CME's partner in Ukraine, Alexander Rodnyansky, lost 1st instance court with Igor Kolomoiski in Ukraine claiming 70% interest in Studio 1+1, currently held by Mr. Rodnyansky. Note that CME holds 60% stake in Innova/Intermedia, which holds a 30% stake in Studio 1+1. Based on an agreement with Mr. Rodnyansky from December 30, 2004, CME is entitled to 60% interest in Studio 1+1 (any distribution to shareholders). Ukraine contributed 17% to CME's segment EBITDA in the 1H06.
According to CME, Mr. Kolomoiski said that even if he succeeds he would follow contractual agreements with CME and acknowledged CME's 60% interest in Studio 1+1. At the same time, the license will be transferred to CME as a part of restructuring of Ukrainian company.
In any case, CME's finds the court's decision disappointing nevertheless Innova/Intermedia will appeal against the decision, which has not come into force. CME believes that no person can have a legitimate claim to a 70% interest in Studio 1+1. According to CME, the outcome of the lawsuit should not have any impact on CME's Ukrainian operations not its 15-hours license approval as the company has been given early approval by the Government for license extension beyond 2006. Dispite CME claiming no impact on its Ukrainian operations, the result raises risks associated with CME's operations in Ukraine.