MTG Presentation at the Kinnevik Capital Markets Day
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MTG is a leading international entertainment group focused on broadcasting and pay-TV. It operates 28 free-TV channels across 11 countries watched by over 100 million people and pay-TV platforms in 9 countries. In 2010, MTG had revenues of SEK 13.1 billion with an 18% EBIT margin. MTG is pursuing growth opportunities through digitalization, new channel launches, bundled pricing, and expanding its pay-TV platforms into new countries and technologies like online streaming.
MTG Presentation at the Kinnevik Capital Markets Day
- 1. Modern Times Group MTG AB “A Modern Media Group for Modern Times” Investment AB Kinnevik Capital Markets Day 23 February 2011 1
- 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 Introduction 2
- 3. MTG = Made To Grow + Operationally Geared Revenues (SEK million)* EBIT (SEK million)* 14,000 2,500 12,000 2,000 10,000 8,000 1,500 6,000 1,000 4,000 500 2,000 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2002 2003 2004 2005 2006 2007 2008 2009 2010 Introduction 3 *Continuing operations excluding associated company income & non-recurring items
- 4. Balanced Revenue Mix Integrated Operator Benefits • Balanced revenue mix of cyclical Segmental revenue mix advertising sales & linear subscription 100% sales 80% 60% • Unparalleled efficiency due to control 40% of content, packaging, pricing & 20% distribution 0% 2006 2007 2008 2009 2010 • Integrated operating structure yields synergies & competitive advantage Free-TV Scandinavia Pay-TV Nordic Emerging Markets 2010 revenue mix • Enables proven resilience to economic downturns 11% Advertising 43% Subscription 46% B2B / B2C 4
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- 7. Market Position Primary Challenger Sweden Norway Denmark Position #2 #2 #2 Commercial audience share (15-49) 36.8% 26.4% 24.5% FY 2010 Catch-up services Yes Yes Yes Sold on ’bundled’ basis Yes Yes Yes 7
- 8. The Opportunity Digitalisation Scandinavian TV landscape (2005) Scandinavian TV landscape (2010) • 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) Free-TV Scandinavia • Arrival of DTT & IPTV offer opportunity to increase penetration & launch new channels 8
- 9. The Opportunity Breaking the Monopoly 9
- 10. Seizing the Opportunity Catching Structural Tailwinds National penetration Commercial audience share (15-49) 100% 50% 90% 40% 80% 70% 30% 60% 20% 50% 10% 40% 30% 0% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 TV3 Sweden TV6 Sweden Sweden Norway Denmark TV8 Sweden TV3 Norway Viasat 4 Norway TV3 Denmark TV3+ Denmark • Inclusion of MTG Free-TV channels in all • Overall TV viewing time increases as direct major ‘paid for’ digital TV networks result of greater channel choice • National penetration rises to 90% for some • Launch of new channels in all 3 countries not MTG channels – NOW considered a national Free-TV Scandinavia only counters potential fragmentation of TV3 media audience share but increases combined share of viewing & closes CPT gap to incumbent 10
- 11. Seizing the Opportunity The “Media House” Model Complementary channel profiles Average weekly reach (15-49) 100% Old & Male Old & Female 90% +0% 80% +24% 70% +10% 60% 50% 40% 30% 20% 10% 0% Young & Male Young & Female Bonnier MTG ProSiebenSat.1 Free-TV Scandinavia Source: MMS 2003 2010 11
- 12. Free-TV Scandinavia Operating Results (SEK million) • Advertising market growing faster than 4,500 50% GDP and TV gaining share from other 45% 4,000 advertising media 40% 3,500 • Triple Play effect leads to substantial 35% 3,000 advertising market share gains due to: 30% • Rising penetration levels 2,500 • New channel launches 25% 2,000 • Reducing CPT discount 20% 1,500 15% • Sales only down 1% at constant exchange rates in 2009 ‘year of recession’ & up 16% 1,000 10% again in 2010 ‘year of recovery’ 500 5% • Controlled programming investments yield 0 0% incremental profitability despite launch of 2006 2007 2008 2009 2010 Free-TV Scandinavia new channels each year Revenue EBIT EBIT margin 12
- 14. Market Position Primary Challenger Czech Estonia Latvia Lithuania Bulgaria Hungary Slovenia Ghana Russia Republic Position #1 #1 #1 #2 #2 #3 #2 - #4 Commercial audience share 41.9% 38.1% 40.7% 23.4% 28.2% 7.5% 10.1% 15.6% FY2010 (15-49) (15-49) (15-49) (15-54) (18-49) (18-49) (18-49) (14-49) (target demographic) Catch-up services Yes Yes Yes No Yes No No No Yes Sold on ’bundled’ Yes Yes Yes Yes Yes Yes N/A N/A N/A basis 14
- 15. The Opportunity Attractive Market Dynamics TV Advertising Spend (USD million) TV Advertising Spend Per Capita (USD) 50,000 USA 180 6,000 UK USA 140 3,000 Russia 800 100 UK 600 60 400 200 20 0 -20 TV Ad Spend / Total Ad Spend TV Viewing (minutes per day) 60% 300 50% 250 40% 200 UK USA 30% 150 Free-TV Emerging Markets 20% 100 10% 50 0% 0 15 2010 data except * 2009 statistics
- 16. Seizing the Opportunity The “Media House” Model • Implementation of same multi- Commercial Audience Share (FY2010) channel strategy in Emerging 50% Markets to defend market leadership in Baltics & challenge incumbents in 40% other markets • Complementary secondary channels launched in all scale markets 30% • Selective investment in programming during recession to build market 20% positions • Bundled pricing introduced to erode 10% pricing advantage of incumbent • Taking audience & advertising market 0% 2006 2007 2008 2009 2010 Free-TV Emerging Markets share from previously dominant incumbents in Czech Republic & Czech Republic (15-54) Bulgaria (18-49) Hungary (18-49) Slovenia (18-49) Bulgaria with rising power ratios Pan-Baltic (15-49) 16
- 17. Free-TV Emerging Markets Operating Results (SEK million) • Exponential growth pre-Recession with 2,500 lagging recovery in 2010 – sales up 4% in 2010 at constant exchange rates 2,000 • Baltic operations leading recovery with sales up 20% year on year in Q4 2010 at 1,500 constant exchange rates 1,000 • Combined operating loss in 2010 reflects ongoing investments in early stage Slovenian & Ghanaian businesses & sub 500 scale Hungarian business 0 • Baltic, Czech & Bulgarian businesses 2006 2007 2008 2009 2010 reported combined profit in 2010 Free-TV Emerging Markets -500 • Highly operationally geared to advertising Revenue EBIT market recovery 17
- 18. Investing in Growth CTC Media • 38.3% shareholding acquired for USD 83 mn with Operating results (USD millions) current equity market value of ~USD 1.3 bn 700 (February 2010) 600 500 • Sales up 15% y/y in ruble terms to USD 379.0 mn 400 for 9M 2010 300 • OIBDA of USD 116 mn for 9M 2010, with 200 margin of 31% 100 • Net cash position & payment of USD 80 million 0 dividend in 2010 2005 2006 2007 2008 2009 9M 9M 2009 2010 Sales OIBDA excl. non-recurring items Audience share (4+) CTC Media Russian Ad Sales growth (RUB) 25% 20% 48% 15% 10% 5% 32% 0% 19% 8% -3% 18 2006 2007 2008 2009 9M 2010 2009 2010
- 19. 19 Pay-TV Nordic
- 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’ 20
