The following discussion should be read in conjunction with the sections entitled "Forward-looking Statements" on page 4 and "Risk Factors" in Part I, Item 1A.

Contents

ll. General Market Information

Ill. Analysis of Segment Results

IV. Analysis of the Results of Consolidated Operations

Vl. Critical Accounting Policies and Estimates

Vll. Related Party Matters

l. Executive Summary

Continuing Operations

The following table provides a summary of our consolidated results for the years
ended December 31, 2008 and 2007:

                                                                   For the Years Ended December 31, (US$ 000's)
                                                                      2008                2007         Movement

Net revenues                                              $      1,019,934       $     838,856       $  181,078
Operating (loss) / income                                         (127,797 )           210,456         (338,253 )
Net (loss) / Income                                       $       (255,544 )     $      88,568       $ (344,112 )
Net cash generated from continuing operating activities   $        135,555       $     106,695       $   28,860

The deterioration in our operating income is principally due to the recognition of a non-cash impairment charge of US$ 336.7 million in respect of our operations in Ukraine and Bulgaria (see Item 8, Note 4, "Goodwill and Intangible Assets").

Station Performance

In 2008 our established operations in Croatia, the Czech and Slovak Republics, Romania, and Slovenia performed very strongly. We acquired the interests of the minority partners in our Ukraine (STUDIO 1+1) operations and re-launched the station in 2008, incurring significant costs as a result. We also acquired new operations in Bulgaria during 2008 which incurred startup losses.

In 2008 we reported growth in total Segment Net Revenues of 21.6%. Aside from our Ukraine (STUDIO 1+1) operations, each of our stations showed growth in excess of 15.9%, with particularly strong growth in the Czech Republic and Romania.

Total Segment EBITDA grew by 6.9%. We generated a total Segment EBITDA margin of 34.0% compared to the 39.0% margin reported in 2007 (Segment EBITDA is defined and reconciled to our consolidated results in Item 8, Note 19, "Segment Data"). Our total segment results were affected by losses in our developing markets of Ukraine and Bulgaria. In Ukraine our two operating segments generated Segment EBITDA losses of US$ 34.8 million compared to Segment EBITDA of US$ 23.5 million in 2007, and our new operations in Bulgaria generated Segment EBITDA losses of US$ 10.2 million. Excluding these, in 2008 we generated Segment EBITDA of US$ 390.7 million, an increase of 30.2% over 2007, and a total Segment EBITDA margin of 42.5%, compared to 42.1% in 2007.

Our net cash generated from continuing operations increased by 27.0% in 2008.

During the first half of 2008, our Segment results benefited from a general weakening of the dollar against the currencies in which our results are generated. This situation reversed in the second half of the year, and by December 31, 2008 the currencies of all our markets except the Slovak Republic were weaker against the dollar than they had been at the start of the year. We were not impacted by the weakening general economic conditions that have affected many Western countries until very late in the year. Rapidly growing economic uncertainty in the last quarter of 2008 led to a significant reduction in GDP growth rates in most of our markets and our advertising sales in December were lower than we had anticipated in some markets.

Key Events

In late 2007 we began negotiations with our minority partners in the Studio 1+1 group to acquire their remaining 40.0% interest. On January 31, 2008, we entered into a framework agreement which established a mechanism for us to acquire a 30.0% interest and an option to acquire the final 10.0% interest at agreed prices.

We completed the acquisition of the first 30.0% interest in June 2008, paying cash consideration of US$ 223.2 million (including acquisition costs) and began to implement our plan to maximize the potential of the STUDIO 1+1 channel by establishing a multi-channel broadcasting platform. This included installing a new management team and significantly restructuring our operations.

On September 10, 2008, we exercised our option to purchase the remaining 10.0% interest. We completed this purchase on October 17, 2008 for cash consideration of US$ 109.1 million. We have taken responsibility for advertising sales for Ukraine operations with effect from January 1, 2009 and have set up an in-house sales department following the termination of our agreements with the Video International Group.

In December 2008, we also announced that we had entered into a preliminary agreement to buy out our minority partners in Gravis-Kino in exchange for our interest in CITI for net consideration of US$ 10.0 million and to take a 10.0% interest in Glavred Media Holding LLC for cash consideration of US$ 12.0 million. These transactions, which were completed in February 2009, will enable us to integrate the KINO channel with STUDIO 1+1 to build an efficient multi-channel broadcasting platform (see Item 8, Note 23, "Subsequent Events").

Although we strongly believe these transactions will ultimately maximize the value of our operations in Ukraine, our operations were vulnerable to the sharp decline in the market that commenced in November and December of 2008 and which is expected to continue in 2009 and 2010 We therefore concluded that some of our Ukraine assets had become impaired in the fourth quarter. Accordingly, we recorded an impairment charge of US$ 271.9 million in respect of both of our Ukraine operations (see Item 8, Note 4 "Goodwill and Intangible Assets:
Impairment of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets").

