mtg presentation at the kinnevik capital markets day
DESCRIPTION
TRANSCRIPT
1
Modern Times Group MTG AB
“A Modern Media Group
for Modern Times”
Investment AB Kinnevik
Capital Markets Day
23 February 2011
2
A Focused Entertainment Group
With an Unrivalled Broadcast
Footprint
• Launched commercial Free-TV & Pay-TV in Scandinavia & spun-out of
Kinnevik in 1997 - market cap of SEK 2.6 billion at listing
• Revenues of SEK 13.1 billion in 2010 with 18% group EBIT margin & 0.9x net
debt/EBITDA – current market cap of SEK 28.1 billion
• Operating 28 Free-TV channels in 11 countries watched by over 100 million
people
• Operating Satellite Pay-TV platforms in 9 countries with Viasat premium
content packages & individual channels also sold over 3rd party networks in
28 coutries
• Largest shareholder in CTC Media - Russia’s largest independent commercial
TV broadcaster
Intr
oductio
n
3
MTG = Made To Grow
+ Operationally Geared
Intr
oductio
n
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2002 2003 2004 2005 2006 2007 2008 2009 20100
500
1,000
1,500
2,000
2,500
2002 2003 2004 2005 2006 2007 2008 2009 2010
Revenues (SEK million)* EBIT (SEK million)*
*Continuing operations excluding associated company income &
non-recurring items
4
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010
Free-TV Scandinavia Pay-TV Nordic Emerging Markets
2010 revenue mix
Segmental revenue mix
43%
46%
11%
Advertising
Subscription
B2B / B2C
• Balanced revenue mix of cyclical
advertising sales & linear subscription
sales
• Unparalleled efficiency due to control
of content, packaging, pricing &
distribution
• Integrated operating structure yields
synergies & competitive advantage
• Enables proven resilience to
economic downturns
Balanced Revenue Mix
Integrated Operator Benefits
5
6 Fre
e-T
V S
candin
avia
Sweden Norway Denmark
Position #2 #2 #2
Commercial audience
share (15-49)
FY 2010
36.8% 26.4% 24.5%
Catch-up services Yes Yes Yes
Sold on ’bundled’ basis Yes Yes Yes
7
Market Position
Primary Challenger
8
The Opportunity
Digitalisation
• More than a quarter of homes only received 2 public service channels + 1
commercial channel before digitalisation
• MTG Free-TV channels limited to <70% national penetration through satellite
& cable - NOT considered a ‘national’ media
• Scandinavian markets are first to close down analogue TV – Swe 2007,
Norway & Denmark (2008)
• Arrival of DTT & IPTV offer opportunity to increase penetration & launch new
channels
Fre
e-T
V S
candin
avia
Scandinavian TV landscape (2005) Scandinavian TV landscape (2010)
The Opportunity
Breaking the Monopoly
9
10
Seizing the Opportunity
Catching Structural Tailwinds
Fre
e-T
V S
candin
avia
30%
40%
50%
60%
70%
80%
90%
100%
2006 2007 2008 2009 2010
TV3 Sweden TV6 Sweden
TV8 Sweden TV3 Norway
Viasat 4 Norway TV3 Denmark
TV3+ Denmark
0%
10%
20%
30%
40%
50%
2006 2007 2008 2009 2010
Sweden Norway Denmark
National penetration Commercial audience share (15-49)
• Inclusion of MTG Free-TV channels in all
major ‘paid for’ digital TV networks
• National penetration rises to 90% for some
MTG channels – NOW considered a national
media
• Overall TV viewing time increases as direct
result of greater channel choice
• Launch of new channels in all 3 countries not
only counters potential fragmentation of TV3
audience share but increases combined share
of viewing & closes CPT gap to incumbent
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Bonnier MTG ProSiebenSat.1
