgarian regulator. The transaction should be completed until the end of April. Within the transaction CME will buy assets of the entire bTV group, which besides bTV (the biggest commercial TV) includes two cable TV stations (bTV Cinema and bTV Comedy) and 74% stake in Radio Company, an operator of several radio stations. The consideration is subject to adjustment in the event that actual working capital at completion differs from an agreed level of target working capital. CME will also enter into an agreement to acquire from Top Tone Holdings Limited its 20% interest in TV channels Pro.BG and Ring.BG, where CME already holds 80% stake. In exchange for the 20% stake the seller will receive 6% stake in a newly created subsidiary that will hold the bTV business and Pro.BG and Ring.BG businesses. Top Tone Holdings will also have the right to acquire an additional 4% interest for a period of up to three years from closing. The closing is expected to be simultaneous with the completion of the acquisition of the bTV businesses. After the lapse of the three-year period, Top Tone Holdings Limited will be entitled to sell the entire stake back to CME. The sale of bTV had been subject of speculations for some time. In 2008 at least seven large companies showed interest in purchasing the company (e.g. German RTL). At first, the price for 100% stake was estimated at EUR 1.1bn, but gradually it fell to EUR 750m. With the economic crisis on its way, potential buyers lost interest. At the end of January, Reuters reported that CME was in the final stage of negotiations regarding the purchase of bTV for EUR 500m (USD 700m), which we considered relatively high. The final price is lower and therefore we regard it positive. bTV enjoys the strongest position on the Bulgarian TV market with almost 40% audience share and approximately 50-60% TV ad market share. The Bulgarian market has two major players (bTV and Nova TV) as well as several smaller TV stations, including Pro.BG and Ring.BG of CME group (4% audience share). Nova TV (MTG group), the second largest station, has 18% audience share and approx. 30% TV ad market share. In 2007 it was bought by MTG for EUR 620m but the transaction was not received well by investors. EV/EBITDA multiple was about 30 and it certainly cannot be applied to the present situation, when the Bulgarian economy (exp. 2009 GDP: -5%) is much affected by the global recession.

Our view In view of the price, we consider the purchase of bTV positive as the acquisition will be value-adding (based on our estimate of future cash flow). However, the impact should be more limited than in the case of the sale of Ukrainian assets. CME said that based on the unaudited results for fiscal year ended June 2009, total revenues of bTV group amounted to USD 105m and adjusted EBITDA reached USD 45m (43% margin). Based on the purchase price of USD 400m, the P/EBITDA multiple would be 8.9, which was broadly in line with median of peers according to Bloomberg when transaction was announced. We regard the purchase price adequate also with respect to the relative comparison, especially given the high potential of the Bulgarian market and a purchase of the biggest TV, whose results can be evaluated as good. The Bulgarian acquisition could be viewed as a trade-off for the loss-making Ukrainian assets (which were sold for USD 308m). Bulgaria should help create the value of the entire CME group. The acquisition will help CME solve a problem with funding the existing Bulgarian operations. The company has two smaller televisions in the development stage, which means high investments. We assume that CME could take advantage of the synergy effect from operating a few channels, with possible costs reduction. The acquisition will also help CME meet its target of positive EBITDA by 2013, as the other two smaller televisions are generating rather big losses (exp. 2009 EBITDA: a loss of USD 45m). CME expects to be in the black already 2010. We expect EBITDA profit of USD 3m (see below; consolidation of bTV from May 2010), i.e. the company’s goal is realistic.

10

Projection of bTV’s financials According to available information (audited figures), 2008 revenues of bTV reached USD 120m and EBITDA was at EUR 48m (40% margin). Adjusted EBITDA (excluding fees from management contracts with News Corp., which will terminate after the acquisition) stood at USD 60m (50% margin). Given the slow-down of ad market, we expect that 2009 revenues of bTV could contract by 19% (including FX effect) to USD 97m and EBITDA to USD 32m (33% margin). Adjusted EBITDA could, according to our estimates, amount to around USD 42m (-31% y/y; 43% margin). In 2010 revenues could grow to USD 100m and adjusted EBITDA to USD 44m (exp. in local currency: revenues +1%, expenses -1%). We assume that the consolidation of bTV will take place from May 2010, in which case it would contribute to CME’s revenues in 2010 with USD 71m and to EBITDA with USD 31m (44% margin). The table below gives a projection for the following years.

Exhibit 6: Projection of bTV’s financials USD m Revenues

2008e 2009e 2010e* 120 97 71 y/y n.a. -19% -27% EBITDA 60 42 31 y/y n.a. -31% -25% EBITDA margin 50.0% 43.0% 43.9% Source: ATLANTIK FT; * consolidation of bTV since May 2010

2011e 107 50% 48 54% 44.9%

2012e 117 10% 54 13% 46.2%

2013e 128 9% 61 12% 47.3%

The acquisition of bTV will help CME more than offset the losses generated by the two smaller TVs in the development stage (Pro.BG and Ring.BG), which in 2009 amounted to a loss in EBITDA of USD 45m. In the future the performance of Pro.BG and Ring.BG should improve, and revenues should gradually grow to USD 20m in the next five years on expenses of USD 30-35m. This should lead to the lowering of EBITDA loss to roughly USD -10m. Since the profit-generating bTV will more than offset the losses of the two TVs, CME’s operations in Bulgaria should have a positive effect on the earnings of the entire group. We expect EBITDA in Bulgaria to grow relatively fast, which is supported by two factors. Firstly, improving earnings of bTV (economic recovery) and secondly, a growth in revenues of the two smaller TVs outpacing a growth in expenses (investments in programme content should start to show up in audience share and revenues).

