Good morning and good afternoon, ladies and gentlemen, thank you for holding. Welcome to the MTG Q3 2013 results conference call. At this time, all participants are in a listen-only mode. After the presentation, participants will have an opportunity to ask questions, at which time instructions for the question and answer session will be given. If any participant has difficulties hearing the presentation, please press star followed by zero for operator assistance. May I also remind you that you can find the presentation slides on MTG's website at mtg.com. I will now hand the call over to Jørgen Madsen Lindemann, MTG President and CEO, who is joined on the call today by MTG CFO, Mathias Hermansson. Please go ahead.
Thank you, operator. Good morning and good afternoon, everyone. The third quarter is a seasonally small sales period. Our sales growth has now improved for the fourth consecutive quarter. All five of our business segments reported local currency sales growth on a quarterly basis for the first time since Q1 2011. The performance so far in 2013 clearly demonstrates that our investments in our three key areas, content, digital, and geographical expansion, are having the desired effect and ensuring that our customer offerings are stronger than ever. We are continuing to invest in this momentum to make sure that we continue to create local, relevant, and digital experiences that engage and excite consumers. We are therefore constantly adding new products such as new channels, more relevant content, and innovative digital services, all of which we are making available on as many distribution platforms as possible.
The upcoming launch of new free TV channels in Norway and Tanzania and the preparation we are now making for our exclusive coverage of the Sochi Winter Olympics in Sweden and the Baltics are clear evidence of this drive. We are also about to complete the acquisition of the Nordic region's largest independent group of production companies, Nice Entertainment. This is a significant milestone, as it will establish us as a scale industry player and storyteller following the early acquisitions of Paprika Latino, DRG, and Novemberfilm. MTGx is also developing fast and providing a digital acceleration platform for the whole group. As usual, let's briefly review the performance of each of our businesses and start with the Scandinavian free TV operations, where sales growth is back in positive territory for the first time since Q4 2011.
The Swedish and Norwegian advertising markets are both estimated to have grown in the quarter, while the Danish TV advertising market is estimated to have continued to decline. Our ad sales were up in Norway and stable in Sweden and Denmark. Our audience share in Sweden, our largest market, was down year on year. The performance improved throughout the quarter and the audience share was up year on year in September. Our combined Danish audience share was up significantly year on year and achieved its highest Q3 level since 2000, following the addition of our channels to various third-party distribution networks, the inclusion of TV3 sports channels, as well as a number of successful local productions. The audience share for our Norwegian media house was down year on year. TV3 recovered to report a higher target audience share in September.
As previously announced, a third free TV channel will be launched before the end of this year in Norway. Our online audience share and revenues have continued to grow year-over-year in each of the three Scandinavian countries and reflect our first-mover advantages and commitment to capturing this demographically attractive and incremental audience. Operating profit for the Scandinavian free TV business was up 4% at constant exchange rates in the quarter. We will expect our full-year operating profit growth at constant exchange rates to be at the higher end of the mid-single-digit percentage point range as we invest to increase our audience shares, launch the new Norwegian channel, boost growth levels, and gradually regain advertising market shares. Also, please remember that Sochi Winter Olympics will boost sales and adversely impact Q1 2014 profits for the Scandinavian free TV business.
We move to our Nordic pay TV business, revenues were up 7% at constant exchange rates, which again reflect Viasat's subscriber intake, rising satellite premium ARPU, and the full consolidation and expansion of the TV3 sports channels in Denmark. The overall subscriber base continued to grow when including Viaplay. The satellite premium subscriber base was down in the quarter as anticipated. The number of third-party subscribers was also down in the quarter, but is expected to grow again in the fourth quarter as third-party operators increase their marketing efforts and new channel packages come on stream. Viaplay continued to report healthy subscriber intake, and our market-leading offering is now further enhanced with the coverage of Allsvenskan Premier League football in Sweden. We continue to benefit from the price increases introduced early in the year for the full top-tier package.
The increased penetration of the services within our own satellite base. OpEx increased significantly year-over-year as expected as a result of our investment in content, Viaplay, and the consolidation and expansion of the TV3 sports channel business. We continue to expect Nordic pay-TV business revenue to grow at constant exchange rates in 2013, and to report an EBIT margin of between 11% and 12% for the full-year 2013, and a higher margin in 2014. Our exclusive coverage in Sweden of the February 2014 Sochi Winter Olympics will boost sales and adversely impact Q1 2014 profits for the Nordic pay-TV business.
Moving on now to the free TV emerging market business segment delivered another quarter of outstanding growth, with 21% sales growth at constant exchange rates, driven by healthy underlying sales growth, higher advertising market share in almost all of our territories, and boosted by the sales corporations. However, I would like to stress that we will now begin to face tougher comps in the market that remain soft, and given the ratings pressure in Czech Republic in particular, we expect the growth rates to be lower moving forward. OpEx was also up significantly in the quarter driven by the effect of the sales corporation, as well as the launch of Prima Zoom in Q1, further investments in programming, and the build-up to the launch of the new free TV operations in Tanzania.
We expect a similar level of OpEx growth at constant exchange rates in the fourth quarter as we have seen for the year to date. Moving on to our pay-TV operations in the emerging market, sales were up 7% at constant exchange rates and were particularly driven by our wholesale mini pay channel business in Russia. The group's premium package of our four HD channels in Russia and the rest of the CIS continue to show strong subscriber growth, and a further distribution agreement has now been signed with the NTV-Plus satellite platform. The wholesale mini pay channel business has now added almost 16 million subscriptions since the end of Q3 last year and over 1 million subscriptions in the last quarter alone.
The satellite pay-TV subscriber base grew by 13,000 compared to last year, but the base declined compared to Q2 due to the highly competitive environment in Ukraine. The overall satellite base is expected to grow again in Q4 due to the heavy seasonality in this business, as well as strengthening of our Ukrainian platform with the new channels and services. OpEx was up significantly following the previously announced investment in premium content and the development of HD premium package offering. We continue to expect to achieve a better than break-even full year 2013 EBIT result. Investments are continuing as planned, and there's no change to the expectation for rise in profitability levels in 2014. Finally, just a quick word on the studios, MTGx and the radio segment.
Sales were up 29% at constant exchange rates, which primarily reflected the consolidation of acquired businesses, but also healthy underlying organic growth at MTG Studios. This was primarily offset by the lower sales for MTG Radio in Sweden. We are now about to complete the acquisition of Nice Entertainment, which will significantly scale our content production and distribution business and fits well with our previously acquisition and integration of Paprika Latino, DRG, and Novemberfilm. The MTG studio business was profitable when you exclude the M&A cost associated with the acquisition that we have made. The profit for our Norwegian and Baltic radio business could not offset the losses for our Swedish radio business. We are continuing to invest in the digitalization of our Norwegian radio business and in our MTGx digital acceleration platform.
The investment in MTGx are now expected to amount up to SEK 70 million in the second half of 2013. Please remember that the majority of revenues generated by MTGx are reported in the group's other operating segments. In summary, we are moving ahead fast on all fronts. We are growing across each of our business segments and have stronger, more relevant, and more digital consumer products than ever before. There is, however, also more competition for consumers' time and money than ever before, and we are facing tough comps in a number of our businesses and markets. We are in a very healthy financial position, and we will continue to invest in the momentum that we have created.
This, of course, in order to ensure that we can continue to grow and shape the future of entertainment with the new channels and services that will soon be on air and online, as well as exciting new storytelling opportunities like the Olympics. That completes my comments on the operation so far. Now over to you, Mathias.
Thank you. As you've seen, we reported 9% revenue growth in the quarter, which is an acceleration from the previous quarters and the fourth consecutive quarter of improving growth. When adjusting for minimal FX effects this quarter and the growing contribution from acquired businesses, our underlying organic growth at constant exchange rates was 5%, which puts us in the top end of our peer group. We also grew our revenues in all five of our business segments on a quarterly basis for the first time since Q1 in 2011. This clearly reflects our ongoing investments into our key three strategic drivers: relevant content, digital services, and further geographical expansion. We have made further headway in each of these three areas with the investment in content for our pay TV business and the soon-to-be-completed Nice Entertainment, as Jørgen discussed, which followed the DRG and the Novemberfilm deals this year.
Our digital expansion is accelerating as planned with MTGx as the enabler, and we are about to launch new channels in both Norway and Tanzania. Sitting alongside these three strategic focus areas is the continued focus on operational and financial efficiency across the whole group. OpEx have grown as well as revenues as we invest in organic and acquisition-led growth. OpEx was up 15% at constant exchange rates in the quarter, and 11% on an organic basis. As you heard, we are on track with the investments we outlined to you a year ago, and we continue to see that the investments, particularly in content, are driving our top-line growth. The OpEx growth in the quarter also included M&A costs associated with these transactions we have completed and also some of the ongoing projects we continue to work on.
As a result of all these investments combined, our group profits were lower year-on-year, but we still reported a healthy operating profit of close to SEK 300 million in the quarter. CapEx levels have also increased as predicted due to the investment that we are making in our brand new playout facility in the U.K. and our further digital VOD expansion. Just so you understand that we expect CapEx even higher in the fourth quarter compared to the third quarter on the back of the playout investments that we are doing. This does, however, not mean that our asset light operating model is changing, and we still expect CapEx to be less than 3% of revenues for the year. Moving into next year, the playout investment will continue throughout the first half of next year, but at a much lower rate than in Q4 this year.
Our return on capital employed remains healthy at 29%. We also have a 25% return on equity ratio in the quarter. We had a negative change in working capital this quarter, which relates to the timing of certain content right payments, particularly some key football rights this quarter. As you all know, these changes do swing quarter to quarter. We are also moving away from an all-time record low of working capital level last quarter, as you remember. Overall, we continue to convert a high proportion of our earnings into cash flow due to this asset-light operating model I have described to you several times. We continue to benefit from the strong dividend stream we get from CTC Media in Russia.
We have invested in shares, as I mentioned earlier. Our total borrowing levels changed just a little bit in the quarter to SEK 1.1 billion gross, and our cash balances were stable at SEK 450 million in the quarter. Therefore, our net debt position was SEK 373 million at the end of the period, which is equivalent to 0.2 times trailing 12-month EBITDA, which is still very low. We continue to have one of the strongest balance sheets among our peers. We also have over SEK 6 billion of available liquid funds at our disposal. We have traction with our M&A activities, as you've seen. We have a clear strategy to invest into all of these three core strategic areas that we mentioned. We are committed to continue to deliver a balance of investment and growth together with rising shareholder returns over the next few years.
Now back to you again, Jørgen.
Thank you, Mathias. That concludes our comments on the results. We will now be happy to answer your questions. We have, again, a lot of people on this call today and want to answer each of your questions. To allow time, please limit yourself to no more than two short questions, please. Operator, can we have the first question, please?
Thank you, sir. Ladies and gentlemen, we are now ready to register questions. If you would like to ask a question, please press star one on your telephone keypad and you will enter a queue. Should you wish to cancel, please press star two. We will now take our first question, which comes from Lisa Yang of Goldman Sachs. Please go ahead.
Hi. Good afternoon. Two questions from my end. First one is on the third-party subs, which decline by 13,000 in the quarter. I remember that previously you said you expect an increase in the second half given the recent partnerships you signed. Just wonder if you can give us any color on that, and why do you think that should basically improve in the next few quarters? The second question is still on the pay TV Nordic. You narrowed your margin range slightly to 11%-12%. Just wondering what are your thoughts behind that? Is that basically due to better top-line growth than expected, or you're scaling back investments? Also next year, is it possible to have a range of the margin you expect, or at least what level of top-line growth you would expect to be able to grow margins?
Thank you.
Yeah. I can take your first question. You referred to the third-party networks and partnerships, I think the partnerships that we have referred to historically is the partnerships around our free TV channels and the distribution that we have made, particularly in Denmark. That is the partnership which we have created recently. When it comes to the third-party networks, what we are seeing in the dialogue, or what we are hearing when we have the dialogue with them, is that all of them obviously would like to have a good Christmas sale, to have a good sale in the fourth quarter. Therefore, the campaigns that we can see they're launching should give us hope that we will also increase in the third-party network in fourth quarter.
I think it's important to say as well that if you look at the business, we do expect to grow combined when you look at DTH, third-party network, and Viaplay in the fourth quarter like we did here in the third quarter as well.
I'll try to answer the second question on the margin range. I think the simple answer is that if you look at the three first quarters this year, we always came in above the 11 percentage point range. It would be strange for us to keep the guidance below that, I think. I think the second part of the question. It's more a housekeeping question, actually, just to make sure no one misunderstands what we bring. The other part of the question, I think, the guidance for next year is something we refrain from actually leaving to you guys this right now. We talked about margins coming up from 2013, which we still stick with. We also tried to tell you a little bit about the Olympics right now that will impact the margins in Q1 on pay.
Expect Q1 margin to come down a little bit, for the full year, we should be fine.
Sorry, just on the Olympics, how are you planning to allocate the cost between free-TV and pay TV next year?
As you know, we have the Winter Olympics in Sochi and the Summer Olympics in Rio. Overall, between those two, we allocate more of the cost to the Winter Olympics than Summer Olympics as the first one. Then, of course, we have the split between pay and free as well, where we take most of the cost in free TV as opposed to pay TV. When it comes to the way we treat it over time as well, within those parameters I just mentioned, is free TV would take the costs in the quarter where we play it out. That's really where you get the main benefit. When it comes to the pay TV, we take the cost across two years, because this is not only a one quarter event for pay TV, something that hopefully will benefit from for a longer time.
The cost is spread over two years for pay TV and in the quarter for free TV. I hope that helped a little bit.
Great. Thank you very much.
Our next question is from Adrien de Saint Hilaire from Exane BNP Paribas. Please go ahead.
Adrien with
Questions. Jørgen, you just mentioned that you expect third-party subscriber to rebound in Q4. In Q3, you've had 7% growth despite declining number of subscribers on third-party. Is it fair to assume that growth in pay TV Nordics should accelerate in Q4 because you will have better subscriber numbers? That's the first question. Secondly, I'm just wondering, I think in the past you have said that free TV Scandinavian margins at around 25%, that was a bit top-ish. Fundamentally, if you look beyond the investments you have to make in new channels and the Olympics next year, where do you see structurally margins going? Do you believe that you can come back to a level north of 20%? These would be my first two questions, please.
Yeah. On your first question, when it comes to the third-party networks, and of course, what we base that on, the expected growth is, of course, what we're seeing right now in terms of the idea they have on marketing and so forth and the cooperation we have with them. That is why we anticipate that we will grow third-party network subscribers. The impact, of course, we have to wait and see, so I can't give you any expectations around that. When you talk about the free TV, we are making investments, and we are making long-term investments as well, meaning, of course, that we are launching in Norway, we're launching a new channel. We have the Olympics, of course, which also should help us long-term also for free TV.
There's no doubt that to go back to the high margins around, what did you say, 20 something, 25%, that is not what we foresee within short, no.
Okay. If I can just sneak in a follow-up question is on MTGx. How much of the original SEK 50 million has been spent in Q3? Have you seen any revenues coming from MTGx in this quarter? Is it just for now an upfront investment? Thanks.
If I answer the first question, I think roughly 40% of the SEK 50 million has been spent. Right now, we now discussed SEK 70 million, up to SEK 70 million in the second half, and around 40% of that has been spent, to be clear.
Around MTGx, as we say, it is a big long term to make sure that we will be strong on the whole digitalization of our products. It is at early stage for them, and Rikard is building up his team and the capabilities right now. We will see, hopefully, a good impact going forward. That is not something you will see short term.
Okay. Thank you very much, guys.
Our next question is from Stefan Nelson of SEB. Please go ahead.
Thank you. I have two questions. I'll take them one at a time. First, if you could elaborate a little on the pay TV side. First of all, the price hikes you implemented in the summer, how much of the effect are we already seeing in the numbers, and how much do you think we have ahead of us? Also, if you could tell us a bit more about the trends you're seeing in your subscriber base, if you're seeing any cord shaving or people sticking with their packages, and how do you expect this to evolve in the coming one to two years?
Hi, Stefan. On the first question of the price, the impact on the price hikes, I think the main effects are already right now in the business as is. Of course, there are some year-on-year effects coming through, the main part is already in.
When it comes to cord shaving, we don't see that right now. We see that since we are gaining on a combined level and we don't see it. We are following, of course, monitoring very closely what we see happen around the world. So far it is not what we see around the world. We're talking about an addition to already existing subscriptions. That is what we are seeing right now.
Okay, great. Just a follow-up there. Given the trends we're seeing in the pay TV business, do you see any chance of reaching your historical pay TV margin levels before the next rights cycle in, I guess, two years?
As it looks right now, it doesn't really look like that, no.
You wouldn't give us any idea where you're aiming at more long term?
I think it's not entirely up to us. I think, of course, as you've all seen, it's a competitive market for rights and for the consumers, as Jørgen said. It's very difficult for us to have a long-term prediction of where it may end up at long term in terms of increases from today's levels.
Just to follow up on that, I think important is, of course, that we continue to stay relevant in the pay TV area, and that is why that we are investing in the content. That is why that we are giving our customers, of course, more valuable content. Since, as Mathias said, the competition is fierce out there. There's a lot of offering, and there's a lot of fight for people's time and also money as it is right now. It is about to stay relevant with the right content offering.
Great. I'll probably use my question. Just want to clarify the pay TV Eastern European guidance on lower growth. Are you seeing any signs of market growth going forward and kind of trying to balance off the ratings decline in the Czech Republic versus the structural change with your new deals? What does this mean, lower growth? Could we see a negative growth next year, or do you think that other things will balance out?
Just to make clear, it's free you're talking about, free TV emerging markets?
Yeah, just free TV, emerging markets, where you're talking about tougher comparisons.
I think as you have seen the last three quarters, we have had very strong growth on the back, of course, of strange behavior from the competitor in the market. That is not going to continue, unfortunately. They have a new management team at CME right now. I do foresee that they will behave a bit different. We are struggling a bit right now with the ratings on Prima as well. That is why that we are saying, it is not going to be the same levels. That is unfortunately not the case as we can see it right now.
Okay. Do you see any ad market improvements that will boost your revenues next year to balance out this effect?
I think unfortunately as well, the visibility there is still very low. Again, I think as we have said all the time, that the whole trick is to make sure that we continue to develop the businesses as such, and that we are doing, as you can see with Bulgaria doing fine, Lithuania doing fine also here in the second, sorry, the fourth quarter now, I can see that all the channels are doing great now as well. It is to make sure that when the markets bounce back, of course, we do have a stronger position than we had when the markets went sour. Again, the visibility is very low. That's why we wanted as well to make sure that we all understood that the growth rate we have seen is not sustainable long term.
Okay. Fair enough. Thanks so much.
Our next question is from Mikael Laséen of Carnegie. Please go ahead.
Yeah, thank you. I just want maybe more clarification about the Olympic Games and the impact. You're not implying that you will make a loss in the free TV side, or have I misunderstood that? Just to clarify.
What we're saying is that the Olympic rights themselves are loss-making in the first quarter.
Okay. That will be a loss-making event, basically.
For the individual quarter and for free TV, yes.
Yeah. Okay. Yeah, that's my first question. Maybe if you could comment also on the pay TV emerging market side, what's going on in Ukraine and the dynamics there?
I think what we have seen is, of course, fierce competition when it comes to the free digital offering. We have now enhanced the platform by making a new content deal with the local important free-to-view operator, free-to-view media house, and that hopefully should enhance the offering. It is basically that there has been a very strong free DTT offering. Of course, what would help us in Ukraine as well is if the bigger free TV channels, if they would be encrypted. That, of course, would be a strong opportunity for us to gain more clients. We have put on Inter, which is a big media house. We have launched our HD channels, and also Viaplay is launched in Ukraine to our DTH customers. That combined should give a better offer.
Okay. When it comes to OpEx in 2014, is it too early to comment on that, or will you level out on these levels?
I think it's a little bit too early to comment on that.
Okay, fair enough. Thank you.
Our next question is from Martin Arnell of ABG. Please go ahead.
Hi, guys. It's Martin here. My first question is on pay TV Nordics and Viaplay. Do you see a chance to continue to raise pricing here in the medium term? Considering that the product has improved, or is Allsvenskan not a good product enough for?
I think that the way that we always do our price analysis is, of course, that we are constantly analyzing the traction of the product. We are making conjoint analysis constantly to make sure that we are priced the right way. I think that the Allsvenskan is, of course, a very strong product, no doubt about that, and therefore it is enhancing our product as such, like our movies and our own produced content is doing. It is something, Martin, we constantly are analyzing if we are priced the right way. I think that is what we can say at this stage, also due to competition reason.
Can you comment anything on the impact from when you added that product in Sweden this summer?
Yeah. Of course, when you make your research, you see a greater customer satisfaction. It goes without saying that the sports people who like Champions League, who like Premier League and so forth, they also like Allsvenskan, it goes without saying. It's a sweet treat for them. The impact is positive, that goes without saying.
Perfect. Thanks. Just a final question on the costs in free TV Scandi. Do you still believe that you could see mid-single-digit growth for next year in free TV Scandi?
I think if you strip out the effect of the Olympics, you should not expect any material difference compared to the previous cost growth levels we've seen. The Olympics clearly distorts that picture a little bit.
Okay. Thanks. Fair enough.
Our next question is from Rasmus Engberg of Handelsbanken.
Yes, hi. Almost right there. I wanted to ask you on the pay TV development in the third quarter, can you outline what the organic growth was?
Hi, Rasmus. Mathias. I think, as we just said, I think last quarter as well, around a little bit less than half of the growth comes from the addition of the TV3 sports channels .
I tried to calculate it backwards. It seems as though your organic growth was a little bit higher in this quarter than in the previous quarter. Is that your interpretation as well?
A little bit, yes.
Considering that it was summer and all that, isn't that something to be very happy about? I don't see you making a big point about it, but I'm just wondering whether I got it all wrong that given Viaplay, that you would sort of anticipate people to cancel during vacation or so.
As Jørgen said, I think the efforts we did, not only the Allsvenskan deal and on Viaplay, for example, but also the Download-to-go and the kids content, which was very strong. Of course, we made the summer churn for Viaplay a lot less than previous years, that obviously helped a lot.
If I look at this organic growth in the quarter, is that entirely due to Viaplay and the rest of the business is sort of flat-ish, or how should I think about that?
Based on the numbers that we are publishing, of course, you see that the traditional business, particularly the DTH, is not growing dramatically, to put it mildly. The key growth driver is absolutely right. It's Viaplay.
Would that be volume then, I assume?
Both volume and pricing.
Yeah. All right. Can I just ask you also on this launch of a new channel in Norway, why have you waited? The key season has already started. Is there a particular thought behind that or are there other things obstructing your launch of that?
No, I think there's two things which is important. Of course, we want to launch in the fourth quarter because it needs to be up running when we are presenting our advertising packages for 2014. That is why we are launching now in the fourth quarter as well. Then we wanted to get the optimal distribution as well for the channel. That is something we have in place, and that is why we now have a date when we will launch the channel.
Thank you.
Our next question is from Natasha Brilliant of Barclays.
Yes, good afternoon. Just following on about the Norway channel. Do you have any targets you could share with us now we're a bit closer to the launch? Maybe just in terms of startup losses or audience share targets, anything that you could share with us would be very helpful. Then staying on the free TV side, any color you could share on Q4 advertising and what you've seen so far?
I think the only thing we say on the Norwegian channel launch, because it is slightly difficult, because it's an integrated part of the Norwegian free TV offering we have. It's slightly difficult to break it out standalone. As normal, I think it will drive one, two percentage points top line growth probably for the year. Sorry, not top line growth, cost growth. Sorry. To give you an indication of that, within the next one to two years, it should break even on profits.
On the markets, yeah, I think if you look at IRM estimate the third quarter in Sweden to be up by 5% and 6% in Norway. The Danish market, I read an article here on the Danish media side where one of the big agencies believing the market would be down by 4.5%-5%. A sour market in Denmark, which unfortunately continues into the fourth quarter, according to the market analysis as well, and market estimates, the market would be down as well there. If you listen in the market, around 5%-6% is the estimate right now. IRM believe that the Swedish market would be up 2.5%, which means a lower growth than in the third quarter and Q4 in Norway, IRM estimates, would be up 5%.
Okay, great. Thank you. Could I just ask one more, please, on the balance sheet? You've said that your gearing is very low and that there's the potential for shareholder returns. I think most people assume a small increase in the dividend versus last year, could that be conservative, and could we see more than a small increase?
I think for those of you who know us, it's probably know that the answer for us is probably it's a little bit too early to say, it's really a long board discussion that we need to have as well before we come back. I will come back in Q4, of course.
Okay. Thank you.
Our next question is from Anders Wenberg of Pareto. Please go ahead.
Hello, Anders Wenberg here. I think most questions have been asked already. I just wondered if you can go a little bit more in detail on your comment about Eastern Europe and the comps getting tougher. Do I understand it correctly that you're talking about the advertising market share comps are getting tougher? Are you also talking about the market? What specific markets are you talking about then? I know you touched upon CME's behavior recently. Can you go a little bit more in detail on what they're doing and not doing? I know they've been very slow during the first half and very aggressive, or not aggressive, but raised prices a lot. Has that changed? Thanks. I'm a bit confused on the topic, sorry.
Yeah, no. A lot of things are happening in the market, of course. I think important is to say that what we have seen in the first half in Czech particular is, of course, a very aggressive move from the competitors when it comes to price increases. Basically, what we have seen, as we've discussed with you as well, is that they priced themselves out of the market, which has led to a decline in the market, which is quite surprising, I would say. We have gained advertising shares, as you can see, the growth for the last 3 quarters has been quite significant on the back, mainly on Czech. Of course, Bulgaria has done fine and also [Portugal], but Czech is a big market for us, of course.
What we will see going forward, what we hear in the market, but again, it's not something that's confirmed. We hear that will be more sensible, the new management, when it comes to pricing and so forth. Still, of course, the TV product is very strong. It is a very strong advertising medium also in Czech. Of course, we do estimate that the market leaders will increase prices, but not to the extent that they have done before. That is, of course, why that we will, of course, not be able to have that free ride that we have had the first 3 quarters where we have done extremely well in terms of gaining market shares, in particular Czech. The underlying business for Eastern Europe free TV, yeah, we are strong, and we are big in terms of ratings in Bulgaria, in Czech, in Lithuania.
Far in Lithuania, I think we are up around 20% relative already now in the fourth quarter. The problem is that we don't see the markets increase accordingly. As you know, there is a big delta still from when the crisis happened 2008, 2009 to now. The visibility is still very low, to be honest. Therefore, it is difficult to predict. What we are doing is to make sure that we stay relevant and that we build our position in each of the markets. Now we're looking at online businesses as well, since now we have bought into Netinfo in Bulgaria as well to make sure that we increase our presence and relevance in the different markets. That is, of course, an opportunity that we have right now.
free TV advertising development, it is very difficult for us to give you any idea on right now. Sorry for that.
Okay, thanks.
Our next question is from Poul Ernst Jessen of Danske Bank. Please go ahead.
Hi, guys. I had a couple questions on Free TV Denmark in particular. The market has been down for, is it one and a half year now? Have you seen any changes in Q3 versus the first half of this year?
The market is still sour. As you can see, of course, we had a market decline. Was it around a 10% believe in the Q1 or Q2? It is not the same speed. On the other hand, the market still estimate to be down around 5%-6% when we talk to the market in Denmark in the fourth quarter. Nothing has happened there. It is not that we see change short term. That is not what we can see.
With the deals with Canal Digital and Boxer, they had some free campaigns initially in the first half of this year. Denmark is a mini-pay market. Have you started to collect mini-pay revenues, or is that something that we should expect in Q4 or even later in 2014?
It is a mini-pay market. Of course, the broader the penetration that we're going to get, the more mini-pay revenue obviously we will get as well. That is, of course, something we constantly are working on is to make sure that the content stay relevant and also that there's a reason for the cable operators or the DTT platforms or whatever to pay for our channels. With the traction that we see in Denmark, extreme growth when it comes to ratings. I think he has his best quarter since 2000. I don't think we have had higher ratings there, I believe, since Q3 2000. He's doing fine when it comes to relevance, I can tell you. Of course, it could be fantastic if the market started to grow the other way as well, so we can capitalize on it as well.
Finally on the churn, if I'm not mistaken, Denmark has been about 70% of the net subscriber loss in your satellite in the past four years or so. Is the churn continuing to decline in Denmark, or have we seen sort of the worst part of the subscriber migration in between the different platforms?
Yeah, we do see a bit lower churn in Denmark. We do see that we have a stronger product in Denmark now with the exclusion, of course, of Tier 3 sport with the Premier League coming in and also the inclusion of the SBS channels and so forth. We do see a lower churn. Still, it is a very competitive market and new offerings, of course, are popping up constantly. The content has increased and therefore the churn we have seen is lower.
I actually got one final question, if I may. In FreeTV Scandinavia, first half of 2013, there were some, I'm not sure how to phrase it in English, but under deliveries in terms of ratings. Is that effect behind us now? Are you sort of meeting unusually easy comps for the first half of next year?
That is small. I think all the advertisers in Denmark, they're happy because they got very good campaign delivery so far since the sold-out ratio obviously, in spite of the fact that it took market share, was not what it should have been. He's gaining market shares in Denmark. In Sweden and Norway, we haven't had no issues. It's small swings, the smaller campaigns which are not delivered, then they deliver probably the 14 days in the new quarter. That's fine.
Okay, thanks.
Our next question is from [Bianca Danno] of Bank of America. Please go ahead.
Hi. Yes, it's Bianca from Merrill Lynch. Two questions, please. Firstly, on MTGX, you've guided SEK 70 million of costs in the second half of this year. Could you please help us to how we think about the additional costs for 2014? Would SEK 140 million be a sensible assumption, or should we have seen something less than that? Secondly, on pay TV Nordic margins, you've reiterated guidance of margin expansion next year. Given your comments on the Olympics impacting margins in Q1, could you confirm if you're happy with the current consensus, which assumes 100 basis points margin expansion in 2014?
Hi, Bianca. Mathias here. For the first question, MTGX, I think what I tried to explain in Q4 is slightly more cost than in Q3. The run rate, if you try to double the SEK 70, you come a little bit short, probably, as far as we can see right now. That could obviously change throughout the year, but that's the visibility we have right now. In terms of the pay TV margin and concerns, I think we'll pass on. I don't even know the concerns. Even if I would, I wouldn't have answered the question, unfortunately. To confirm, again, we still think that 2014 margin's coming up compared to 2013, in spite of the Olympics in Q1.
Okay. Thank you.
Thank you. That concludes the question and answer session. I would now like to hand the call back to Jørgen Madsen Lindemann for his concluding remarks.
Thank you, operator, and thank you all for your time today. We will announce our full year results on February the 12th, and I very much hope to meet with as many of you as possible before then. Thank you and goodbye for now.
That concludes today's conference call. Thank you for your participation.