- 21. Seizing the Opportunity Growing Viasat...ellite DTH Satellite Premium subscribers Premium DTH ARPU (SEK) 750 (000’s) 5,000 700 4,000 650 3,000 600 2,000 550 1,000 500 0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Value-added services (000’s) • Operating in Europe’s most competitive & 250 digitalised pay-TV market 200 • Satellite gradually losing share to other distribution forms BUT Viasat gaining market 150 share in the satellite environment 100 • Clear premium pay-TV market leader 50 • Low churn levels following acquisition of key Pay-TV Nordic sports rights + new channel launches 0 • Steadily rising premium DTH ARPU due to 2006 2007 2008 2009 2010 price rises & increasing penetration of VAS 21 HDTV PVR Multi-room
- 22. The Evolving Opportunity Technology Shift Gatekeeper Virtual Operator Owned & Operated Viasat Channels in Independent in 3rd Party Satellite Platform 3rd Party Networks Internet Networks Environment Pay-TV Nordic 22
- 23. Seizing the Opportunity The “Platform Agnostic” Approach Premium subscriber development (000’s) 1,500 1,000 500 0 2006 2007 2008 2009 2010 DTH Satellite 3'rd party network* Jun 2008 Oct 2009 Mar 2010 Jun 2010 Pay-TV Nordic 23 *IPTV subscribers for 2006-2008, 3’rd party network subscribers for 2009 and 2010
- 24. Seizing the Opportunity Entertainment “at your Command” First to Market with Full Service ‘Over-The-Top’ Solution Mobile Set -Top Box • Anytime Access all services ‘on demand’ • Anywhere Access subscription online Tablet Media Players • Any Device Enjoy subscription on multiple PC/Mac devices in and out of home Uniquely Combining Advertising & Subscription Funded Models Game consoles Embedded TV Set Applications OTT Set-Top box Pay-TV Nordic 24
- 25. Pay-TV Nordic Operating Results (SEK million) • Top line growth driven by 3rd party 5,000 50% subscriber acquisition & rising DTH 4,500 45% premium ARPU 4,000 40% 3,500 35% • Margins stable due to underlying improvement off-setting investments in 3,000 30% sports rights (English Premier League), 2,500 25% new technologies (HD, 3D & Viaplay) and additional channels 2,000 20% 1,500 15% • Highly cash generative with lower SAC for 1,000 10% subscribers on 3rd party networks 500 5% 0 0% 2006 2007 2008 2009 2010 Revenue EBIT EBIT margin Pay-TV Nordic 25
- 27. Market Position Seeking New Opportunities Year 2003 2004 2005 2006 2007 2008 2009 2010 Countries 7 11 15 22 23 24 25 25 Channels 2 3 5 6 7 8 10 15 DTH platforms Baltics Ukraine Russia 27
- 28. Seizing the Opportunity Growing the Subscriber Base DTH Subscribers (000’s) Mini-pay subscriptions (000’s) 300 60,000 250 50,000 200 40,000 150 30,000 100 50 20,000 0 10,000 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Basic DTH Premium DTH Mini-pay TV subscriptions • Viasat is the only satellite Pay-TV operator • Business launched in 2003 with sale of in the Baltics – premium offering with stable Viasat movie & documentary channels subscriber base & ARPU to 3rd party networks in C&E Europe • Premium subscriber base includes • Now more than 50 million Ukrainian offering since Feb 2008 & Basic subscriptions to 15 Viasat movie, Pay-TV Emerging Markets primarily comprises rapidly growing documentary and sports channels to Raduga platform in Russia ~2,500 3rd party networks in 25 countries including US 28
- 29. Ukraine Europe’s 2’nd Largest Territory TV distribution market share DTH satellite market share - All 1% 100% 2% 0% 0% 80% 60% 40% 20% 0% 97% Free satellite TV Viasat NTV+ Cable (tot.) Pay DTH Free DTH Poverkhnost Other DTT (tot.) IPTV (tot.) Terr. Analogue DTH satellite market share – Pay-TV • Substantial market opportunity – Europe’s second largest country by land mass 2% 2% 5% • 50% of ViaStrong DTH satellite platform acquired in Q2 2008 & further 35% acquired in Q2 2010 29% Pay-TV Emerging Markets • Selling premium packages of Viasat & 3rd party channels 63% • Already larger than NTV+ with unprompted brand awareness levels of over 60% • 5 year breakeven horizon from launch in 2007 Viasat NTV + Tricolor Viva Poverhnost' TV 29 Sources: Screen Digest, GFK and internal analysis