Exhibit 7: Projection of financials of Bulgarian operations (bTV Group, Pro.BG, Ring.BG) USD m Revenues

2008 2009 2010e* 1 4 77 y/y n.a. 179% 2101% EBITDA -10 -45 3 y/y n.a. 340% -106% EBITDA margin -806.4% -1,272.0% 3.3% Source: CME, ATLANTIK FT; * consolidation of bTV since May 2010

2011e 117 51% 25 861% 21.0%

2012e 131 11% 35 42% 26.8%

2013e 145 11% 46 32% 32.0%

11  CHANGES IN PROJECTIONS Our evaluation has been updated and the estimate of future CME’s performance has been modified to include the following changes: a) Extension of projected period until 2015 b) Macroeconomic projections, revenues, EBITDA c) EUR/USD exchange rate d) Interest expenses e) Sale of Ukrainian assets f)

Acquisition of bTV

a) Extension of projected period until 2015 In our model we extended the projected period until 2015 (originally 2013). On the other hand, we did not include the year 2009 in our projection of discounted cash flow (DCF). As a result of this modification, the first phase of the DCF model is 6 years long (originally 5 years).

b) Macroeconomic projections, revenues, EBITDA Prompted by the recent development of the global economy, we adjusted the expected real GDP growth, making most changes in 2010 and 2011 estimates. Now we expect a slightly faster economic growth in 2010 (except for Croatia and Bulgaria where another decline is expected) than we did in the previous projection. On the other hand, our estimate for 2011 is mostly slightly below the previous one. Overall, the new estimates do not show major changes. Recently the outlook for the world economy, including CEE region, has improved. The restart of economic growth was supported by stimulus packages. Their effect will slowly fade away and this could pose a risk of another decline, which would negatively show in advertisers’ spending and thus CME’s revenues. In 2010 CEE region should see a slight growth (about 1%); however, this is improvement after a very bad 2009, when most countries declined by 4-8%. Ukraine was in the worst position (2009: exp. -15.0%) and had to seek for help of the IMF.

Exhibit 8: Real GDP growth in 2009-15 2009e

2010e

2011e 2012e New projection Czech Republic -4.1% 1.6% 2.8% 3.5% Romania -7.1% 0.9% 3.2% 5.0% Slovakia -4.7% 2.1% 3.5% 4.0% Ukraine -15.0% 3.0% 4.0% 5.0% Slovenia -7.8% 0.9% 2.6% 3.5% Croatia -5.8% -0.5% 2.5% 4.0% Bulgaria -5.1% -0.3% 2.7% 4.0% Old projection Czech Republic -4.0% 1.0% 2.5% 3.5% Romania -5.0% 0.6% 5.0% 5.0% Slovakia -5.0% 1.7% 5.2% 4.5% Ukraine -13.0% 1.0% 4.5% 5.8% Slovenia -3.8% 0.7% 3.7% 3.7% Croatia -4.1% 0.3% 2.5% 4.0% Bulgaria -2.9% 0.2% 2.5% 4.0% Source: MMF, FocusEconomics Consensus Forecast, ATLANTIK FT

2013e

2014e

2015e

4.0% 5.0% 4.0% 5.4% 3.5% 4.0% 5.0%

3.5% 5.0% 4.0% 5.5% 3.3% 3.8% 5.0%

3.5% 4.5% 3.5% 5.5% 3.0% 3.5% 4.5%

4.0% 5.0% 4.0% 5.8% 3.7% 4.0% 5.0%

n.a. n.a. n.a. n.a. n.a. n.a. n.a.

n.a. n.a. n.a. n.a. n.a. n.a. n.a.

12

Projection of revenues and EBITDA (TV broadcasting and internet segment) Based on the new macroeconomic projections together with adjusted exchange rates and ad market development, we have made a new estimate of revenues in individual countries. The following estimates include just TV broadcast and internet segment (95% of total revenues). The projection of earnings of MediaPro Entertainment (Romania) – production, sale and distribution of TV content and films – is included in the section “Operating performance by segments and countries”. Our new projection assumes that total sales will be higher in all years except 2010. This is due to a higherthan-expected growth in ad market and a more favourable projection of EUR/USD exchange rate (slower appreciation). The upgraded projections are partly motivated by the acquisition of bTV, whose revenues more than offset a revenue loss in Ukraine, where assets are to be sold. Revenue estimates for individual countries were mostly upgraded. Romania was an exception with lowered projections until 2012 because we now assume a slower recovery of the local market. Romanian ad prices declined especially in the second half of 2009. According to 4Q09 results, revenues in local currencies declined most in Romania (-27% y/y) and it was the only country besides Bulgaria where revenues fell short of our expectations. Full-year Romanian revenues declined by 23% (in local currency), the sharpest decline of all countries except Ukraine, which was strongly hit by major GDP decline and fierce competition.

Exhibit 9: Breakdown of revenues by countries in 2010-2013 2010e USD m Old New Czech Republic 303 300 Romania 225 188 Slovakia 110 112 Ukraine* 59 0 Slovenia 68 69 Croatia 49 51 Bulgaria** 10 77 Total 823 799 Source: ATLANTIK FT; * deconsolidation since ** consolidation of bTV since May 2010

2011e 2012e 2013e Old New Old New Old New 320 330 331 364 345 389 260 224 284 276 295 323 119 121 123 130 126 136 72 0 87 0 95 0 72 73 71 77 73 80 53 55 53 58 54 64 14 117 17 131 19 145 909 920 965 1,036 1,007 1,138 April 2010 (asset sale) – year 2010 given under discontinued operations;

Exhibit 10: Revenues – difference compared to previous projection Country 2010e 2011e 2012e 2013e Czech Republic -1% 3% 10% 13% Romania -16% -14% -3% 10% Slovakia 2% 2% 6% 8% Ukraine* n.a. n.a. n.a. n.a. Slovenia 2% 1% 9% 10% Croatia 4% 4% 9% 20% Bulgaria** 707% 737% 689% 648% Total -3% 1% 7% 13% Source: ATLANTIK FT; * deconsolidation since April 2010 (asset sale) – year 2010 given under discontinued operations; ** consolidation of bTV since May 2010

We expect a double-digit growth in revenues (in USD) until 2013 thanks to a gradual recovery of individual economies. The 2009-13 CAGR in revenues should reach 3.7% (previously estimated at 0.9%).

13

Exhibit 11: Development of revenues by countries (y-o-y change) Country 2010e 2011e 2012e 2013e Czech Republic 9% 10% 10% 7% Romania 7% 19% 23% 17% Slovakia 4% 8% 7% 5% Ukraine* n.a. n.a. n.a. n.a. Slovenia 3% 6% 6% 4% Croatia 5% 6% 7% 10% Bulgaria** 2101% 51% 11% 11% Total 18% 15% 13% 10% Source: ATLANTIK FT; * deconsolidation since April 2010 (asset sale) – year 2010 given under discontinued operations; ** consolidation of bTV since May 2010

Exhibit 12: Compound annual growth rate of revenues (CAGR 2009-13) Country Old New Czech Republic -1,8% 0.6% Romania 1,4% 3.3% Slovakia -1,0% 0.6% Ukraine* -0,9% n.a. Slovenia -2,1% -0.1% Croatia -0,4% 3.2% Bulgaria** 72,7% 158.2% Total 0,9% 3.7% Source: ATLANTIK FT; * deconsolidation since April 2010 (asset sale) – year 2010 given under discontinued operations; ** consolidation of bTV since May 2010

The upgraded projection of revenues is positively reflected in the estimated EBITDA and EBITDA margin. It must be also noted that EBITDA will be boosted by the sale of Ukrainian assets and the purchase of Bulgarian bTV. The loss in Ukraine (2009: USD -40m) will no longer be a part of CME’s earnings and the losses of the two smaller TVs in Bulgaria (2009: USD -45m) will be more than offset by bTV’s profit. This will show especially in 2010, when EBITDA is expected to grow to USD 231m from USD 114m in 2009 (segment of TV broadcast and internet). With the release of 4Q09 results, CME said that in 2010 expenses in local currencies should be lower than in 2009. We consider this feasible because contrary to previous intentions, expenses in 2009 were not lowered. In core markets (CR, Romania, Slovakia, Slovenia, Croatia) expenses stagnated (0%) while in developing operations (Ukraine, Bulgaria) they increased by 16%. Total operating expenses (including corporate) increased in 2009 by 2%, which is 12% decline in USD. In 2009 CME said that it could cut down expenses by 20% in case of need. However, this did not happen, partly due to an attempt to increase market share, which would strengthen the company’s position in future negotiations with advertisers. We estimate that in the segment of TV broadcast and internet, 2010-12 EBITDA will reach USD 231/295/361m compared to previously estimated USD 190/252/297m

Exhibit 13: TV broadcasting and internet - EBITDA (2010-2013) 2010e 2011e 2012e 2013e USD m Old New Old New Old New Old New Czech Republic 140 142 151 158 159 177 170 189 Romania 67 50 92 68 105 94 108 118 Slovakia 21 14 31 19 37 25 41 30 Ukraine* -35 n.a. -26 n.a. -11 n.a. -4 n.a. Slovenia 21 20 23 22 22 25 23 26 Croatia 2 2 3 3 4 5 5 8 Bulgaria** -26 3 -22 25 -19 35 -16 46 Total 190 231 252 295 297 361 327 418 Source: ATLANTIK FT; * deconsolidation since April 2010 (asset sale) – year 2010 given under discontinued operations; ** consolidation of bTV since May 2010

14

Exhibit 14: TV broadcasting and internet - EBITDA margin (2010-2013) 2010e 2011e 2012e 2013e Old New Old New Old New Old New Czech Republic 46.2% 47.4% 47.1% 48.0% 48.2% 48.6% 49.2% 48.7% Romania 30.0% 26.5% 35.5% 30.3% 36.9% 34.2% 36.8% 36.4% Slovakia 19.5% 12.7% 26.0% 15.5% 30.2% 18.9% 32.7% 22.1% Ukraine* -60.0% n.a. -36.0% n.a. -13.0% n.a. -4.0% n.a. Slovenia 30.5% 28.5% 32.5% 30.5% 31.5% 31.7% 31.2% 32.3% Croatia 4.0% 4.0% 6.5% 6.2% 8.0% 9.4% 8.7% 12.7% Bulgaria** -275.0% 3.3% -160.0% 21.0% -115.0% 26.8% -80.0% 32.0% Total 23.1% 28.9% 27.8% 32.1% 30.8% 34.8% 32.5% 36.7% Source: ATLANTIK FT; * deconsolidation since April 2010 (asset sale) – year 2010 given under discontinued operations; ** consolidation of bTV since May 2010

Projection of revenues and EBITDA (CME group) Based on the new projections, we now expect 2010-12 revenues to amount to USD 845/975/1,105m compared to the previous estimate of USD 878/966/1,022m (difference: -4%/+1%/+8%). EBITDA should grow to USD 197/260/325m compared to previously expected USD 155/217/260m (+27%/+20%/+25%). An increase in EBITDA margin to 23.3%/26.7%/29.4% in 2010-12 (vs. 17.7%/22.5%/25.5%) is given by assets restructuring (sale in Ukraine and acquisition in Bulgaria).

Exhibit 15: CME (group) – total revenues, EBITDA (2010-2013) 2010e 2011e 2012e 2013e USD m Old New Old New Old New Old New Revenues 878 845 966 975 1,022 1,105 1,065 1,221 EBITDA 155 197 217 260 260 325 289 380 EBITDA margin 17.7% 23.3% 22.5% 26.7% 25.5% 29.4% 27.1% 31.2% Source: ATLANTIK FT; * deconsolidation since April 2010 (asset sale) – year 2010 given under discontinued operations; ** consolidation of bTV since May 2010

Exhibit 16: Difference to previous projection 2010e 2011e 2012e 2013e Revenues -4% 1% 8% 15% EBITDA 27% 20% 25% 32% EBITDA margin 5.6pps 4.2pps 3.9pps 4.0pps Source: ATLANTIK FT; * deconsolidation since April 2010 (asset sale) – year 2010 given under discontinued operations; ** consolidation of bTV since May 2010

Exhibit 17: EBITDA margin (2006-2013) new projection old projection reported

EBITDA margin 35% 30.8%

32.0%

31.2% 29.4%

29.1%

30%

26.7% 23.3%

25%

27.0% 25.4% 22.4%

20% 17.6%

15% 10.5% 10% 2006

Source: CME, ATLANTIK FT

2007

2008

2009

2010e 2011e 2012e 2013e

15

c) EUR/USD exchange rate In the new projection of EUR/USD rate we no longer expect such strong appreciation of USD. We still think that in the long-term, the US dollar will appreciate. In 2013 we expect an average exchange rate of 1.33 compared to previously projected 1.18. As a result, the new exchange rate projection will have a certain positive impact on CME’s revenues because weaker USD is better for CME when converting revenues in local currencies to USD.