2003 2010
11
Seizing the Opportunity
The “Media House” Model
Fre
e-T
V S
candin
aviaSource: MMS
Old & Male Old & Female
Young & Male Young & Female
Complementary channel profiles Average weekly reach (15-49)
+0%+24%
+10%
12
Free-TV Scandinavia
Operating Results
• Advertising market growing faster than
GDP and TV gaining share from other
advertising media
• Triple Play effect leads to substantial
advertising market share gains due to:
• Rising penetration levels
• New channel launches
• Reducing CPT discount
• Sales only down 1% at constant exchange
rates in 2009 ‘year of recession’ & up 16%
again in 2010 ‘year of recovery’
• Controlled programming investments yield
incremental profitability despite launch of
new channels each year
Fre
e-T
V S
candin
avia
(SEK million)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2006 2007 2008 2009 2010
Revenue EBIT EBIT margin
13 Fre
e-T
V E
merg
ing M
ark
ets
14
Market Position
Primary Challenger
Estonia Latvia LithuaniaCzech
RepublicBulgaria Hungary Slovenia Ghana Russia
Position #1 #1 #1 #2 #2 #3 #2 - #4
Commercial
audience share
FY2010
(target
demographic)
41.9%
(15-49)
38.1%
(15-49)
40.7%
(15-49)
23.4%
(15-54)
28.2%
(18-49)
7.5%
(18-49)
10.1%
(18-49)
15.6%
(14-49)
Catch-up services Yes Yes Yes No Yes No No No Yes
Sold on ’bundled’
basisYes Yes Yes Yes Yes Yes N/A N/A N/A
0
50
100
150
200
250
300
0
200
400
600
800
The Opportunity
Attractive Market Dynamics
TV Advertising Spend (USD million) TV Advertising Spend Per Capita (USD)
TV Ad Spend / Total Ad Spend TV Viewing (minutes per day)
USA
Russia
50,000
6,000
3,000
Fre
e-T
V E
merg
ing M
ark
ets
15
-20
20
60
100
140
180
0%
10%
20%
30%
40%
50%
60%
UK
USA
USA
2010 data except * 2009 statistics
UK
UK
Seizing the Opportunity
The “Media House” Model
1616
• Implementation of same multi-
channel strategy in Emerging
Markets to defend market leadership
in Baltics & challenge incumbents in
other markets
• Complementary secondary channels
launched in all scale markets
• Selective investment in programming
during recession to build market
positions
• Bundled pricing introduced to erode
pricing advantage of incumbent
• Taking audience & advertising market
share from previously dominant
incumbents in Czech Republic &
Bulgaria with rising power ratios
Fre
e-T
V E
merg
ing M
ark
ets
Commercial Audience Share (FY2010)
0%
10%
20%
30%
40%
50%
2006 2007 2008 2009 2010
Czech Republic (15-54) Bulgaria (18-49)
Hungary (18-49) Slovenia (18-49)
Pan-Baltic (15-49)
17
Free-TV Emerging Markets
Operating Results
• Exponential growth pre-Recession with
lagging recovery in 2010 – sales up 4% in
2010 at constant exchange rates
• Baltic operations leading recovery with
sales up 20% year on year in Q4 2010 at
constant exchange rates
• Combined operating loss in 2010 reflects
ongoing investments in early stage
Slovenian & Ghanaian businesses & sub
scale Hungarian business
• Baltic, Czech & Bulgarian businesses
reported combined profit in 2010
• Highly operationally geared to advertising
market recovery
Fre
e-T
V E
merg
ing M
ark
ets
-500
0
500
1,000
1,500
2,000
2,500
2006 2007 2008 2009 2010
Revenue EBIT
(SEK million)
0%
5%
10%
15%
20%
25%
2009 2010
18
Investing in Growth
CTC Media
Operating results (USD millions)
CTC Media Russian Ad Sales growth (RUB)
• 38.3% shareholding acquired for USD 83 mn with
current equity market value of ~USD 1.3 bn
(February 2010)
• Sales up 15% y/y in ruble terms to USD 379.0 mn
for 9M 2010