- 30. Russia Europe’s Largest Territory TV distribution market share DTH satellite market share - All 100% Orion- Raduga TV, Express, 2% 80% NTV+, 10% 4% Platform 60% HD, 1% 40% 20% 0% Tricolor, 83% Cable (tot.) Pay DTH Free DTH DTT (tot.) IPTV (tot.) Terr. Analogue Subscriber development in 2010 • Even more substantial market opportunity – (indexed) Europe’s largest country by population 250 • Low levels of satellite penetration • 50% of Raduga DTH satellite platform acquired in 200 Pay-TV Emerging Markets Q1 2010 150 • Mid-tier mass market offering with competitive offering of 80 MTG & 3rd party channels at 100 attractive price 50 • 5 year breakeven horizon from launch in 2009 0 30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sources: Screen Digest and internal analysis
- 31. Pay-TV Emerging Markets Operating Results (SEK million) • Top line growth driven by expansion of 1,000 50% mini-pay business from launch in 2003 & 900 45% growth of Baltic satellite platform 800 40% • Profitability of Baltic satellite platform & 700 35% mini-pay business supports ongoing 600 30% investments in Ukrainian & Russian satellite platforms 500 25% 400 20% • 2010 profitability impacted by full 300 15% consolidation of Ukrainian platform from July & inclusion of Russian platform from 200 10% February 100 5% 0 0% • Business highly geared to subscriber 2006 2007 2008 2009 2010 Pay-TV Emerging Markets growth & rising consumer spending power Revenue EBIT EBIT margin 31
- 33. Financial Performance Flexible Position Income Cash flow Financial position SEK millions FY2010 SEK millions FY2010 SEK millions FY2010 Sales 13,101 Net cash flow from Total debt 2,526 1,533 operations EBIT (incl. Associates) 2,355 Cash & equivalents 500 -300 Pre-tax profit Cash flow to investing 2,321 Net debt 2,026 Net income from Cash flow to financing -707 1,750 Net debt / LTM continuing operations 0.9x underlying EBITDA Total net incl Net change in cash & 3,541 -135 discontinued ops cash equivalents Available liquid funds 4,400 • Significant impact on reported results • Cash flow from operations up 48% & • New unsecured SEK 6.5 billion 5 year of y/y strengthening of SEK reporting equivalent to 70% of Group EBITDA revolving multi-currency credit facility currency vs. operating currencies arranged in October 2010 • Receipt of USD 31 mn (SEK 216 mn) • Annual tax rate of 25-30% of dividends from CTC Media • SEK 9.6 billion public equity market value of 38.3% shareholding in CTC Media (SEK 1.8 billion book value) 33
- 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 Financial Resources - Combined with ongoing launch of Free-TV & Pay-TV channels every year 34
- 35. Capital Allocation Shareholder Returns • 25% Return On Capital Employed for 2010 Annual Cash dividends (SEK) 16 • 30% Return On Equity for 2010 14 12 10 • CDON Group (MTG’s internet retailing 8 operations) distributed to shareholders in 6 December 2010 with market value of 4 >SEK 2 billion 2 0 • Board of Directors to propose increased 2007 2008 2009 2010 annual cash dividend of SEK 7.50 per share to AGM in May 2011 Ordinary Extraordinary Proposed Financial Resources 35
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- 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 Summary 37
- 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 Summary 38
- 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: investor.relations@mtg.se Nasdaq OMX: ‘MTGA’, ‘MTGB’ Contact information 39