Exhibit 18: Projection of EUR/USD exchange rate EUR/USD (average) 2007 New projection 1.37 y/y 9.1% EUR/USD (average) 2007 Old projection 1.37 y/y 8.7% Source: Bloomberg, ATLANTIK FT

2008 1.47 7.3% 2008 1.47 7.3%

2009 1.39 -5.2% 2009e 1.38 -6.1%

2010e 1.42 1.8% 2010e 1.40 1.4%

2011e 1.39 -2.1% 2011e 1.33 -5.0%

2012e 1.36 -2.2% 2012e 1.25 -6.0%

2013e 1.33 -2.2% 2013e 1.18 -5.6%

2014e 1.31 -1.5% 2014e n.a. n.a.

2015e 1.29 -1.5% 2015e n.a. n.a.

d) Interest expenses We have included in our evaluation the issuance of additional bonds worth EUR 240m (approx. USD 350m) payable in 2016, which were issued at the end of September 2009. The proceeds from this issuance were used to refinance the remaining part of bonds payable in 2012 (EUR 181.8m with a fixed interest rate of 8.25%) and for general corporate purposes. The new bonds have the same conditions as the previous issuance worth EUR 200m (fixed interest rate of 11.625%), which was used to refinance a loan from EBRD (EUR 150m; 2.5%) and bonds 2012 (EUR 63.2m). Due to this, interest expenses should increase by approx. USD 20m annually, which was already included in our previous valuation. The considerably higher interest rate reflects current market conditions and particularly the repeated lowering of CME’s rating (higher risk premium). As a result of the issuance of new bonds, interest expenses will increase by about USD 18m or USD 0.27 per share annually owing to a higher interest rate and a higher volume of debt. This will bring an impact of almost USD 3 per share on the company’s value. Thanks to the new issuance, CME put off the repayment of a part of its debt and got rid of one the two bond covenants, namely the gross debt to EBITDA ratio, which was not to exceed 4.5. The other covenant concerning the interest coverage ratio (EBITDA to interest expenses: at least 2.0) remains valid. We assume that this covenant will be met in 2012 at the earliest. At the end of 2009, CME made a credit line agreement with Erste Bank (Ceska sporitelna) for CZK 3bn (USD 163m), due in 2012. The aim was to refinance the existing credit line provided by Ceska sporitelna (CZK 1.5bn) and repay some intercompany loans. CZK 2.8bn has been drawn. The interest rate is PRIBOR + 4.9% margin (previously 1.65% margin). Interest expenses will rise by USD 4-5m annually. At the end of 2009 the debt totalled USD 1.4bn, of which 91% is due in 2013 or later. This means that the company will not be under pressure to repay a large sum of the debt in the foreseeable future. The disadvantage is higher future expenses related to the refinanced debt.

Exhibit 19: Debt maturity (as of 31 December 2009) Year 2010 2011 2012 2013 2014 2015 and later Total Source: CME, ATLANTIK FT

Value (USD m) 117 0 0 398 216 641 1,372

Share 9% 0% 0% 29% 16% 47% 100%

Share (Cumulative) 9% 9% 9% 38% 53% 100% -

Based on the covenants, CME may not increase its debt if the interest coverage ratio is below 2.0 (EBITDA to interest expenses). At the end of 2009, the ratio stood at 1.4. We expect it will exceed 2.0 (2.3) in 2012 at the earliest. However, the covenants of the existing loans still enable CME to increase its debt by EUR 250m (USD 360m). A part of it has been already drawn and USD 167m is still available.

16 With the release of 4Q09 results, CME said that USD 190m in cash is available for developing operations (Ukraine, Bulgaria). Since the Ukrainian assets will be sold, a part of this money is likely to be shifted to main operations.

How will higher volume of debt be reflected in interest expenses? For illustration we show how the higher volume of debt (2008: USD 1.0bn vs. 2009: USD 1.4bn) and the higher cost of funding will lead to the doubling of interest expenses in the future (in comparison with our projection from March 2009). According to our calculation, the adverse impact of the increase in interest expenses on the company’s value reaches about USD 8 per share (already priced in the stock price). In less than a year, the expected level of interest expenses has approx. doubled (see table).

Exhibit 20: Interest expenses USD m 2007 March 2009 projection 54.9 Current projection 54.9 Increase Source: CME, ATLANTIK FT

2008 68.5 68.5 -

2009 76.8 115.8 39.0

2010e 71.3 132.9 61.6

2011e 62.7 132.5 69.8

2012e 59.1 127.3 68.2

2013e 53.8 113.6 59.8

e) Sale of Ukrainian assets At the beginning of April CME completed a sale of Ukrainian assets (Studio 1+1 and Kino) for USD 308m (USD 5 per share). The stock price increased by approx. the transaction value (the market perceived the news positively). The purchaser is Harley Trading Limited (owned by Igor Kolomoisky – director and shareholder of CME). Further, it was announced that the original agreement (July 2009) between Mr. Kolomoisky and CME for the sale of 49% share in Ukraine and a put option on 51% stake for USD 300m was cancelled. According to our information, the reason was a faster completion of the transaction. We regard the sale of the Ukrainian assets as a good decision since these assets generated a loss already at the EBITDA level and our outlook for Ukraine was not favourable (see table). Although the Ukrainian performance should gradually improve, we did not expect the company would be able to meet its goal of positive EBITDA until 2012. Therefore, this sale will improve the overall results of CME.

