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Central European Media Swings to Second-Quarter Loss

Adrian Sarbu CEO Central European Media P
Adrian Sarbu, CEO of Central European Media

Time Warner owns a big stake in the Eastern European TV networks company, which has struggled amid economic challenges, but expects trends to improve.

TV networks group Central European Media Enterprises, in which Time Warner owns a 49.9 percent stake, continued to struggle amid economic challenges during the first half of the year.

The company, which operates in several Eastern European countries, on Wednesday reported a second-quarter loss of $41 million, compared with a year-ago profit of $3 million. Revenue fell from $211 million to $180 million.

Revenue for the six months ended June 30 were $317 million, compared with $378 million for the first half of 2012. The company's loss widened from $11 million to $150 million.

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Adrian Sarbu, the company's Romanian-born president and CEO, said increased advertising prices and carriage fees for the company's networks would put "the company back on the path to growth in 2014."

The company, which runs TV channels in the Czech Republic, Bulgaria, Romania, Croatia and Slovenia, had "secured double-digit TV advertising price increases in the Czech Republic and single-digit increases in other countries" for ad commitments.

Carriage fees in Romania and Bulgaria were expected to double this year compared to 2012, Sarbu said, adding: "Our products are performing better than last year."

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But lower revenue in the Czech Republic "impacted our financial results in the second quarter and first half of 2013 as certain key advertisers have only recently accepted our higher prices," he explained. "Looking forward, we expect the declining trend of TV advertising spending to reverse in the fall."

In a investor conference call Wednesday that was streamed live over the internet, Sarbu reiterated the role played by advertising agencies in the Czech Republic that resisted the price increases for longer than CME anticipated.

Speaking against a background rubic that read On the path over reversing declining TV advertising spend, Sarbu said: "We expect to get the right prices for the value delivered to our customers."

CME's audience market share in the Czech Republic was a combined 43% -- up 5% on last year -- Sarbu said, adding that the programming strategy of all CME's stations was driven by high quality "local content."

Negotiations with major Czech advertisers had secured agreements with the top 20 for the new pricing structure, he added.

* Time Warner has pumped money into CME, which has been looking to cut its debt load of around $1 billion as advertising revenue in its key territories continues to be weak. The entertainment conglomerate has said it expects the company to grow solidly once it overcomes its current challenges.

Georg Szalai in London contributed to this report.