During 2008 we also made the first expansion of our geographic footprint since 2005 through an acquisition in Bulgaria. In July we announced our acquisition of an indirect 80.0% interest in TV2, which operates a start-up national terrestrial channel, and Ring TV, which operates a sports cable channel, for total cash consideration of US$ 152.3 million. The acquisition of TV2 and RING TV provides an opportunity for us to establish a leading multi-channel broadcasting platform in a new market. Unfortunately, the Bulgarian economy was also heavily impacted by the global financial crisis in the fourth quarter and is expected to continue to suffer in 2009 and 2010. We therefore recorded impairment charges of US$ 64.9 million in respect of our Bulgarian operations (see Item 8, Note 4 "Goodwill and Intangible Assets: Impairment of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets").

In smaller transactions we expanded into radio with our acquisition of Radio Pro in Romania, and in the Czech Republic enhanced our internet operations and announced a licensing agreement to launch a localized MTV channel in 2008. In April 2008, we acquired certain assets of Radio Pro, the owner of two leading radio channels in Romania, for RON 47.2 million (approximately US$ 20.6 million at the date of payment). In May 2008 we acquired Jyxo, an information technology provider and blog.cz, operator of the leading blog site in the Czech Republic, which we also acquired, for up to US$ 11.6 million if certain operational targets are met (see Item 8 Note 3 "Acquisitions and Disposals: Romania). In September, 2008, we announced a multi-year licensing agreement with MTV Networks International to launch a localized MTV channel in the Czech Republic, with the opportunity to also distribute the channel in the Slovak Republic via cable and satellite. We expect the channel to launch during 2009.

In March 2008, we issued US$ 475.0 million of 3.5% Senior Convertible Notes, the proceeds of which were used to acquire the additional ownership interests in our Ukraine operations and for general corporate purposes. In connection with the issuance of the Convertible Notes we purchased capped call options over shares of our Class A Common Stock.

Late in the year we had a number of executive management changes. Marina Williams, our Executive Vice President, resigned in October to pursue other professional opportunities. Michael Garin retired as Chief Executive Officer at the end of December 2008 and resigned from the Board of Directors of CME in February 2009. Adrian Sarbu, our Chief Operating Officer, was appointed President and Chief Operating Officer from January 1, 2009.

Future Trends

Economic conditions in our markets worsened significantly at the end of 2008 and economic news in the first two months of 2009 has been generally negative. There is a wide range of GDP and economic predictions for our markets for 2009, but the majority of these anticipates substantially worse conditions than in 2008 and the consensus projections, which steadily deteriorated in the last months of 2008, have sharply declined in the first months of 2009.

The first quarter of the year is the main period in which we negotiate advertising contracts with our clients. In light of these deteriorating economic conditions, advertisers are uncertain about the level of spending they are prepared to commit and this has slowed our progress in closing advertising sales contracts for 2009. As a result, the level of advertiser demand for gross rating points ("GRPs") and the consequent effect on pricing is currently unclear. We therefore cannot predict with certainty how our advertising sales will develop in 2009. We now expect that total advertising spending will decline in 2009 in most or all of the countries in which we operate. The extent of the decline will probably be in a single digit percentage range, although if the current economic conditions continue or worsen the level of decline could be substantially greater. We cannot predict with any degree of accuracy how the effect of such a decline will impact television advertising. In Ukraine uniquely poor economic conditions lead us to expect a decline of the television advertising market of up to 60%.

Since June 30, 2008 the dollar has strengthened considerably against most European currencies, including the Euro and the local currencies of our station operations. In general, an increase in the strength of the dollar against the functional currencies of the markets in which we operate will reduce the dollar value of the segment sales and segment EBITDA that we report. This trend has continued in the early months of 2009 and analyst predictions suggest that further weakening is likely.

We have been taking actions to reduce costs to protect profits and to conserve liquidity. These steps include staff reductions in our operations and our headquarters, pay constraints, the deferral of certain operating expenditures, the deferral or cancellation of capital expenditures and managing our broadcast schedules to reduce the rate of programming cost growth. We have also modified our development strategies for Ukraine and Bulgaria and significantly reduced our planned levels of investment expenditure. Notwithstanding these cost reductions, our goal continues to be to maintain the high audience shares and the strength of our brands that we currently enjoy in our key markets, as we believe this is essential to the long term value of CME. We intend to maintain sufficient investment to protect these strengths. Taking all these factors into account, we now expect that we will see a decline in Segment Net Revenues and Segment EBITDA in 2009 in local currency in some or all of our markets.