Exhibit 21: Ukraine – previous projection of financials (estimate from September 2009) USDm 2007 Revenues 127 y/y 30% EBITDA -35 y/y -11% Source: ATLANTIK FT

2008 99 -22% -35 -248%

2009e 32 -68% -41 19%

2010e 59 86% -35 -15%

2011e 72 22% -26 -27%

2012e 87 21% -11 -56%

2013e 95 10% -4 -66%

In the past CME invested about USD 350m in the purchase of assets in Ukraine, of which USD 330m was used to buy 40% stake in Studio 1+1 (in 2008). To this figure, an unspecified volume of investments needs to be added, since the assets were generating negative cash flow. In 2010, Ukrainian EBITDA should end in a loss of USD 10m (for the first 4 months of 2010 before the sale is completed). 2010 results from Ukraine will be reported only in the item of discontinued operations.

f) Acquisition of bTV Please see chapter “Acquisition of bTV”.

17  OPERATING PERFOMANCE BY SEGMENTS AND COUNTRIES

i) TV broadcasting and internet Exhibit 22: Czech Republic USD m Revenues y/y EBITDA y/y EBITDA margin Source: CME, ATLANTIK FT

2008 377 35% 209 33% 55.4%

2009 276 -27% 128 -38% 46.6%

2010e 300 9% 142 11% 47.4%

2011e 330 10% 158 11% 48.0%

2012e 364 10% 177 12% 48.6%

2013e 389 7% 189 7% 48.7%

CAGR 09-13

2008 275 27% 112 20% 40.7%

2009 177 -36% 39 -66% 21.8%

2010e 188 7% 50 30% 26.5%

2011e 224 19% 68 36% 30.3%

2012e 276 23% 94 39% 34.2%

2013e 323 17% 118 25% 36.4%

CAGR 09-13

2008 133 20% 50 21% 37.9%

2009 107 -19% 14 -72% 12.9%

2010e 112 4% 14 3% 12.7%

2011e 121 8% 19 32% 15.5%

2012e 130 7% 25 31% 18.9%

2013e 136 5% 30 23% 22.1%

CAGR 09-13

0.6% -1.9%

Exhibit 23: Romania USD m Revenues y/y EBITDA y/y EBITDA margin Source: CME, ATLANTIK FT

3.3% 1.0%

Exhibit 24: Slovakia USD m Revenues y/y EBITDA y/y EBITDA margin Source: CME, ATLANTIK FT

0.6% -9.7%

Exhibit 25: Ukraine USD m Revenues

2008 2009 2010e* 2011e 2012e 2013e CAGR 09-13 99 32 7 0 0 0 y/y -22% -68% -79% -100% n.a. n.a. n.a. EBITDA -35 -40 -10 0 0 0 y/y -248% 16% -75% -100% n.a. n.a. n.a. EBITDA margin -35.0% -126.3% -150.0% n.a. n.a. n.a. Source: CME, ATLANTIK FT; Note: dekonsolidation since April 2010 (assets sale), * 2010 figures will be reported under discontinued operations

Exhibit 26: Slovenia USD m Revenues y/y EBITDA y/y EBITDA margin Source: CME, ATLANTIK FT

2008 81 16% 25 12% 31.5%

2009 67 -17% 18 -30% 26.7%

2010e 69 3% 20 10% 28.5%

2011e 73 6% 22 13% 30.5%

2012e 77 6% 25 10% 31.7%

2013e 80 4% 26 6% 32.3%

CAGR 09-13

2008 55 47% -5 -61% -9.9%

2009 49 -10% 0 -104% 0.5%

2010e 51 5% 2 822% 4.0%

2011e 55 6% 3 65% 6.2%

2012e 58 7% 5 62% 9.4%

2013e 64 10% 8 48% 12.7%

CAGR 09-13

-0.1% 0.4%

Exhibit 27: Croatia USD m Revenues y/y EBITDA y/y EBITDA margin Source: CME, ATLANTIK FT

3.2% -208.5%

18

Exhibit 28: Bulgaria USD m Revenues

2008 2009 2010e* 2011e 1 4 77 117 y/y n.a. 179% 2101% 51% EBITDA -10 -45 3 25 y/y n.a. 340% -106% 861% EBITDA margin -806.4% -1272.0% 3.3% 21.0% Source: CME, ATLANTIK FT; * consolidation of bTV since May 2010

2012e 131 11% 35 42% 26.8%

2013e 145 11% 46 32% 32.0%

CAGR 09-13 158.2% -235.4%

Exhibit 29: Development of revenues in local currency 2010e Czech Republic Romania Slovakia Ukraine Slovenia Croatia Bulgaria

2% 0% 3% n.a. 2% 2% 2062%

Czech Republic Romania Slovakia Ukraine Slovenia Croatia Bulgaria Source: CME, ATLANTIK FT

2% 12% 3% n.a. 4% 2% 225%

2011e New projection 7% 17% 10% n.a. 8% 8% 55% Old projection 6% 17% 14% n.a. 12% 12% 54%

2012e

2013e

CAGR 09-13

9% 22% 10% n.a. 8% 9% 14%

6% 17% 7% n.a. 6% 12% 13%

0.7% 5.3% 2.6% n.a. 1.9% 5.1% 163.5%

7% 13% 9% n.a. 5% 7% 26%

7% 7% 9% n.a. 8% 5% 24%

0,8% 3,7% 3,5% n.a. 2,3% 3,6% 80,4%

ii) Production, sales and distribution of TV content (Media Pro Entertainment) Exhibit 30: MediaPro Entertainment (Romania) USD m 2009* 2010e 2011e Revenues 3 46 55 y/y n.a. 1522% 20% EBITDA -1 5 7 y/y n.a. -868% 44% EBITDA margin -21.1% 10.0% 12.0% Source: CME, ATLANTIK FT; * consolidation since 9 December 2009