• OIBDA of USD 116 mn for 9M 2010, with
margin of 31%
• Net cash position & payment of USD 80 million
dividend in 2010
Audience share (4+)
0
100
200
300
400
500
600
700
2005 2006 2007 2008 2009 9M 2009
9M 2010
Sales OIBDA excl. non-recurring items
48%
19%
32%
-3%
8%
2006 2007 2008 2009 9M 2010
19 Pay-T
V N
ord
ic
20
Market Position
Premium Content Provider of
Choice
• MTG & 3rd party Free-TV channels
• MTG thematic sports channels – Viasat Football, Viasat Hockey, Viasat Motor,
Viast Golf, Viasat Sport HD
• MTG thematic movie channels – TV1000 Nordic, TV1000 Action, TV1000 Family,
TV1000 Classic, TV1000 Drama
• MTG thematic documentary channels – Viasat History, Viasat Nature,
Viasat Explorer, Viasat Crime
• Leading 3rd party premium channels – music, news, documentaries, kids, nature etc
• MTG & 3rd party HD channels
Breaking News: ‘Last night MTG aired the first ever sports event to be produced in 3D in
Scandinavia – live coverage of the last 16 clash between FC Copenhagen vs. Chelsea in the
UEFA Champions League’
0
50
100
150
200
250
2006 2007 2008 2009 2010
HDTV PVR Multi-room
0
1,000
2,000
3,000
4,000
5,000
2006 2007 2008 2009 2010
21
Seizing the Opportunity
Growing Viasat...ellite
Pay-T
V N
ord
ic
500
550
600
650
700
750
2006 2007 2008 2009 2010
Premium DTH ARPU (SEK)
Value-added services (000’s)
DTH Satellite Premium subscribers
(000’s)
• Operating in Europe’s most competitive &
digitalised pay-TV market
• Satellite gradually losing share to other
distribution forms BUT Viasat gaining market
share in the satellite environment
• Clear premium pay-TV market leader
• Low churn levels following acquisition of key
sports rights + new channel launches
• Steadily rising premium DTH ARPU due to
price rises & increasing penetration of VAS
22
The Evolving Opportunity
Technology Shift
Owned & Operated
Satellite Platform
Viasat Channels in
3rd Party Networks
Virtual Operator
in 3rd Party Networks
Gatekeeper
Independent
Internet
Environment
Pay-T
V N
ord
ic
23
Seizing the Opportunity
The “Platform Agnostic” Approach
Pay-T
V N
ord
ic
0
500
1,000
1,500
2006 2007 2008 2009 2010
DTH Satellite 3'rd party network*
Premium subscriber development (000’s)
*IPTV subscribers for 2006-2008, 3’rd party network
subscribers for 2009 and 2010
Jun 2008 Oct 2009 Mar 2010 Jun 2010
24
Seizing the Opportunity
Entertainment “at your Command”
First to Market with Full Service
‘Over-The-Top’ Solution
• Anytime Access all services ‘on demand’
• AnywhereAccess subscription online
• Any Device Enjoy subscription on multiple
devices in and out of home
Uniquely Combining Advertising
& Subscription Funded Models
Pay-T
V N
ord
ic
Set -Top Box
PC/Mac
Mobile
Tablet Media
Players
OTT Set-Top box
Game consolesEmbedded
TV Set
Applications
25
Pay-TV Nordic
Operating Results
• Top line growth driven by 3rd party
subscriber acquisition & rising DTH
premium ARPU
• Margins stable due to underlying
improvement off-setting investments in
sports rights (English Premier League),
new technologies (HD, 3D & Viaplay) and
additional channels
• Highly cash generative with lower SAC for
subscribers on 3rd party networks
Pay-T
V N
ord
ic
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2006 2007 2008 2009 2010
Revenue EBIT EBIT margin
(SEK million)
26 Pay-T
V E
merg
ing M
ark
ets
27
Year 2003
Countries 7
Channels 2
DTH platforms
2004 2005 2006 2007 2008 2009 2010
11 15 22 23 24 25 25
3 5 6 7 8 10 15
Baltics Ukraine Russia
Market Position
