License Debacle Shocks Hungarian Media

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Budapest, Hungary -- The Hungarian media industry was
shocked last week when the country's Supreme Court ruled that one of the two
17-month-old, private terrestrial-TV stations should have its license revoked because its
1997 bid for the frequency was invalid.

The court said the National Radio and Television Board
(ORTT) knew that the application submitted by a consortium led by Luxembourg-based CLT-Ufa
was incomplete, and it has ordered the ORTT to cancel its contract with the group, which
runs a station called RTL Club.

"We are absolutely astonished," said Istvan
Kavas, general manager of RTL Club. "We consider our contract legal, and [we will]
continue to develop plans to improve the station."

Other executives questioned whether this decision will
prevent companies from investing in Hungarian media.

"It makes the country's media look unstable, and
there is still more investment that needs to be made," said one television executive
who asked not to be identified.

This investment is especially important for Hungary's
young pay TV industry, which is trying to build a programming lineup that will attract
subscribers. If RTL Club is yanked off the air, that could thwart investments.

It is unclear whether the Supreme Court has the power to
give such an order, and the ORTT wouldn't comment on what action it might take until
it can further study the decision.

The ruling stems from a suit filed in 1997 by the local
operation of Bermuda-based Central European Media Enterprises Ltd. (CME), which lost the
tender even though it outbid the two winners. CME runs a cable station in Hungary called
TV 3. An investor group led by Scandinavian Broadcasting System S.A. won the other
station.

The decision surprised many media executives because it
overturned a ruling by the Budapest City Court last March, which said that mistakes were
made during the tender process, but that none was serious enough to reverse the outcome.

"We thought that the court would say, 'Yes,
mistakes were made,' and maybe issue some fines. But it just seems too late in the
day to start the process over," said Mike Buurman, media-account director at ad
agency McCann-Erickson, Budapest.

Kavas acknowledged that the consortium filed two additions
to its application after the April 1997 deadline, but he insisted that it did so because
the ORTT wanted more information.

"We didn't breach tender rules," he said.

Kavas said that if either the Supreme Court or the ORTT
moves to shut down the station, the owners would sue for "a very huge" amount of
money. He added that the station has invested $89 million in the last 17 months.

However, few believe that RTL Club will be closed.

"RTL would win any fight," said Barry Cupples,
managing director of OMD, the media-buying arm of ad agency DDB Needham.

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