"I work for a media company, CME, which operates private television and radio stations throughout the central and eastern European region. I have been with CME for almost 4 years and work as a director in developing stations and new areas of business. Although our main office is in London, I am now based here in Prague.
I'll be glad to share any information which I can which might be of interest to others and look forward to receiving correspondence from those who subscribe to this group, as I understand CME is an often talked about subject in this forum.
Regards, David Stogel"
Dear David Stogel,
It is greatly appreciated that you have joined this discussion group, obviously as part of the effort of Central European Media Enterprises to create a good image for itself.
There are a number of important questions regarding the business activities of CME in the Czech Republic. The issues at stake transcend the borders of the Czech Republic because CME television activities in that country obviously serve as a precedent for launching similar activities in other post communist countries.
This is why I am sure many readers of this discussion group will be interested in your answers to the following questions. I would like to publish them in Czech in the Prague-based Slovo daily newspaper and in the Czech-language internet daily "Neviditelny pes"
Glasgow University
2nd April, 1997
1. (a) The Czech law on Radio and TV broadcasting says that broadcasting licences are untransferable (Law No. 468/1991, amended in 1996, Article 10.2.). The broadcasting licence for CNTS Nova, which CME owns and operates in the Czech Republic, was awarded in 1993 to a group of Slovak and Czech intellectuals, gathered together in the CET 21 group.
(b) Using a complicated "loan agreement", concluded in August 1996 between CME and Vladimir Zelezny, chief executive of Nova TV, CME seems to have now gained full control over CET 21. Zelezny has purchased participation interest from most of the original members of CET 21, thus increasing his participation in CET 21 from some 16,69 per cent to 60 per cent. However, as it follows from the provisions of the Zelezny CME "loan agreement", CME retains all the voting rights of Zelezny's increased participation interest of 43,31 per cent.
(c) CME has used Zelezny's new majority in CET 21 to make him ensure "that the Lender (i.e. CME) shall have a veto right over any decision of whatever nature which is to be taken by the participants' meeting of CET 21 s.r.o." (Article 8.4. c and 9.4.c of the Loan Agreement)
To sum up: The Czech Media law says TV broadcasting licences are untransferable. But by gaining a veto right over all decision making in CET 21, CME has gained full control over the TV licence holder.
2. In its stock market Prospectus Summary (the S-3MEF document, submitted by CME to the US Security and Exchange Commission on 30th October, 1996) CME states: "In many [postcommunist] countries, the regulatory systems as they apply to private and especially foreign investors in broadcasting stations are relatively new and untested".
3. (a) On 14th March, 1997, the Bloomberg news agency reported:
HAMILTON, BERMUDA, (March 14, 1997) - Central European Media Enterprises Ltd. (CME) today announced that it will increase its ownership of CNTS by 5.2 percentage points to a 91.2 percent voting interest and a 93.2 percent economic interest. This increase in ownership results from the satisfaction of Nova TV General Director Dr. Vladimir Zelezny's obligations, in lieu of repayment, under a previous disclosed loan agreement between CME and Dr. Zelezny. CNTS operates to the Czech Republic's privately owned national television station Nova TV.
CME's increased ownership in CNTS will go into effect upon the registration of the proposed changes to the Czech Republic's Companies Register, and it is expected that the changes will be formally registered within the next few months. For furher information, please contact: Eugene Secunda +1-212-777-3841
"I emphatically reject the speculation that I am purchasing the additional CET 21 interest in such a way that this would benefit the American company CME. It is true that I am negotiating a loan agreement with CME, but the loan agreement is about something completely different. I can borrow money for the acquisition of CET 21 participation interest from anyone else, the money does not necessarily need to come from CME."
Vladimir Zelezny, Lidove Noviny, Prague, 4th January, 1997
The 10-Q CME quarterly report, submitted to SEC on 18th November 1996:
"This LOAN AGREEMENT is made as of August 1, 1996 ("Effective Date"), between PhDr Vladimir Zelezny (...) and CME Media Enterprises..."
"3. USE OF PROCEEDS 3.1. The proceeds of the Loan shall be used by the Borrower as follows: (a) to acquire 43.31 per cent of the CET 21 Participation interests from sellers... to facilitate the future acquisition of the Target CNTS Participation interest [i.e. the NOVA TV 5,2 per cent participation interest, which is being transferred from CET 21 members to CME]"
10-Q CME quarterly report, dated 14th November, 1996, p.1:
"In the Czech Republic, the Company [CME] owns a 88 per cent economic interest in Ceska Nezavisla Televizni Spolecnost ("Nova TV)"
Vladimir Zelezny, Chief Executive of Nova TV, in his programme "Call the Director", 25th January 1997:
"Mr. Stepanek [Deputy Head of Czech Council for Radio and TV Broadcasting] is lying [when quoting the above information, published repeatedly by CME, for instance also in its 10-Q quarterly report of 14th November, 1996, p.1, see above] The Americans don't own 66 nor 93 nor 88 percent. They own only 1.25%. It was the Commission, it was Mr Stepanek, who said to us that the television is owned by CET 21, which as the licenced company, is the station's operator and holder of thetelevision licence. In this firm the Americans are limited to 1.25%. They did not want to be in contact with Mr Stepanek. Well, who would, knowing his opinions on the market economy?"
(b)
Vladimir Zelezny, "Call the Director", Nova TV, 25th January 1997:
"CET 21 is the broadcasting licence holder, CET 21 is TV NOVA, CET 21 is the broadcaster, CET 21 is the operator".
CME 10-Q quarterly report, submitted to SEC, 14th November 1996, p. 5:
"The Company [CME] is the leading television BROADCASTER in Central and Eastern Europe... The Company OPERATES the leading national television station in the Czech Republic."
(c) Vladimir Zelezny, "Call the Director" Nova TV, 25th January, 1997:
"...the CME president and I were recently sitting at an airport and we calculated what the Czech Republic has given to those 'wicked American imperialists'. The Americans [i.e.CME] have invested more than 40 million dollars. The return on this has been not quite ten million dollars in three years. [CME] is a very correct investor indeed."
10-K, CME 1995 annual report, p. 36:
"Nova TV. At December 31, 1994, the Company [CME] had contributed $9,265,000 to Nova TV. No additional funding was provided to Nova TV during 1995."
10-Q, p. 17: "the Company has received 107 per cent of its original United Stated dollar investment in Nova TV made approximately 2,5 to 3 years earlier."
Who is misleading the public, Mr Zelezny or the CME official stockmarket reports?
"Under Czech legislation ... the Company may not interfere with the journalistic independence of Nova TV or its programming. Czech legislation also prohibits programming that might offend public morals."
The Czech media law:
"Broadcasters provide objective and balanced information, which is necessary for [the viewer to form his/her own] free opinions." (Article 4.2.)
Vladimir Zelezny, Ask the Director, Nova TV, 1st February 1997:
"Well, this programme still exists, I will go on openly answering your questions because this is my right. It is my right to use my freedom of speech.
All those complaints that if I say something here, somebody else should be sitting here and should have the right to answer back, or that they should have the right to answer back at some other time, this is absurd.
This does not happen in any television station anywhere in the world, it does not happen in any country, not even the freest country. It is simply impossible. This is my personal programme. This is a programe from the category of self-promotion, self-advertising, which is used by any TV station. "
Vladimir Zelezny, Ask the Director, 25h January 1997:
"The Americans own 1.25%, and if Mr Stepanek keeps to the law, to his own opinions which he has so often made known, he will have to confess it. It completely shook me and you, you who conduct business, you small entreprenuers, you know that what he said is nonsense. Investors don't bring anything because they borrow money within the Czech Republic. An amatuer's conception of what enterprise is all about! That is the idea of a dilettante who has never engaged in entrepreneurial activity of any kind in his whole life and knows nothing about business.
You see, it was a Czech bank that was lucky enough to be able to lend this money to CME. (heavy sigh) Profit. You were listening. A very dangerous sentence. How is it possible that profit flows out of the country? Profit doesn't flow from broadcasting by itself. Profit comes from other services which CME offers through another company called CNTS, the Czech Independent Television Group, and Mr Stepanek knows very well that this profit doesn't concern him at all because this is not profit which is generated by a media enterprise under the eye of the Commission and Mr Stepanek.
Please confront what I am saying with what Mr Stepanek has said. I cannot say it better than a recent article in a national newspaper which has dedicated itself to confronting these dangerous statements. They carried a headline "A Marxist in the Civic Democratic Party" about Mr. Stepanek. His are really fundamental Marxist opinions - that is, opinions of that Marxism as it developed in this country for several decades. And then that populism! Our Czech money! Our Czech yoghurt! Investment in advertising is investment in advertising. No one is forcing the viewer to buy that precise brand of yoghurt. But of course the government is forcing the citizens to pay the public service TV licence. Advertising just provides the viewer with information about that yoghurt.
Also, I would like to say that these Americans are so swell that they even leave half of the profits here. The media is also a business. It is not just about business, it is also about information. It is about influence, and we all know very well what we have in our hands. We are not abusing it, and we will not abuse it.
OK What is there left to say? On the radio yesterday, Mr Stepanek said that the he could initiate some kind of legal action on behalf of the Commission. At the same time, he said many words which we know are not true, but I don't want to try to divide Mr Stepanek and the Commission. That would be cheap. I think that the statements of one person, who alone feels agrieved and is attempting to use his position on the Commission in order to threaten that information is non-objective and improper.
We will continue broadcasting. Only... it's terrible that... some silly jerk can just attack us in such a public manner and shield himself using the name of an institution, thus spoiling the efforts of many hard working people. There are 400 people who worked tirelessly to establish this station over the past three years. They are overworked because they are so few and because they are undertaking work that is not easy. They now have 65% of the Czech viewership. They are the model for building all commercial television in Central and Eastern Europe - these evil Americans are participating in all that.
Let all the jealous ones choke. "