* Sees negative free cash flow in 2013
* U.S. media group has been strengthening hold on CME
* CME shares fall 50 percent in Prague
By Jason Hovet
PRAGUE, Oct 30 Loss-making broadcaster Central
European Media Enterprises (CME) said on
Wednesday it needed more money to stay afloat and was trying to
secure extra financing from its main shareholder, Time Warner
Shares of CME, 49.9 percent owned by the U.S media group,
fell 50 percent in Prague to a near record low.
The central European broadcaster is struggling through the
toughest period in its two-decade existence after many customers
rejected a higher pricing strategy meant to regain income lost
in a slumping TV advertising market.
CME said it did not expect to make a core profit in 2013,
blaming a weaker outlook in Slovakia and the Czech Republic, its
top market which made up a third of group revenue last year.
Time Warner has been strengthening its hold on CME, which
was founded by billionaire Ronald Lauder in 1994. The U.S. group
bought into CME in 2009 and gave it a cash injection in 2012. It
also bought up nearly half of a share issue in 2013 and
purchased $200 million in preferred CME stock.
The company has lost ground to its main Czech competitor, TV
channel Prima, owned by Sweden's Modern Times Group,
which has seen sales rise this year, benefit ting from CME's
push to raise prices.
CME said its Czech revenue in 2013 would be significantly
below last year and that 2014 would not match 2012's levels.
Co-Chief Executive Christoph Mainusch, who along with Time
Warner executive Michael Del Nin led CME after its veteran chief
executive quit in August, said the Czech business was a priority
and a task was to simplify its pricing policy.
"One of our major tasks is to rebuild the trust ... and
revive the long-term relationships with agencies and advertisers
to build on the price levels that we have achieved with moderate
price increases in 2014," he said.
CME said that there was no certainty that preliminary
discussions with Time Warner on a possible capital transaction,
including debt, would come to anything. It forecast negative
free cash flow of $140 million for the full-year 2013.
"If we are unable to secure additional financing, we will be
unable to meet our debt service obligations and generally fund
our operations sometime within the next 12 months," it said.
"Due to the level of negative free cash flow anticipated for
2013, we will need additional capital and we are currently
evaluating all options available to us, including debt and
equity financing, asset sales and the renegotiation of payment
obligations with a number of major suppliers," CME added.
CME, which also operates television stations in Romania,
Bulgaria, Croatia and Slovenia, had net debt of $839.5 million
at the end of September, down from over $1 billion in March.
Patria Finance analyst Tomas Tomcany said Time Warner had
invested too much in CME to walk away easily. "Certainly it is
in their interests that the company continues operations, so the
hope for some kind of a deal is realistic," he said.
CME cut its forecast for full-year 2013 revenue to between
$640-$650 million. It also said it expected a loss of between
$30-40 million on the level of operating income before
depreciation and amortisation (OIBDA).
It previously expected 2013 revenue of $700-$720 million and
positive OIBDA of $50-$70 million.
Third-quarter revenue fell 3 percent to $135.8 million, and
CME's OIBDA loss was $32.4 million.