Central European Media Enterprises (CETV) broke a long string of losing days yesterday, rising 4%, or $1.77, to $46.49. The company reports earnings before the open on Wednesday but the trigger for Monday’s advance was more likely the announcement that the company has increased its stake in its Slovakian operation and gained control of the broadcasting license.
For $28.7 million, CETV has raised its economic stake in TV Markiza in Slovakia from 70% to 80%. More importantly, CETV’s stake in the company that owns the broadcasting license goes from 34% to 80%. I am expecting Markiza to produce about $24 million in EBITDA next year, up 12% from 2005….

In theory, buying 10% for $28.7 million values Markiza at $287 million, or 12 times next year’s EBITDA. CETV closed at 11 times 2006 EBITDA on Monday so the deal is neutral to very modestly dilutive to valuation. However, one of the big risks to operating in emerging markets relates to license control. Over the years, CETV investors have always asked management about license control issues and rewarded the company when majority control of licenses was obtained. I don