When the global economic climate improves, we expect growth will resume in our markets. As a result, we expect that over the medium term we will see a return to higher levels of GDP growth, as higher well as general advertising and television advertising spending growth in our markets than in Western European or U.S. markets.

Broadcast

The large audience share that we enjoy in most of our markets is due both to the commercial strength of our brands and channels and to the constraints on bandwidth that limit the number of free-to-air broadcasters in our markets. The only markets where we currently face significant competition from other distribution platforms are Romania and Slovenia, where cable penetration exceeds 50% of television households.

As our markets mature, we anticipate more intense competition for audience share and advertising spending from other incumbent terrestrial broadcasters and from cable, satellite and digital terrestrial broadcasters as the coverage of these technologies grows. The advent of digital terrestrial broadcasting as well as the introduction of alternative distribution platforms for content (including additional direct-to-home ("DTH") services, the internet, internet protocol TV ("IPTV"), mobile television and video-on-demand services) will cause audience fragmentation and change the competitive dynamics in our operating countries in the medium term. Due to our integrated multichannel and internet business model, we do not expect that the impact on our advertising share will be significant.

We believe that our leading position in our operating countries and the strength of our existing brands place us in a solid position to manage increased competition, including by launching new niche channels to target niche audiences as these new technologies develop.

Internet

Internet broadband penetration is low in all of our markets in comparison to Western European and U.S. markets. As the GDP per capita of our markets grows over the medium term, we anticipate broadband penetration will increase significantly and will foster the development of significant new opportunities for generating advertising and other revenues in new media. We operate a complex internet business in each of our markets and expect to continue to launch targeted services in order to support or achieve leading positions in terms of unique users. We believe that the strength of our brands, our news programming and other locally produced content, our relationships with advertisers and the opportunities for cross promotion afforded by the large audiences of our broadcast operations put us in a strong position to achieve leading positions in these new forms of media as they develop and to monetize those assets over time. We intend to continue the development of our non-broadcast activities in order to create offerings and launch services on the internet and mobile platforms that complement our broadcast schedules and generate additional revenues.

Financial Position

We believe our financial resources are sufficient to meet our current financial obligations. We do not have any imminent refinancing need; as the earliest maturity date of our Senior Notes or Convertible Notes is in 2012 and our EBRD Loan, which is scheduled to amortize from May 2009, does not mature until 2011. However, further deterioration in the advertising market or continued strengthening of the dollar against the currencies of the markets in which our cash flow is generated would reduce our liquidity reserves. We may also be constrained in accessing new funding due to prevailing credit market conditions and our increasing leverage as Segment EBITDA falls. We will continue to review opportunities to raise additional liquidity, including restructuring our debt and issuing equity or additional local debt as market conditions allow.

CME Strategy

We enjoy very strong positions in our core markets. This is based on brand strength, audience share leadership, the depth and experience of local management and local content production. Historically, these strengths have supported price leadership, high margins, and strong cash flows. We expect these strengths will give our operations resilience in the current economic downturn and the opportunity to benefit as and when growth resumes.

We intend also to take a number of steps to enhance the performance of the business over the medium term. Our priorities in this regard include:

Optimizing the value of our resources through diversification of revenue sources:

· we intend to reorganize our operating structure into three areas - (broadcast) channel operations, content, and internet - to leverage our content strengths to develop a significant new revenue source over the medium term; and

· as this structure becomes established, we intend to continue our transformation from a television broadcaster to a broad based media company by capitalizing on our core strengths and expanding our revenue base into five main sources: advertising, subscription, content distribution, internet and management services.

Further development of our operations:

· we will continue developing our Bulgaria and Ukraine operations in a controlled manner to secure consistent performance and a leading position in those markets; and.

· we will assess opportunities arising from current economic conditions to launch or acquire additional channels and internet operations in our region in order to expand our offerings, target niche audiences and increase our advertising inventory when financially prudent.

In the near term, while current difficult economic conditions continue, we will maintain a strong focus on cost control to protect both profitability and liquidity, while ensuring that this does not lead to the erosion of our brands and competitive strength.

ll. General Market Information

Emerging Markets

Our revenue generating operations are in Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic, Slovenia and Ukraine. These emerging economies have adopted Western-style democratic forms of government within the last twenty years and have economic structures, political systems, legal systems, systems of corporate governance and business practices that continue to evolve. The lower level of development and experience in these areas within our markets, by comparison with most Western European markets, increases the relative level of our business risk.

One indicator of the rate of development and the relative level of business risk associated with economic development in a particular market is such market's Coface rating, which is an assessment of the relative risk of payment default in such market taking into account local business, financial and political factors. The table below indicates the Coface rating for each country in which we operate. For purposes of comparison with other select markets, the United States, United Kingdom, Greece and Italy were ranked A2 in 2008, Hungary and Poland were ranked A3 and Russia and Turkey were ranked B.