2012e 69 25% 10 46% 14.0%

2013e 83 20% 12 20% 14.0%

19  VALUATION

Fundamental valuation We use a two-stage FCFE model (free cash flow to equity) to calculate the value of CME. Free cash flow is taken as cash flow left after the company meets all its financial obligations, including debt payments, and its investment and working-capital needs. Model based on cash flow is suitable for valuation of companies that do not pay dividends or if the investor takes a control perspective. The first stage covers the period between 2010 and 2015 (6 years). This stage reflects detailed projections of financial statements. The FCFE in individual years is calculated as the sum of net cash flows. Future cash flows are discounted to their present value using a required rate of return, which is the sum of the risk-free interest rate (RFR; 6.91%) and the equity premium (EP; 6.85%). The risk-free rate is derived from a weighted average of long-term government bonds (weightings represent the proportion of individual countries from 2010 revenues). As a result of the recent loosening of conditions on financial markets, the risk-free rate declined from 6.91% to 5.27%. The equity premium is derived from a weighted average of premiums for individual countries (we use 6% equity premiums for the Czech Republic, Slovakia and Slovenia, 8% for Romania, Croatia and Bulgaria). Compared to our previous valuation, the weighted equity premium is almost unchanged (6.86% to 6.85%).

Exhibit 31: Risk-free rate and equity premium RFR - new Weightings - new EP - new RFR - old Czech Republic 4.14% 35.6% 6.0% 5.29% Romania 7.58% 27.8% 8.0% 10.41% Slovakia 3.96% 13.3% 6.0% 4.80% Ukraine n.a. n.a. n.a. 10.99% Slovenia 3.49% 8.2% 6.0% 3.89% Croatia 6.18% 6.1% 8.0% 8.26% Bulgaria 5.59% 9.2% 8.0% 7.55% Total 5.27% 100.0% 6.86% 6.91% Source: Bloomberg, ATLANTIK FT; RFR = risk-free rate, EP = equity premium

Weightings - old 38.3% 26.5% 14.8% 4.4% 9.0% 6.6% 0.4% 100.0%

EP - old 6.0% 8.0% 6.0% 10.0% 6.0% 8.0% 8.0% 6.85%

The second stage of the model produces a terminal value, which is the company's value after 2015, assuming the company remains stable and a going concern. The terminal price is derived from the long-term growth rate model, which includes a growth rate after the terminal year to infinity. We use the long-term growth rate of 3.00% (unchanged). The required rate of return decreased to 12.13% from previous 13.76%. the decrease is given mainly by lower risk-free rate.

Exhibit 32: Required rate of return and long-term growth rate Risk-free rate Risk premium Required rate of return Long-term growth rate Source: Bloomberg, ATLANTIK FT

New 5.27% 6.86% 12.13% 3.00%

Old 6.91% 6.85% 13.76% 3.00%

20

Exhibit 33: FCFE projection USD m 2010e 2011e 2012e 2013e Net income 203* 43 97 150 Depreciation and amortisation 72 72 74 75 Adjustment for minorities -217 1 2 2 Impairment of intangibles assets 0 0 0 0 Stock based compensation 7 7 8 9 Changes in working capital -46 -47 -23 -14 Operating cash flow 43 103 184 236 Capital expenditures -50 -60 -65 -70 Investment in subsidiaries -93 0 0 0 Investing cash flow -143 -60 -65 -70 Change in debt 3 -47 -67 0 Equity issues 0 0 0 0 Dividends 0 0 0 0 Financing cash flow 3 -47 -67 0 Net cash flow -96 -4 52 166 + Dividends 0 0 0 0 Free cash flow (FCF) -96 -4 52 166 Source: ATLANTIK FT; * includes a gain from sale of Ukrainian assets (ca USD 217m)

2014e 199 77 3 0 9 -11 279 -70 0 -70 0 0 0 0 209 0 209

2015e 240 79 3 0 9 -34 298 -70 0 -70 0 0 0 0 228 0 228

According to our valuation based on FCFE (the development of cash flow until 2015) we derived that a fair value of CME’s shares amounts to 25 USD per share. A one-year target price represents 28 USD per share (or 532 CZK per share based on the exchange rate of 19.0 CZK/USD). Our previous target price was 18 USD per share (issued on 21 September 2009).

Exhibit 34: CME - valuation (FCFE) USD m Present value of FCFE 296 Present value of terminal value 1,338 Present value of CME (fair value) 1,634 One-year target price Source: ATLANTIK FT; * exchange rate of 19.0 CZK/USD

Per share (USD) 5 20 25 28

Per share (CZK)* 86 388 474 532

Sensitivity of the target price to required rate of return and long-term growth rate A target-price calculation is sensitive to long-term growth assumptions. Moreover, investors have different required rates of return for discounting future cash flows. We have therefore prepared an analysis of the target price’s sensitivity (based on FCFE) to different required rates of return and long-term growth rates. CME’s valuation is very sensitive, especially to the required rate of return.

Exhibit 35: Sensitivity analysis of target price USD 10.13% 11.13% RRR* = 12.13% LT growth = 1,0% 30 26 23 LT growth = 2,0% 33 29 25 LT growth = 3,0% 37 32 28 LT growth = 4,0% 43 36 31 LT growth = 5,0% 51 42 35 Source: ATLANTIK FT; * required rate of return; LT = long-term

13.13% 21 23 25 27 30

14.13% 19 20 22 24 26

21  SHARE PRICE PERFORMANCE The price of CME’s shares considerably grew in the past year, which was partly given by correction of the previous slump accelerated by the bankruptcy of Lehman Brothers, when financial markets were hit by selloffs. The previous stock price decline was also caused by deteriorated financials due to the economic recession. In January the market positively responded to news on the sale of the Ukrainian assets. On the other hand, the announced Bulgarian acquisition (February) was perceived neutrally, which was probably due to the lack of more detailed information. The details will be released by CME after the transaction has been closed (together with 1Q 2010 results). In the nearest term the stock price could be influenced by news on ad market development or by 1Q 2010 results (5 May).

