open skin1/main/states
find this
Code:
<OPTION value="{$states[state_idx].state_code}"{if $default eq $states[state_idx].state_code and $default_country eq $states[state_idx].country_code} selected{/if}>{$states[state_idx].country_code}: {$states[state_idx].state}</OPTION>
and remove this bit
Code:
{$states[state_idx].country_code}: