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December 29, 2005

Czeching in on Central European Media Enterprises

received an email just before Christmas with an update on TV advertising in the Czech Republic. According to TNS A-Connect, during November advertising was up 17% on a year-over-year basis. I view the Czech Republic as one of the more mature TV advertising markets in Central and Eastern Europe, so this is a good sign that the seasonally strong fourth quarter looks good throughout the region.....

The article also noted the largest advertisers during the month were Procter and Gamble (PG), drinks maker Walmark, Nestle (NSRGY), Danone (DA), and T-Mobile. Advertisers with the largest increase in spending over the prior year were insurer Uniqa, Ford (F), Novartis (NVS), and Masterfood. Among advertisers with reduced spending in November 2005 were Coca-Cola (KO), insurer Ceska Pojistovna, Electrolux, and Czech GE Money Bank. What I find notable about the list is the diversity of advertisers by nationality and product or service. I also find it interesting that food, financial services, mobile phones dominate the list. These are exactly the industries you would expect would want to gain a foothold in an emerging consumer economy. Finally, check out the number of quality advertisers mentioned. If you had any doubt about the potential of ad-supported media in emerging markets, the presence of these global behemoths ought to make you think twice.

Ad-supported media stocks in the U.S. face a lot of challenges as traditional media usage fragments and advertising share is lost to new media. In emerging markets, ad-supported media is still a growth media, more akin to Hispanic media in the United States. To play this trend, Central European Media Enterprises (CETV) remains my core holding (Czech Republic is a little under half of 2006 estimates). Programming expenses and ratings matter to CETV as well but the tailwind of double digit TV advertising growth throughout Central Europe provides a nice margin of safety for hitting the numbers.

Posted by Steve Birenberg at December 29, 2005 09:16 AM in CETV