PRAGUE, July 3 (Reuters) - Debt-laden Central European Media

Enterprises is teaming up with Ukrainian

tycoon Igor Kolomoisky in a broadcasting merger likely to make

or break the Prague-listed firm's future in the country.

Kolomoisky agreed to inject $100 million into CME's

loss-making Ukrainian TV channel, Studio 1+1, while merging it

with his own TET TV network, CME said in a statement on Friday.

CME shares rose sharply on the news, and analysts said it

would alleviate funding concerns surrounding the group, which

operates in seven central and eastern European countries

including the Czech Republic and Romania.

The tycoon, who holds a stake in CME and sits on the

company's board, will own 49 percent of the merged broadcast

assets and CME the remaining 51 percent, which it has the right

to sell on to Kolomoisky within a year for a further $300

million.

By 1003 GMT, shares in CME, which is 31 percent owned by

Time Warner, were up 8.5 percent against a European

media sector up 0.5 percent.

'(Ukraine) is a negative cash flow country and therefore

their key task was to solve funding of these operations,'

brokerage Atlantik FT analyst Patrick Vyroubal said.

CME has bet heavily on Ukraine, its biggest market in terms

of population, in the past year by raising its stake in Studio

1+1 and predicting a doubling of revenue over the next three

years to $300 million.

However, the global economic downturn has hammered east

Europe, cutting sharply into advertising spending.

The company reported its 'toughest quarter' ever in the

first three months of this year with a 37 percent drop in

revenue and warned declining ad sales would persist into next

year.

Vyroubal said that, if CME decided to exercise the put

option, it would exit Ukraine at a loss.

'But in the current global environment and decline in ad

spending, it is a potential good exit; therefore the market

views this as positive,' he added.

Time Warner completed a $241.5 million investment in

Bermuda-registered CME last month.

(Reporting by Jason Hovet and Jana Mlcochova; Editing by Dan

Lalor, John Stonestreet)

For main central European company news, double click on E.Europe hot stocks Main E.Europe news Related stories on For real-time index quotes, double click in brackets: Warsaw WIG20 Budapest BUX Prague PX Keywords: CME/UKRAINE

(prague.newsroom@thomsonreuters.com; Reuters Messaging: jana.mlcochova.reuters.com@reuters.net; +420-224 190 479)

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