    Country     2008 Rating           Details of 2008 Rating           2007 Rating 2006 Rating 2005 Rating
Bulgaria            A4      A somewhat shaky political and economic         -           -           -
                            outlook and a relatively volatile business
                            environment can affect corporate payment
                            behavior. Corporate default probability is
                            still acceptable on average.

Croatia             A4      A somewhat shaky political and economic        A4          A4          A4
                            outlook and a relatively volatile business
                            environment can affect corporate payment
                            behavior. Corporate default probability is
                            still acceptable on average.

Czech Republic      A2      The political and economic situation is        A2          A2          A2
                            good. A basically stable and efficient
                            business environment nonetheless leaves
                            room for improvement. Corporate default is
                            low on average.

Romania             A4      A somewhat shaky political and economic        A4          A4          A4
                            outlook and a relatively volatile business
                            environment can affect corporate payment
                            behavior. Corporate probability is still
                            acceptable on average.

Slovak Republic     A3      Changes in generally good but somewhat         A3          A3          A3
                            volatile political and economic
                            environment can affect corporate payment
                            behavior. A basically secure business
                            environment can nonetheless give rise to
                            occasional difficulties for
                            companies. Corporate default probability
                            is quite acceptable on average.

Slovenia            A1      The political and economic situation is        A1          A1          A2
                            very good. A quality business environment
                            has a positive influence on corporate
                            payment behavior. Corporate default
                            probability is very low on average.

Ukraine              C      A very uncertain political and economic         C           C           C
                            outlook and a business environment with
                            many troublesome weaknesses can have a
                            significant impact on corporate payment
                            behavior. Corporate default probability is
                            high.

Source: Coface USA. In January 2009, Coface downgraded a number of countries because of the credit crisis; Croatia, Slovenia and Ukraine have been placed on a negative watch.

European Union Accession

The Czech Republic, the Slovak Republic and Slovenia acceded to the EU in May 2004, and Romania and Bulgaria acceded in January 2007. Croatia is currently in accession negotiations. Accession to the EU brings certain positive developments. All countries joining the EU become subject to EU legislation and we believe that the ongoing progress towards EU entry reduces the political and economic risks of operating in the emerging markets of Central and Eastern Europe. This reduction in political and economic risks may encourage increased foreign investment that will support economic growth. Accession to the EU may also bring certain negative developments. The adoption of EU-compliant legislation in connection with accession may result in the introduction of new standards affecting industry and employment, and compliance with such new standards may require increased spending.

Television Advertising Markets

We derive almost all of our revenue from the sale of television advertising, most of which is sold through media houses and independent agencies. Like other television operators, we experience seasonality, with advertising sales tending to be lowest during the third quarter of each calendar year due to the summer holiday period (July and August) and highest during the fourth quarter of each calendar year. For the year ended December 31, 2008, 90% of our Segment Net Revenues came from the sale of television advertising.

The per capita GDP in our markets is lower than that of Western markets. As a result of the lower GDP and weaker domestic consumption, total advertising spending and, consequently, television advertising spending per capita tends to be lower than in Western markets. However, as a result of television being commercialized in our markets at the same time as other media, television advertising spending generally accounts for a higher proportion of total advertising spending than in Western markets, where newspapers and magazines and radio were established as advertising media well before the advent of television advertising.

                                                                                                                                TV
                                                                                                                            Advertising
                                                                                                                           Spending as a
                                                                    Total             Total           TV Advertising        % of Total
                                                                 Advertising       Advertising         Spending per         Advertising
                             Population                         Spending per      Spending as a        Capita (US$)          Spending
                            (in millions)      Per Capita        Capita 2008      % of GDP 2008            2008                2008
         Country                 (1)          GDP 2008 (1)        (US$) (2)            (2)                 (2)                  (2)
        Bulgaria                      7.6     $       6,154     $        45.9              0.75 %   $             23.7                55 %
         Croatia                      4.6     $      13,491     $        73.0              0.54 %   $             35.5                49 %
     Czech Republic                  10.2     $      22,575     $       108.3              0.48 %   $             48.8                45 %
         Romania                     21.3     $       8,983     $        36.3              0.40 %   $             22.0                61 %
     Slovak Republic                  5.4     $      17,994     $        83.9              0.47 %   $             39.4                47 %
        Slovenia                      2.0     $      27,864     $        88.6              0.32 %   $             51.4                58 %
         Ukraine                     45.9     $       3,928     $        22.5              0.57 %   $              9.9                44 %

(1) Source: Global Insight.

(2) Source: Global Insight and CME estimates.

For purposes of comparison, the following table shows the advertising market statistics for certain other Central and Eastern European markets and selected Western markets.

                                                                                                                             TV
                                                                                                                         Advertising
. . .