Thank you very much, and good morning, everyone, and welcome to this call. Today, we're announcing the creation of something brand new, a fully convergent media and communication provider deeply rooted in the Nordics. We'll do this from combining TDC Group and MTG Nordic Entertainment and Studios. And I'm very pleased to have with me today the President and CEO of MTG, Jorgen Maersen Wienermann, who's joining us from Stockholm. And in the room with me today is Executive Vice President of MTG and Chairman of MTG Nordic Entertainment, Anna Jensen.
Together, we'll take you through the presentation and afterwards, of course, take questions from you. And with that, I will hand it over to you,
Thank you very much, Benilde. And I am joined here today on this call by MGD's CFO, Maria Reddin as well. It is indeed great to share this call today and to talk about a historical moment for both our companies. We are creating something completely new, a first of its kind. We are creating a fully convergent media communication company that will be able to offer even better products for our customers right across the Nordics.
We do believe that this combination will be fantastic for all our stakeholders as it combines the best of both worlds, high quality networks and great storytelling entertainment. As a company, MGG has always believed in strong and lasting partnerships. And today, we take our partnership with TDC Group to a new level. Our Nord Entertainment and Studio businesses have performed very well over the past years also as our Q4 results show today show and this merger is a natural step in a rapidly converging landscape. Arna Jensen, Chairman of our Nordic Management Board has together with his team led our Nordic operations very successfully and will now join the management team of the new company as Jeopardy's CEO and work closely with Benilde to ensure that 1 +1 equals 3.
Transformation has always been part of MGG's DNA, and we have been transforming over the past 3 years into a global digital entertainment company. The combination is a major step along that path and NewFG will after this combination be a very focused, hyper growth company, a journey I will discuss with you all in the coming days, weeks months. This call, though, is about the combination of GSE Group and MTG and law entertainment and studio business and all the benefits that it will bring for all stakeholders. So moving on to the next slide. We believe that the transaction structure that we have agreed with GSE Group is very well tailored to the needs of both companies and their respective shareholders.
The transaction consideration will consist of a cash component of ZAR3.3 billion, which will be paid to MTT at completion and the equity component in the form of around NKK 309 1,000,000 issued TDC Group shares. Immediately at completion of the transaction, the shares will then be distributed to MTG shareholders. As a result, MTG shareholders will collectively own approximately 28% of the combined entity. We are also pleased to confirm that Kinnevik, our largest shareholder, has indicated their support of this exciting transaction. So now I will hand the call back to Jupen Hill, and we'll be happy to take your questions later.
Thank you.
Thank you very much, Jan. Turning to Slide 6. We have provided the summary of what we're announcing today. We will be covering all of that in the subsequent slides. So I will not be going through Page 6, but you can, of course, refer back to that as we go through.
So with that, moving on to Slide 7. This, of course, is where we present the first fully convergent media and communications provider in Europe. We're doing that, as we've said, by combining TDC Group's strong networks, our offerings in mobile broadband and TV with MTG, Nordic and Entertainment Studios, content production, broadcasting and streaming services. We believe that this is a very attractive combination, and we expect to have significant synergy realization coming out of this. As you can see on the right hand side of this, approximately DKK600 1,000,000, of which DKK400 1,000,000 are expected to come from cost synergies.
As you can also see in the lower right hand corner, this will be immediately accretive to cash flows as well as to the growth profile and cash conversion of the company. Referring to the accretion on cash flow, already in year 1, there will be a 5% accretion, ramping up to a very nice accretion of 15% as the synergies phase in. On the basis of this as well as the deleveraging that this combination will lead to, we are happy to say that we expect to increase our dividend per share to DKK1.4 full year for 2018, subject to closing of this transaction. And as just said, the transaction is supported by MTG's largest shareholder, Kinnevik, and we expect closing second half of this year, obviously, pending shareholder and regulatory approvals. So with that, we'll turn to take a look at the assets we are each contributing.
And on Slide 8, we take a deeper look at TDC Group. As you know, TDC Group consists of a strong distribution footprint, communication and entertainment solutions in Denmark and Norway. The business is operated through highly trusted consumer and B2B brands with strong brands names such as UC, GET, Telmo, Full Rate and TDC Business. Through these, we deliver premium TV experiences, high speed broadband and mobile voice. All of these products are, of course, delivered through a strong infrastructure in both countries.
And in Denmark, the broadband infrastructure covers the entire country with 60% high speed penetration and the best mobile network for the last 3 consecutive years. In Norway, we have a high speed broadband infrastructure that covers approximately 30% of our households and a mobile MVNO agreement with the best network in the country. So now let's hear what MCG contributes, Anders.