Seeking New Opportunities
0
50
100
150
200
250
300
2006 2007 2008 2009 2010
Basic DTH Premium DTH
28
Seizing the Opportunity
Growing the Subscriber Base
• Viasat is the only satellite Pay-TV operator
in the Baltics – premium offering with stable
subscriber base & ARPU
• Premium subscriber base includes
Ukrainian offering since Feb 2008 & Basic
primarily comprises rapidly growing
Raduga platform in Russia
Pay-T
V E
merg
ing M
ark
ets
Mini-pay subscriptions (000’s)
10,000
20,000
30,000
40,000
50,000
60,000
2006 2007 2008 2009 2010
Mini-pay TV subscriptions
DTH Subscribers (000’s)
• Business launched in 2003 with sale of
Viasat movie & documentary channels
to 3rd party networks in C&E Europe
• Now more than 50 million
subscriptions to 15 Viasat movie,
documentary and sports channels to
~2,500 3rd party networks in 25
countries including US
63%
29%
5%2% 2%
Viasat NTV + Tricolor Viva Poverhnost' TV29
Ukraine
Europe’s 2’nd Largest Territory
Pay-T
V E
merg
ing M
ark
ets
DTH satellite market share – Pay-TV
DTH satellite market share - All
• Substantial market opportunity – Europe’s second
largest country by land mass
• 50% of ViaStrong DTH satellite platform acquired
in Q2 2008 & further 35% acquired in Q2 2010
• Selling premium packages of Viasat & 3rd party
channels
• Already larger than NTV+ with unprompted brand
awareness levels of over 60%
• 5 year breakeven horizon from launch in 2007
97%
2%1%
0%0%
Free satellite TV Viasat NTV+Poverkhnost Other
0%
20%
40%
60%
80%
100%
Cable (tot.) Pay DTH Free DTH
DTT (tot.) IPTV (tot.) Terr. Analogue
TV distribution market share
Sources: Screen Digest, GFK and internal analysis
Tricolor, 83%
NTV+, 10%
Orion-Express,
4%
Raduga TV, 2%
Platform HD, 1%
30
Russia
Europe’s Largest Territory
• Even more substantial market opportunity –
Europe’s largest country by population
• Low levels of satellite penetration
• 50% of Raduga DTH satellite platform acquired in
Q1 2010
• Mid-tier mass market offering with competitive
offering of 80 MTG & 3rd party channels at
attractive price
• 5 year breakeven horizon from launch in 2009
Pay-T
V E
merg
ing M
ark
ets
DTH satellite market share - AllTV distribution market share
Subscriber development in 2010
(indexed)
0%
20%
40%
60%
80%
100%
Cable (tot.) Pay DTH Free DTH
DTT (tot.) IPTV (tot.) Terr. Analogue
Sources: Screen Digest and internal analysis
0
50
100
150
200
250
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
31
Pay-TV Emerging Markets
Operating Results
• Top line growth driven by expansion of
mini-pay business from launch in 2003 &
growth of Baltic satellite platform
• Profitability of Baltic satellite platform &
mini-pay business supports ongoing
investments in Ukrainian & Russian
satellite platforms
• 2010 profitability impacted by full
consolidation of Ukrainian platform from
July & inclusion of Russian platform from
February
• Business highly geared to subscriber
growth & rising consumer spending power
Pay-T
V E
merg
ing M
ark
ets
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
100
200
300
400
500
600
700
800
900
1,000
2006 2007 2008 2009 2010
Revenue EBIT EBIT margin
(SEK million)
32 Fin
ancia
l R
esourc
es
33
Financial Performance
Flexible Position
SEK millions FY2010
Sales 13,101
EBIT (incl. Associates) 2,355
Pre-tax profit 2,321
Net income from
continuing operations1,750
Total net incl
discontinued ops3,541
SEK millions FY2010
Net cash flow from
operations1,533
Cash flow to investing-300