Exhibit 36: Performance of CME’s share price on the PSE Performance Price (CZK) YTD 1M 3M 6M 12M 1R High 1R Low Absolute 667 49% 18% 36% 43% 88% 667 322 Relative (Index PX) 1,295.4 33% 11% 27% 31% 35% MCap (CZK m) Free float Free float (CZK m) Average daily liquidity (CZK m) Average daily liquidity (shares) 40,912 49% 20,047 81 170,760 Source: Bloomberg, ATLANTIK FT; close price as of 16 April 2010 CM E

Volume

Share price

2000

100%

1000 sell-offs after Lehman Brothers bankruptcy

Price (CZK)

1500

75% 50% 25%

1000

500

500

250

0

0%

0

04 /0 06 8 / 08 08 /0 10 8 /0 12 8 /0 02 8 / 04 09 / 06 09 /0 08 9 / 10 09 /0 12 9 /0 02 9 / 04 10 /1 0

8 8 8 8 8 9 9 9 9 9 9 0 0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /1 /1 04 06 08 10 12 02 04 06 08 10 12 02 04

750

Volume (mn CZK)

PX 125%

Exhibit 37: Performance of CME’s share price on the NASDAQ Performance Absolute

Price (USD) YTD 1M 3M 6M 12M 1R High 1R Low 34.9 48% 15% 29% 25% 105% 38.1 15.4 Relative (Nasd. Comp.) 2,481.3 38% 11% 21% 10% 56% MCap (USD m) Free float Free float (USD m) Average daily liquidity (USD m) Average daily liquidity (shares) 2,140 49% 1,049 11 408,751 Source: Bloomberg, ATLANTIK FT; close price as of 16 April 2010 Volume

CM E

100%

90

50% 25%

04 /0 06 8 /0 08 8 /0 10 8 /0 12 8 /0 02 8 /0 04 9 /0 06 9 /0 08 9 /0 10 9 /0 12 9 /0 02 9 /1 04 0 /1 0

0%

Share price 400 sell-offs after Lehman Brothers bankruptcy

300

60

200

30

100

0

04 /0 06 8 /0 08 8 /0 10 8 /0 12 8 /0 02 8 /0 04 9 /0 06 9 /0 08 9 /0 10 9 /0 12 9 /0 02 9 /1 04 0 /1 0

75%

Price (USD)

120

0

Volume (mn USD)

NASDAQ Comp. 125%

22  RELATIVE COMPARISON In terms of relative comparison, we regard the EV/EBITDA ratio as the most suitable multiple because it reflects the company’s operating performance and the level of indebtedness. Peer comparison is only a supporting methodology. There are several reasons for this: (i) different accounting standards; (ii) different availability of information; (iii) impact of acquisitions and subsidiaries on the balance-sheet structure; (iv) different dividend policies; and (v) expected divergence of profit margins in future. Based on EV/EBITDA, CME is traded at a premium (57%, 35% and 22% for 2010-12 respectively) compared to peers in the sector. In our opinion, the premium is now however relatively high. In general, the premium is considered justified given the company’s growth potential, which can be documented by a decrease in the premium towards 2012. In our opinion, comparison based on 2011 or 2012 is more reasonable because by then the financials of all the companies should have become normalised.

Exhibit 38: Relative comparison (EV/EBITDA, P/E)

ANTENA 3 TELEVISION CTC MEDIA INC GESTEVISION TELECINCO SA ITV PLC M6-METROPOLE TELEVISION MEDIASET SPA MODERN TIMES GROUP PROSIEBEN SAT.1 MEDIA AG RTL GROUP TELEVISION FRANCAISE (T.F.1) TVN SA Median CENTRAL EUROPEAN MEDIA ENT CME vs. peers Source: Bloomberg, ATLANTIK FT

2010e 12.4 12.6 17.7 11.2 8.8 8.8 13.5 9.6 10.4 12.6 11.7 11.7 18.3 57%

EV/EBITDA 2011e 10.0 10.4 10.9 8.2 8.5 7.3 11.0 9.2 9.9 8.7 9.4 9.4 12.8 35%

2012e 9.0 8.8 8.1 7.6 7.6 6.7 10.4 8.9 7.9 7.8 8.1 8.1 9.9 22%

2010e 16.7 20.1 23.1 21.2 18.6 19.0 16.7 10.9 18.4 32.6 26.8 19.0 -348.9 -1939%

P/E 2011e 13.1 16.8 15.7 13.2 17.0 15.7 13.4 10.0 16.1 16.9 18.6 15.7 38.8 146%

2012e 11.9 13.7 14.2 11.0 15.7 13.3 11.9 9.0 14.2 15.4 15.6 13.7 18.9 38%

23  RECOMMENDATION In our updated valuation we have included the sale of Ukrainian assets, the acquisition of bTV, higher interest expenses, new macroeconomic projections and a revised EUR/USD rate. The required rate of return declined to 12.13% from previous 13.76%, which is caused especially by a lower risk-free interest rate thanks to loosening conditions on financial markets. Based on the new projections, we expect 2010-12 revenues of USD 845/975/1,105m, compared to the previous estimate of USD 878/966/1,022m (difference: -4%/+1%/+8%). EBITDA should grow to USD 197/260/325m, compared to previously expected USD 155/217/260m (+27%/+20%/+25%). The company should benefit especially from the elimination of the loss-making Ukrainian business and the positive EBITDA of bTV. On the other hand, higher interest expenses are an adverse factor (a higher volume of debt and a higher interest rate). Based on our updated FCFE-based valuation, we have raised a one-year target price of CME’s shares to USD 28 from USD 18 (issued on 21 September 2009) and we keep long-term recommendation at Sell since a target price is 20% below the current market price. We reiterate our Neutral short-term outlook. In the short term investors will follow the news on ad market development and results for 1Q 2010 (5 May), when more details about the Bulgarian acquisition should be given. The ad market in Western Europe in 4Q09 showed signs of recovery, which could with some delay (approx. half a year) become visible in CEE. As a potential risk factor, we see a possibility of another slowdown of the economic growth (double dip) because the effect of fiscal and monetary stimuli is slowly subsiding. Overall, we expect a rather slow economic recovery, since consumer demand is negatively impacted by growing unemployment and greater cautiousness of banks in providing loans. CME said at the presentation of 4Q09 results that in 1H 2010 TV ad spending should remain flat or even fall in some countries as advertisers remain cautious and opportunistic. Therefore, the ad market growth should relate to 2H (especially 4Q) and the full-year growth should be low single-digit. It cannot be ruled out that in 2010 the ad market will further decline with respect to a possible economic slowdown. In our opinion, the tepid economic recovery will put further pressure on cost savings (including marketing). Possible weakening of the ad market would be then an unpleasant surprise for investors.