Thank you very much, Pernila, and good morning, everybody. On Slide 9, you will find an overview of MTG's Nordic Entertainment and Studio Businesses. We are present in all the 4 countries running Broadcasting, Streaming and Content Development Operations and radio in Norway and in Sweden. Over the past 30 years, MTG has developed its business in the Nordics to be the largest and most powerful media house in the Nordics. And we are now in a combination where we combine the benefits of having structure in our historic businesses and now we have growth in our streaming businesses that creates a very powerful combination for the future.
Moving to Slide 10, you will see the combination that we're now creating between our two companies and it is a great combination. I've had the pleasure to work in previous life at TDC and with Pernilla and the past 4 years with MTG has been a fantastic journey. And I know from within the two companies what a fantastic capabilities the teams of these two companies contribute with. And MTG, TDC having been partners for many years, it feels really exciting to take this step together. And there will be a lot of great development when we put together these 2 very, very strong teams.
If we then move to Slide 11 and have a look at the scale Nordic player that we are creating and scale is a key word here as is footprint. And the combination that we're now creating is a fully converged Nordic company with over SEK 30,000,000 in revenue and meaningful enhancement of both reach and breadth of services from where we both stand today. MTG is nicely accretive to the growth profile of TDC having grown revenues at around 6% in 2017, resulting in a more attractive growth position on a pro form a basis. Further and even more importantly, MDG's growth is profitable on both EBITDA and operating free cash flow levels. And as a result, TDC's cash flow will increase by approximately a third, helped by the strong cash generation of MTG and the very healthy cash conversion that we are contributing with.
And this is even before the significant synergies that we are expecting from this merger. And further, at a 92% cash conversion ratio in 2017, the combined business becomes even more cash efficient, driving cash flow accretion and dividend coverage, and this will be discussed later on the call. The transaction allows us to dramatically increase our scale while keeping our full focus on the Nordic markets where we will be the leading convergent player. Pernille?
Thank you very much, Anders. So on Slide 12, an outline on we believe is a very compelling strategic rationale. These are truly complementary businesses. And by putting them together, that enables us to provide excellent customer propositions with rich, flexible and personalized services for everyone. And of course, most importantly, we are creating significant value for all of our shareholders through the synergies and the subsequent cash flow accretion.
Turning to Slide 13. The combined company will become the largest investor in content in the Nordics, having one of the most complete portfolios of content across premium acquired sports like the Premier League, Champions League, etcetera. We will have the strongest offering of TV and movies, along with the scale and capability to continue the strong creation of local scripted drama as well as continue the track on producing well known shows like the Robinson Expedition and Paradise Hotel. And last but not least, we will continue to work with partnership, both partnerships both with content owners and distributors to ensure that all of this great content can be consumed on one platform. Turning to Slide 14.
The combined company will have, as we mentioned, the ability to reach 10,000,000 Nordic households with this unique content offering. And to highlight some of the commercial opportunities within our customer base, We have, in total, nearly 3,000,000 TV customers, of which more than 1,500,000 are IP enabled, which provides the opportunities for higher degree of customization of the entertainment experience. We will have more than 3,000,000 mobile voice customers, and we will have the strongest on demand streaming position in the Nordics with more than 2,000,000 streaming customers. Lastly, 1,500,000 broadband subscribers across Denmark, Norway and Sweden. Turning to Slide 15.
Most importantly, we will be combining 2 strong tech organizations, thereby creating a top 5 employer of media and tech talent across TMT Companies in Western Europe. We'll have 1,000 in house tech developers under the same roof with focus on building the best entertainment solutions across DTH, fixed and mobile streaming. And based on the combined customer insights across all of these platforms, we will furthermore be able to much better understand the Nordic consumers' demands and personalized offerings to them much better than today. With that, back to Johannes.
Thank you. And moving over to Slide number 16. And when we combine the content scale, reach and the people that we have, we create what is basically the most important part of everything that we will be talking about today, the next generation media communication services and products to be able to deliver the growth that we see at the horizon of our businesses. We will be leading the market with local streaming services, both paid and free. Flexibility is very important for our customers.
So we're aiming to deliver truly flexible TV packaging based on full content packaging freedom. We want to deliver an opportunity to create entertainment solutions made mobile first. And in the driving seat to define next generation sports experience, we want to include virtual reality, multi angle watching as a few examples. And not only will we have the next generation media and communication services, we will also have a very, very strong distribution platform across both own and our very important partner infrastructures. On Slide 17, we'll be looking at a more concrete example on how these next generation media and communication services would look.
We strongly believe in being able to tailor make entertainment solutions even more than we're doing today. And we can extend this customization opportunities based on channels on demand services and significant amounts of insight and data from our current businesses. On top, we will deliver customization that makes sense for all customers, but we will not move to a situation where we debundle to the degree where specific sports rights and the latest series of a favorite scripted season will be debundled. This will not benefit this position. On Slide 18, one of the other entertainment innovation that I am personally truly excited about is the opportunity to create entertainment solution that is truly made for mobile.
Majority of entertainment solutions today are tailored to mobile, but very few has been designed to be truly mobile first. And we want to create the next generation of products where entertainment services and mobile voice subscriptions and data subscriptions is not 2 separate items. It is a joint product. And this will enable us to target new types of customers that might not be in each of the traditional entertainment solutions today. If then look at Slide 19, 2019.
The future proof advertising models is something that will be at the core of what we will be doing, securing growth also on this important part of our businesses. Today, we are looking at linear viewing, moving to digital, and we want to make sure that that transaction transformation is one that enables us to drive growth across the advertising business models. When we add radio to the combination, we have an ecosystem that makes perfect sense for the majority of our current advertising customers and buyers That will allow us to continue to drive growth despite the common belief that TV advertising is going down. So we are creating an ecosystem that we believe will create growth also in this very, very important segment. Pernille?
So turning to Slide 20 and coming back to why we think this is a compelling combination. This transaction will allow us to realize significant pools of synergies. And first of all, it's very important to note that the synergies we're presenting are the result of some very detailed analysis, which we've done together with MTG. We are fully confident in our ability to realize and likely exceed these synergies. We've identified cost synergies amounting to €400,000,000 in full run rate.
These include consolidation of OTT products, integration of technology platforms, customer acquisition cost savings and additional cost synergies are expected from organizational streamlining of our back office functions. CapEx synergies are expected within product, technology and TV distribution. And the revenue synergies are mainly driven by reduced churn and extended customer lifetime value from an enhanced and more flexible product offering as well as opportunity to improve our position in the OTT market that you just heard Anders talk to. Turning to Slide 21. The combination of our assets will create significant valuation upside for our shareholders.
The transaction price creates a win win outcome for both companies and both pools of shareholders. If we look at the blended operating free cash flow multiple of the new combined entity, we will start off at 14.6 percent excluding synergies. But with full cost and revenue synergy impact, we will be able to reduce this to 13x, thus indicating a meaningful upside from TDC Group's current multiple of 15.5. The transaction is importantly cash flow accretive for shareholders immediately in year 1 after completion by a healthy margin, and that is even before synergies. And it becomes nicely accretive after giving effect to synergies.
Turning to Slide 22. We have always reiterated our strong commitment to maintain investment grade rating, and we've been very careful in managing our leverage. We're therefore also pleased that this transaction will further strengthen our balance sheet position. Based on pro form a 2017 financials, the acquisition allows us to decrease leverage to approximately 2.6x net debt to EBITDA. TDC is committed to a medium term target of reporting of reported adjusted net debt to EBITDA in the mid-2s whilst maintaining investment grade rating.
And turning to Slide 23. This improved leverage will have impact, of course, also on the dividends. As you know, TDC has an ambition to pay an attractive return to shareholders, which will be paid either as dividends or through share buybacks. The more comfortable balance sheet position allows us to consider returning more capital to our shareholders. And we are therefore also pleased to announce that subject to this transaction closing, we plan to increase our dividend for 20.18 to DKK1.4 per share.
This dividend is supported by the deleveraging achieved by the acquisition as well as strong cash flow generation of the combined group. It is important to note in this context that we will keep most of MTG's asset most of the cash flows coming from the MTG assets in 2018 within this new combined group under the agreed lockbox transaction structure. We reiterate our policy to pay an attractive return to shareholders. And from 2018 and onwards, it is our intention to adopt a progressive dividend policy. Turning to Slide 24.
When we combine the 2 organizations, we will combine media and communication skills at all level. The Chairman of the Board of the new company will be Pierre Denon, who is currently the Chairman of TDC. He will be accompanied by 2 new Board Directors with relevant experience from the media industry, one of which will be Johan Lineman. And at management level, I will become the Group CEO and President, supported by Anders Jensen as Deputy Group CEO. Anders will play a crucial role in the integration of the 2 companies and the subsequent execution of our joint plan.
Lastly, as I've alluded to earlier, we will combine our organizations, creating a new entity of almost 10,000 passionate and highly skilled employees. Skills and passion, we believe, will make this happen. And the skills and passion of our thousands of employees in Denmark, Finland, Norway and Sweden are off the charts. Finally, I would like to summarize the next steps and the process to completion of this transformative acquisition. The transaction will be subject to approval by the shareholders of both MTG and TDC.
We will be inviting our shareholders to vote on a transaction at our shareholder meeting, which we expect will be held over the coming 6 to 8 weeks. In parallel to the shareholder approval, we will initiate merger control approval process with the relevant competition authorities. We expect to complete the transaction by the end of 2018, and we'll be excited to start integration and realization of synergies right after that. With that, we will open up for questions.
Thank you. Our first question comes from Paul Jensen of Danske Bank. Please go ahead. Your line is open.
Yes, thank you. I have a few questions. One question is on the valuation of the MTG part seen from the TDC point of view and also giving that the share is down 12%. How do you look at this compared to your own business? And secondly, are there any form of exclusivity for TDC in that in this deal on the content going forward?
And then also, is this a done deal? Or will, if possible, seen in the light of speculation of Telia having interest in TDC. Can they come up and break this one by putting in an offer for the shareholders of TDC in the meantime before the GM?
All right.
Thank you very much, Pol. If I start with the valuation seen from the point of TDC, The transaction values the MTG assets at SEK19.55 billion, which is also where, as you probably know, the sum of the parts valuation on average on these assets lies. And as we've shown you, we believe that the operating free cash flow multiple upon acquisition is attractive. And certainly, as synergies will be realized, it will become obviously even more attractive. So in other words, we are buying or we are combining the 2 companies based on market valuations, both on TDC and MTG.
You then asked about the exclusivity of content. And I think it's important to say that we are not believers in exclusivities or walled gardens. We do not think that creates value. What we are believers in is creating the strongest Nordic open platform where all of this great content that we just talked about will be made available to potentially up to 10,000,000 Nordic households. We believe that, that is where the true value generation of this combination lies.
And maybe I'll just have Anders comment on that as well before I answer your last question.
Yes. I think this is very important to point out. In MTG, we have built up the strongest content portfolio across the Nordics and we have built that through partnerships with many various both distributors and other kind of partnerships. And that is pivotal for the business and will remain so also in the future. Like Pernilla said, we believe in flexibility and openness and we want to be the aggregator of aggregators, not just delivering exclusive content to our specific customer groups.
So this is important to point out Openness will remain important for us.
And then I think your last question, Paul, was, is this a done deal and what about Telia? In terms of is this a done deal, no, it's not, obviously. What we're announcing today is that we have entered into this agreement. It is supported and recommended by the boards of both companies. And the largest shareholder of MTG has undertaken an irrevocable that they will vote in favor of this at the EGM of MTG.
But over the coming weeks, of course, we will be road showing, talking to analysts and investors, gathering feedback. And ultimately, this is a decision for the shareholders, and that will be taken at the EGM. Should other parties see a value in 1 of the 2 of the assets or indeed the combined assets, the both of the companies will, of course, as always, take that seriously and consider their fiduciary duties towards the shareholders in the reply that they may or may not come up with. So that is how we see the governance around the deal.
Okay. Are there any breakout fees?
There are smaller breakout fees involved, but nothing significant, no.
Okay. Thank you.
Thank you. Our next question comes from Joanna Alquist of SEB. Please go ahead. Your line is open.
Thank you. Yes, I have a question regarding the synergies. If you could sort of elaborate on the time line you expect. Are the cost synergies currently imminent? And the revenue synergies, do you foresee them being is this a churn preventing action?
Or what do you foresee here? Any comments on those 2 will be helpful. Thank you.
Yes. Thank you for the question, Anders here. If you look at some of the synergies, the way we see them going forward, our focus will be in the short term on the cost synergies and making sure that we make this combination as powerful as it can possibly be. And we believe there is a 12 to 18 month timeline for which in which we will implement and harvest the majority of the synergies that we foresee. And on the back of the new products that we will be developing, obviously, the revenue synergies will come on top.
But to make sure there is a good and solid foundation in this whole transaction, the cost synergies will be at the focus of what we will be doing post closing. We have a lot of fantastic ideas about products and innovation and they will drive revenue over time, but the costs need to come first.
And maybe it is worth just pointing out that the vast majority of the revenue synergies that we are announcing today is expected to come from churn prevention.
Okay. Our next question comes from Terence Hsu of Morgan Stanley.
I've got a couple of questions, please. Just firstly on the deal structure, Pernilla. Can you just give us a bit of more detail about why you structured the deal in such a way with so many shares, new shares being issued? I think in the past when you acquired GET, you cut the dividend instead. So that's my first question.
And then my second question was just on some of the slides that you mentioned, MTG being a Pan Nordic operator. I know the TDC has been scaling back in some of the Nordic regions like in Sweden. Should we see this deal as you're wanting to increase your presence in some of the other countries that you're already in?
Thank you very much, Terence. If we look at the deal structure first, I think obviously that is a function of many things that we have tried to optimize for here. One is alluding back to the answer I gave Paul earlier on, on the valuation, which is this is a merger. There are no premiums on any of the assets that either of us contribute into the transaction. And as such, part of the upside for the current MTG shareholders is obviously continued exposure to the combined entity, and they will get that in the form of 28% ownership.
And that's, of course, also based on the strong belief of the realizable or the fact that the synergies will be realized. That's where the upside will come from. And then I think it's also very important to say that 2 years ago, when we announced the new strategy for the CDC Group and we put out a new dividend level and dividend policy, we said at that time that we would be very committed to driving an accretive profile in terms of return of cash to our shareholders. And I think what we're putting forward today shows you that we have managed to structure what is a strategically very important move for the TDC Group in a way where we are also improving our dividend capacity. And thus, we are also today guiding for increased dividends in 'eighteen and certainly also in the years beyond.
Your second question alluded to the question of market presence across the Nordics. And as Anders mentioned earlier on, what is becoming increasingly critical for both of our businesses is the question of scale. And for that reason and many others, in fact, we believe that a Nordic platform is paramount in succeeding in a converged world, which we're all operating in. And of course, from day 1, we will have a somewhat more fully fledged business model in Norway and Sweden excuse me, Norway and Denmark, given TDC's presence. But obviously, we have important partnerships also in Sweden and Finland on the distribution side.
And maybe I'll turn it over to Anders to comment a little bit more on that point.
Yes, the scale and reach of distribution is critical in our businesses. And even though we've been doing that very successfully through partnerships, we have also successfully in Sweden operated a triple play distribution on fiber that will be important for us going forward. Now we have talked about moving to get an MVNO agreement for mobile in Sweden and that becomes even more important now. That goes also for Finland where we have a very, very interesting and solid challenger position, especially on the content streaming side with Via Play being one of the fastest growing platforms in Finland. So we believe the combination of the very strong Danish and Norwegian positions combined with opportunities in Sweden and Finland will add to the scale and the footprint that we think is very important for this whole setup.
Thank you. If I can just ask one quick follow-up. I was just wondering if you can give us a little bit of color on how involved Kinnevik were in instigating the deal because obviously they've decided to take or they've offered to take pro competitive measures to get their other transaction through with Com Hem and Tele2?
I think what is, 1st of all, worth highlighting is that Kinnevik has given its irrevocable support to the deal. They are strong believers in the vision of creating a Nordic powerhouse with regards to converged media and communication services. This is what is happening in the world of media and tech and communication these days. So they are strong believers in that vision. And I think one should see today's announcement in that context.
But other than that, I will invite Anders to comment on that as well.
I
think that that's a very fair way of describing it. And I think the vision and the way of looking at this, I mean, Perline and I discussed this already back in 2014, we were both in TDC and I was on my way to MTG. So I think this is a vision and an idea that has grown over time with very, very solid support from the main shareholder in MTG.
Great. Thanks very much.
Thank you. And our next question comes from Sunil Patel of Bank of America Merrill Lynch. Please go ahead. Your line is open.
Thank you. I just have two questions. One is in terms of remedies because of Kennewick's holding in the Tana 2 Com Hem and now in the NewCo, do you expect any remedies as part of this transaction? Size of population size of Denmark, Norway combined, I mean, there's no sort of physical distribution that TDC have having sold out of the B2B. Is the next step there to own infrastructure and therefore become fully convergent in what is the biggest market there for you?
Thank you.
Thank you very much. I think on the Remedy side, obviously, we will now be starting the dialogues with the relevant regulators. And it is too soon to comment upon what may or may not happen. Obviously, we have built into our numbers that we present today, our synergies. We have built in certain assumptions.
But of course, on a detailed level, we shall have to see what the process brings. I think it's important to see what we are doing here in the context of the global play that is happening, whereas if we go back a few years, it was all about who was the strongest local competitor. These days, of course, we are up against the global giants. So I think and hope that, that will also be part of the assessment that we will be going through now. With regards to convergence in the Swedish market, as Anders just alluded to, MTG already has very strong partnerships in Sweden and does also distribute on other parties' infrastructure.
Whether over time there will be a situation where we can perhaps have more infrastructure in Sweden, we shall see. But that is not part of what we're announcing today. And our focus now will be fully on delivering on what we are announcing today.
Yes. And to add maybe just a few comments on that. We believe passionately in our business in the current MTG business in Sweden that full convergence can be delivered through solid wholesale agreements with relevant partners. So we can be asset light, if you will, in that context. What is important to bear in mind is that we are bringing the fastest growing and most advanced OTT platform to the table which we control 200% and is developed and owned within MTG in the Nordics.
That is probably and possibly an even more important asset to bring to the table than the connectivity assets per se.
Thank you.
Thank you. Our next question comes from Andrew Lee of Goldman Sachs. Please go ahead. Your line is is open.
Yes. Good morning, everyone. Thanks for taking my call. I just wanted to ask about precedence for your for the synergies and the strategic deal, where else have you seen this done globally where you've seen the combined telco media operators make a success of it and deliver the synergies that you're targeting? Kind of what have you used as your comps for thinking about the upside from this transaction?
Thank you very much, Andrew. Obviously, as you well know, there is a lot of long list of examples of this having been done. But we all know that this is the big theme and that a lot of certainly telcos, which is where I can speak from here, a lot of telcos have been trying to do similar things. We've recently seen Swisscom make a move in Switzerland. And as you know, there is also a Portuguese thing happening as we speak.
So definitely, what we're seeing in Europe and, as you well know, also in the U. S, are examples of these things coming together. That doesn't mean, of course, that there is a proof case out there that this can be done. But I think what is also important to understand is that this is also, from the TDC point of view, a way to get more content exposure without entering into the very heated acquisition race on our own. So take the example of the sports rights and the inflation of content prices that we have seen happening there, that has, at least to some extent, been driven by entrants of new players trying to buy content directly.
And generally, what we've seen in those situations is that it tends to be, in most cases, sort of a 1 to 2 off, maybe not necessarily either not necessarily a very sustainable business model. I think what's also important to say here is that MTG is quite unique in its composition of business areas that Anders alluded to before in the fact that content is already made available across all platforms and that the free to air or advertising part of the business is very unique in the way it spans all channels, all platforms from the rather traditional TV and radio all the way to some very innovative and arguably very successful digital place such as AVOD solution. So I think also we should be aware here when assessing this that MTG is quite unique. And therefore, the combination with TDC or with indeed any telco is probably easier to envisage compared to a situation where you were only in one of those areas that MTG is currently spanning.
Thank you. And can I just ask a follow-up question? Have you had I'm sure you probably can't answer this, but what was the Kinnevik's view on their aims and targeting of a pan Nordic operation? Is that something that's been discussed? And would TDC be a route to that?
And then secondly, kind of confirmed press speculation about interest in TDC since the Apollo did at 1.5 to 2 years ago. Have you had any approaches for TDC that you can either discuss or suggest over the last 6 months?
Thank you, Andrew. I think on Kinnevik's view, I think what we can say is what I did say, which is they share the vision that we are putting forward here with regards to creating a strong pan Nordic player, a converged player. And I think that's the important point. And without that shared vision of what a truly Nordic powerhouse would look like, I think it's very unlikely that we would have gotten to the great transaction that we are announcing today. With regards to TDC, no, we will not be commenting on that.
Our next question comes from Maurice Patrick of Barclays.
So I guess a couple of questions. First of all, on the cost reduction on the organic business, I think you've indicated for 2018 a €300,000,000 reduction or greater than €300,000,000 if I'm not right. I don't know the change from the implicit guidance you gave in 2016. So just thoughts on what's changed now, I think given them are more like 450, 500 for the year. And the second question really is related to previous one, which is you've highlighted the strategic importance of content and you have a loan in finding those challenges and opportunities.
To what extent do you think this transaction is a defensive one? It's much as holding off the rise of the OTTs or just or actually more offensive in the natural sort of move from all telecommunications players into a converged world. When you talked in the past about rising content cost being dilutive to using gross margins, so does that sort of help manage that going forwards?
Thank you very much, Maurice. Yes, it's true that today, we also put out our Q4 release, including guidance for 2018. And in there, we say that we will achieve cost savings of at least €300,000,000 during the year. And we also, of course, in 2017, achieved €400,000,000 of cost savings. So in aggregate, for those 2 years, €700,000,000 I think when we put all of that together since 2016, we are well above €500,000,000 which is arguably very close to the €600,000,000 to €700,000,000 that we put forward in the beginning of 'sixteen.
And we remain confident that we will be able to achieve further cost savings in the years to come with or without the transaction that we announced today. So we are well on track to deliver on the simplification and digitization of the TDC business model that we put out as an ambition at the beginning of 20 16. And obviously, with last week's announcement of the organizational changes we have made in TDC in order to further support the digitization of our business, we remain very upbeat about the continued potentials in this area. With regards to the transaction and how we see this, we see this as a proactive move. This is a way for us to make sure that we can all create value for all stakeholders, not least, as we've shown you, for our shareholders going forward.
If you think about it, it's also, in a way, a morphing or a further development of our business model. And given the fact that TDC is already this unique blend of a telco and a cable co, We have a very big entertainment business. And when we look at all the trends out there, we think that the right move for us to make is to morph or further develop our business in this way. One important data point is that video consumption globally is growing double digit. That's true for the Nordics as well.
And with this move, we will be much better positioned to have a bigger part, stronger market share in the part of the video viewing that is growing the most, which is arguably the SVOD services. And as we showed you, we will, with this combination, have more than 2,000,000 subscribers already on streaming services in the Nordics and some very impressive growth rates on Via Play and Via Free, which I'll invite Anders to comment on a little more.
Yes. And I think also to your question on the content and whether this is defensive or offensive, I think our perspective and our experience over the past many years is that it's impossible to be defensive when you enter a content game. You have to be offensive and you have to be very, very clear what you want to develop. And we don't expect any of the competition that we see now to go away anytime soon. But having said that, the way to create stability in any given industry and also in this one is to make sure that you have solid scale long term players competing in a willingness to create value for all involved rather than just looking at short term benefits.
So we believe that there will be continued very, very strong competition. But we also believe that there will be more rational behavior going forward. But we are prepared for any direction that it might take. But being defensive is not possible actually.
Just as a quick follow-up, I'm not sure I heard the response to a previous question. Did you say you still wanted to enter Sweden via MVNO? I may have misheard it.
No, that's correct. We have had also before now this announcement in Sweden for MTG. We have talked for some time about the opportunity with adding mobile to our current fiber triple play TV distribution that we have in our own brand in Sweden. And that sort of is continuously very relevant and very important for us and maybe even more so. And the question also earlier was whether it's important to own the infrastructure.
We believe that convergence and triple play and quad play for that matter can be delivered on a wholesale basis.
And maybe I'll just add that we think that what we bring to the table is, of course, very much mobile competences. What we've done over the last 2 years is turn a declining mobile business in Denmark into a strong growth story. And I think with this combination, we will be able to boost what Anders just alluded to.
Great. Thank you, guys.
Thank you. Our next question comes from Peter Nielsen of ABG. Please go ahead. Your line is open.
Thank you. A couple of questions, please. You've outlined the strategic rationale behind this. Could you talk, Peniel, a bit about how you believe this will help you protect your Danish TV business and to some degree the Norwegian, but I guess, 1st and foremost, the Danish one? And secondly, if we accept the strategic premises on which this is based, does this not dramatically increase your need for a mobile business in Norway to fully capitalize on this merger?
Thank you.
In terms of the strategic rationale, yes, of course, there is an element of churn prevention, if you will, or increasing the customer or improving the customer experience and increasing this customer satisfaction on our TV businesses that goes for ours as well as MTG's existing TV businesses. And the way we will do that, of course, is that we will be able to offer much more flexible, richer offerings here using the combination of the great inventory that MTG has along with the partner agreements that we both have on the content side. And we will be able to, we think, really drive the evolution of what a truly unique and excellent consumer experience with regards to entertainment should be like. We have certainly a pole position for doing that, and we strongly believe in that. And Anders alluded to some of the new products that we will be designing and building over the months to come, months years to come.
All of that, of course, starting with mobile, which leads me into your second question. We already have an MVNO agreement with what has been rated the best network in Norway. And as we just talked about on Sweden, we are perfectly comfortable building these solutions on an MVNO basis.
Okay. I was sort of alluding to a meaningful mobile business. But you answered to the first question, Puneet, does that mean that you are not fully confident that your new TV packages and the new flexible offering would be sufficient to protect your Danish business? And you haven't really seen the results of it yet.
Well, Peter, first of all, we are launching the new offering in UC in Denmark next week. We launched them in GET in Q2 of last year. We are very confident based on what we've seen in GET and the initial responses we've gotten in Denmark. We're very confident that, that new proposition will be much more attractive than anything else that is on the market in Denmark and Norway. But what we're saying here today is we have higher ambitions than that.
We want to truly drive the evolution and set the standard for what an excellent consumer experience in the Nordics should be. So the consumers in Nordics are, as you know, digitally very advanced. And they are quite demanding with regards to what they expect to be able to do with their entertainment products, broadly speaking. And we are now ideally positioned to define how that will play out over the years to come.
Okay. Thank you.
Thank you. Our next question comes from Ulrik Krast of Jefferies. Please go ahead. Your line is open.
Thank you. Three questions, please. The first one is, in the synergies, are there any cross border synergies? Are these all sort of essentially the end market synergies in Denmark and Norway? 2nd question is, could you please I'm not sure, I might have missed in the presentation, but could you please tell us what the actual revenue and exposure of the MTG assets is to Denmark and Norway specifically?
And my last question is, do you is there any sort of plans here for a business portfolio stratification? So you acquire the assets and you sort of have already ideas what you want to what you might want to do, for example, with satellite business or so other bits and pieces that you're picking up here? Thank you.
Thank you very much. The vast majority of the synergies are local, so within each of the countries. But obviously, there is an element of back office streamlining, which will include both Denmark and Sweden. But again, it is it will be executed nationally or locally, if you will, within each of the countries. With regards to revenues and exposure, I will turn that over to you, Anders.
Yes. The way thank you. The way we have been reporting MTG up to now and will do so up to closing is Nordic Entertainment as a whole. So we don't report Denmark, Norway, Sweden, Finland separately. What I can say is that obviously both Norway and Denmark are very important market for us, especially in Denmark where we have a very, very solid and important partnership with CDC and other distributors.
So it is important market for us. But any more detail on that, I cannot give you at this point.
With regards to the business portfolio question you asked, this is, of course, one of the things that we have been discussing and certainly will be discussing once this transaction closes. For the moment, we do not have any firm use on disposals that we may or may not want
do. So can I just follow-up
on the geographic exposure? Now I do understand that you're not reporting, and that's the reason I was asking. But obviously, there's a number of TTC analysts who may not have followed NTG quite so closely. So if you just give us an order of magnitude, is the majority of the revenues essentially in Sweden Or is this a sort of fairly broadband mix? If you can I'm not asking for numbers, just sort of order of magnitude type indications.
Thank you.
If you look at our combined Nordic business, the 2 largest and most important markets for us in MTG Nordic Entertainment is Sweden and Denmark with a sort of a fairly even split and then Norway and Finland in that order.
Actually, maybe just to draw your attention to the slide where we show the combination. You can see that we've outlined for each of the countries what sort of combined business we will have in those. And that, again, is just to give those of you who, as you say, have not followed the MTG business as closely as you have the TDC business, at least on Slide 10, you will be able to see what each country includes in terms of the activities, and that will also support, I think, what Anders just told you.
Thank you very much. Thank you. And our next question comes from Adam Fox Rumley of HSBC. Please go ahead. Your line is open.
Thanks very much. I've got a couple please. Could you talk about TDC's current access to MTG's content? Is there anything that specifically changes on the other side of this deal? Secondly, could you say what you're going to do about the lack of digitization in your Danish TV base?
Are you going to push is this a justification to push boxes more aggressively into that in order to be able to take advantage of proper IP based experiences? And then finally, I don't have any firsthand experience with the OTT product from MTG. Can you highlight what's different between your platform compared to, say, Netflix where we might be a bit more familiar with? Is it front end or is it back end sophistication that you think is better than rivals out there?
Thank you very much. So maybe if I just comment on the 2 first questions, and then Anders will talk about the experience of Via Play and why we think it's a question of coexisting rather than necessarily competing head on. So if we talk about the MTG content, as you know, MTG is a strong and very important partner for TDC in Denmark and certainly also in Norway. But I would say, particularly in Denmark, MTG has a very strong market position. We have agreements to with regards to all of their free to air channels.
We have agreements around Via Play, the streaming services. But of course, this is not all that MTG has to offer. And of course, the fact that we will now be jointly utilizing this content to the maximum gives us some added flexibility in how we can actually apply that content. Lack of IP enablement in our Danish base. We are not planning to ramp up the box push.
If anything, we actually think that what we are putting together here will allow us increasingly to supply a premium app based TV service and thus actually, over time, decrease the need for TV boxes. With regards to sort of medium term 'eighteen, 'nineteen, we don't see any changes in the ramp up of box penetration or IP enablement in our base. But we are actually quite enthusiastic about the app based premium entertainment solution that we expect will be the future answer to how one IP enables a TV base.
On your question on the differences between our OTT platform and the likes of Netflix. Well, 1st and foremost, Via Play is the largest combined OTT sorry, TV movie series and the sports proposition on OTT in the Nordics. And that is a major difference compared to Netflix. Obviously, it is a different proposition. And in terms of the platform, despite being obviously slightly smaller in terms of development size than, for example, Netflix, we have developed a platform that is state of the art.
And in addition to being a sort of traditional SVOD platform also ready to manage linear channels. So we have a fully fledged TV distribution platform that can be used in various ways. But important to bear in mind, ViaPlay is the leading OTT solution for TV movie series and sports in the Nordics.
Thank you all very much for your questions. We are going to wrap up this call now. And let me just reinforce, we think what we are putting forward today is a very strong combination of 2 highly complementary assets. The transaction is a merger. The payment, so to speak, involved in the merger includes the SEK 3,300,000,000 along with 309,000,000 newly issued shares in TDC.
Those shares will be immediately upstreamed to the overlying shareholders of MTG, which will mean that MTG's largest shareholder, Kinnevik, will hold around 5% of the combined company post closing. It is also important to say that as we are creating something entirely new here, we expect that the corporate brand of the new entity will be a new one as well, not the commercial brands, but the corporate brands of the combined entity. And that is something we look forward to disclosing once this transaction closes, which we expect will be second half of this year. Thank you very much for your questions and your interest. We look forward to speaking further with you over the coming days weeks.