Cash flow to financing -707
Net change in cash &
cash equivalents-135
SEK millions FY2010
Total debt 2,526
Cash & equivalents 500
Net debt 2,026
Net debt / LTM
underlying EBITDA0.9x
Available liquid funds 4,400
Income Cash flow Financial position
• Significant impact on reported results
of y/y strengthening of SEK reporting
currency vs. operating currencies
• Annual tax rate of 25-30%
• Cash flow from operations up 48% &
equivalent to 70% of Group EBITDA
• Receipt of USD 31 mn (SEK 216 mn)
of dividends from CTC Media
• New unsecured SEK 6.5 billion 5 year
revolving multi-currency credit facility
arranged in October 2010
• SEK 9.6 billion public equity market
value of 38.3% shareholding in CTC
Media (SEK 1.8 billion book value)
34
Capital Allocation
Reinvesting in Growth
Cash flows from Scandinavia invested into
Emerging Markets
- 1997: Launch of Baltic Free-TV operations
- 2000: Acquisition of 95% of Hungarian operation
- 2001: Acquisition of 75% of DTV in Russia
- 2002: Acquisition of 36% of CTC Media in Russia
- 2003: Launch of Mini-Pay business
- 2004: Launch of Baltic Pay-TV platform
- 2005: Acquisition of 50% of Prima TV in Czech Republic
- 2006: Acquisition of 100% of Slovenian operation
- 2007: Acquisition of 50% of Diema channels in Bulgaria
- 2008: Acquisition of 50% of pay-TV platform in Ukraine
- 2008: Acquisition of 100% of Nova TV in Bulgaria
- 2008: Launch of channel in Ghana (W Africa)
- 2010: Acquisition of 50% of pay-TV platform in Russia
- 2010: Acquisition of additional 35% of Viasat Ukraine
- Combined with ongoing launch of Free-TV & Pay-TV
channels every year
Fin
ancia
l R
esourc
es
35
Capital Allocation
Shareholder Returns
• 25% Return On Capital Employed for 2010
• 30% Return On Equity for 2010
• CDON Group (MTG’s internet retailing
operations) distributed to shareholders in
December 2010 with market value of
>SEK 2 billion
• Board of Directors to propose increased
annual cash dividend of SEK 7.50 per
share to AGM in May 2011
Fin
ancia
l R
esourc
es
Annual Cash dividends (SEK)
0
2
4
6
8
10
12
14
16
2007 2008 2009 2010
Ordinary Extraordinary Proposed
36
37
Clear Objectives
& Priorities
• Annual organic sales growth of more than 10%
• Operating profit margin of more than 20% for Viasat Broadcasting
(even excluding associated company income)
• Increasing proportion of Emerging Market sales & operating income
• Generation of healthy ROE & ROCE
• Generation of healthy Total Shareholder Returns
Sum
mary
38
The Lean & Mean
Broadcasting Machine
• Operationally geared growth company with balanced (advertising &
subscription revenues) & diversified (geographically) revenue mix
• Driving growth primarily through organic expansion & start-ups
• Challenger to incumbents in structurally evolving markets
• Successful multi-channel, multi-platform, multi-territory media house model
• Efficient integrated operating structure yields competitive advantage &
synergies
• Investing healthy cash flows from Nordic region into emerging markets
• Strict cost control, cash management & capital allocation
• Strong & flexible financial position
• Delivering enhanced shareholder returns
Sum
mary
39
For Further Information, please visit www.mtg.se or contact:
MTG Investor Relations
Tel: +44 7768 440 414 / +46 73 699 29 91 /+44 779 113 84 86
Email: [email protected]
Nasdaq OMX: ‘MTGA’, ‘MTGB’
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atio
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