24  APPENDIX: FINANCIAL STATEMENTS, MULTIPLES AND RATIOS

Consolidated P & L USD m, cons. US GAAP 2007 2008 2009 2010e 2011e 2012e Revenues 839 1 020 714 845 975 1 105 Operating costs and expenses 444 583 524 527 584 638 Sales, general & admin. expenses 71 91 77 82 89 96 EBITDA 268 297 75 197 260 325 EBITDA margin 32,0% 29,1% 10.5% 23.3% 26.7% 29.4% Depreciation and amortisation 58 87 75 72 72 74 Corporate operating costs 50 43 32 32 34 38 EBIT 210 -128 -83 124 187 250 Net financial expense/(income) -79 -101 -28 -129 -129 -123 Pre-tax 131 -229 -111 -5 58 128 Tax provision 21 35 -3 -1 14 29 Minority interest 17 2 -11 0 1 2 Net income 89 -270 -97 203* 43 97 Source: CME, ATLANTIK FT; * includes a gain from sale of Ukrainian assets (ca USD 217m)

2013e 1 221 688 104 380 31.2% 75 40 304 -107 197 44 2 150

2014e 1 336 741 112 430 32.2% 77 43 352 -93 259 57 3 199

2015e 1 459 804 121 480 32.9% 79 45 399 -90 309 67 3 240

2013e 3,323 2,235 1,088 576 511 3,323 1,580 1,742 381 1,361 1,377

2014e 3,535 2,215 1,320 786 534 3,535 1,779 1,755 401 1,355 1,365

2015e 3,791 2,194 1,597 1,013 584 3,791 2,019 1,772 423 1,349 1,353

Consolidated Balance Sheet USD m, cons. US GAAP Total assets Long term assets Current assets Cash and cash equivalents Non-cash current assets Total equity and liabilities Total equity Total liabilities Current liabilities Non-current liabilities Total debt Source: CME, ATLANTIK FT

2007 2,338 1,803 535 143 392 2,338 1,400 939 234 704 601

2008 2,407 1,912 495 107 387 2,407 1,095 1,311 229 1,083 1,004

2009 2,873 2,043 830 459 371 2,873 1,178 1,695 350 1,345 1,378

2010e 3,085 2,317 767 362 405 3,085 1,290 1,794 343 1,451 1,481

2011e 3,103 2,289 814 358 456 3,103 1,333 1,770 351 1,419 1,444

2012e 3,150 2,253 897 410 487 3,150 1,430 1,720 364 1,356 1,377

Cash Flow projection USD m 2010e 2011e 2012e 2013e Net Income 203* 43 97 150 Depreciation and amortisation 72 72 74 75 Adjustment for minorities -217 1 2 2 Impairment of intangibles assets 0 0 0 0 Stock based compensation 7 7 8 9 Changes in working capital -46 -47 -23 -14 Operating cash flow 43 103 184 236 Capital expenditures -50 -60 -65 -70 Investment in subsidiaries -93 0 0 0 Investing cash flow -143 -60 -65 -70 Change in debt 3 -47 -67 0 Equity issues 0 0 0 0 Dividends 0 0 0 0 Financing cash flow 3 -47 -67 0 Net cash flow -96 -4 52 166 + Dividends 0 0 0 0 Free cash flow (FCF) -96 -4 52 166 Source: ATLANTIK FT; * includes a gain from sale of Ukrainian assets (ca USD 217m)

2014e 199 77 3 0 9 -11 279 -70 0 -70 0 0 0 0 209 0 209

2015e 240 79 3 0 9 -34 298 -70 0 -70 0 0 0 0 228 0 228

25

Multiples and Ratios P/E P/S P/BV P/EBITDA EV/EBITDA EV/S Debt/Equity (%) ROE ROA y/y change Revenues EBITDA EBIT Net income margin EBITDA margin EBIT margin Net income margin Source: CME, ATLANTIK FT

2007 16.7 2.7 1.6 8.6 12.5 4.0 43% 7.6% 4.3%

2008 -5.5 2.2 2.1 7.7 11.3 3.3 92% -21.3% -11.4%

2009 -22.9 3.2 1.9 30.6 44.6 4.7 117% -8.5% -3.7%

2010e 11.4 2.7 1.8 11.7 17.0 4.0 115% -0.3% 6.8%

2011e 53.5 2.4 1.7 8.8 12.8 3.4 108% 3.3% 1.4%

2012e 23.8 2.1 1.6 7.1 10.3 3.0 96% 7.0% 3.1%

2013e 15.3 1.9 1.5 6.0 8.8 2.7 87% 10.0% 4.6%

2014e 11.5 1.7 1.3 5.3 7.8 2.5 77% 11.9% 5.8%

2015e 9.6 1.6 1.1 4.8 7.0 2.3 67% 12.6% 6.5%

39% 44% 50% 334%

22% 11% -161% -404%

-30% -75% -35% -64%

18% 163% -249% -309%

15% 32% 51% -79%

13% 25% 34% 125%

10% 17% 21% 55%

9% 13% 16% 33%

9% 11% 13% 20%

32.0% 25.1% 10.6%

29.1% -12.5% -26.4%

10.5% -11.7% -13.6%

23.3% 14.7% 24.0%

26.7% 19.2% 4.4%

29.4% 22.7% 8.8%

31.2% 24.9% 12.3%

32.2% 26.4% 14.9%

32.9% 27.3% 16.4%



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