Good morning and good afternoon, ladies and gentlemen, and 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. May I also remind you that you can find the presentation slides on MTG's website at mtg.se.
I will now hand the call over to Juergen Madsen, Lindeman, MTG President and CAO, who is joined on the call today by MTG CFO, Mathis Hermasen. Please go ahead.
Thank you, operator, and good morning and good afternoon, everyone. The Q3 is a seasonally small sales period, but our sales growth has now improved for the 4th consecutive quarter. All 5 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 3 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 3 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. 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 Publica Latino, DRG and November 5th. NG GX is also developing fast and providing a digital acceleration platform for the whole group.
Now, as usual, let's briefly review the performance of each of our businesses and start with the Scandinavian 3 gs 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 today, the TV advertising market is estimated 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, but 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 Norwegian Media House was down year on year, but TV3 recovered to report a higher target audience share in September. As previously announced, a 3rd 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 on year in each of the 3 Scandinavian countries and reflects our first move advantage and commitment to capturing this demographically attractive and incremental audience. Was up 4% at constant exchange rates in the quarter, and we really expect our full year OpEx growth as constant exchange rates to be at the higher end of the mid single digit percentage point range as we invest to increase our oil shares, launch the new Norwegian channel, boost growth levels and gradually regain advertising market shares. Also please remember that such Winter Olympics will boost sales and adversely impact Q1 2014 profits for the Scandinavian free TV business.
If we then move to our Nordic pay TV business, revenues were up 7% at constant exchange rates, which again reflect AvayaFace 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 with including ViaPlay. The satellite premium subscriber base was down in the quarter anticipated. The number of 3rd party subscriber was also down in the quarter, but is expected to grow again in the 4th quarter as third party operators increase their marketing efforts and new channel packages come on stream. Viaplay continue to report healthy subscriber intake and our market leading offering is now further in hand with the coverage of Alves Vetsken Premier League Football in Sweden.
We continue to benefit from the price increases introduced early in the year for the full top tier package and the increased penetration of the services within our own satellite base. OpEx increased significantly year on year as expected as a result of our investment in content, via play 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% 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 Patienty Business. Moving on now to the 3 TV Emerging business, the 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. Office was also up significantly in the quarter, driven by the effect of the sales cooperation as well as the launch of Prima Soup in Q1, further investments in programming and the buildup to the launch of the new 3 gs operations in Tanzania. We expect a similar level of OpEx growth at constant exchange rates in the Q4 as we have seen for the year to date. And moving on to our Paycheap 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 4 the rest of the CAS continue to show strong subscriber growth and a further distribution agreement has now been signed with the NCV plus satellite platform.
The wholesale mini pay channel business has now added almost 16,000,000 subscriptions since the end of Q3 last year and over 1,000,000 subscriptions in the last quarter alone. The satellite page 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. Office 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 breakeven full year 2013 EBIT result.
Investments are continuing as planned, and there's no change to the expectation for rising profitability levels in 2014. And finally, just a quick word on the Studios, NGG X 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 MGD Studios. This was primarily offset by the lower sales for MGD Radio in Sweden. We are now about to complete the acquisition of Entertainment, which will significantly scale our content production and distribution business and fits well with our previously acquisition and integration of Pape Kalatino, DRG and Novepafil. The MCG Studio business was profitable when you exclude the M and A cost associated with the acquisitions that we have made.
The profit for our Norwegian and Borgin 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. Investment in MTGX are now expected to amount up to SEK70 1,000,000 in the second half of twenty thirteen. Please remember that the majority of revenues generated by GTX are reported in the group's other operating segments. So in summary, we are moving ahead fast on all fronts.
We are growing across each of our business segments and have stronger, 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 operations so far.
So now over to you, Matthias.
Thank you. As you've seen, we reported 9% revenue growth in the quarter, which is an acceleration from the previous quarters and the 4th consecutive quarter of improving growth. When adjusting for minimal FX effects this quarter and a growing contribution from acquired businesses, our underlying organic growth at constant exchange rate 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 Jurgen discussed, which followed the DRG and the November film deals this year. Our digital expansion is accelerating as planned with MTG X 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 and 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 SEK300 1,000,000 in the quarter. CapEx levels have also increased as predicted due to the investments that we are making in our brand new play out facility in the UK and our further digital VOD expansion. Just you understand that we expect CapEx even higher in the Q4 compared to the Q3 on the back of the play out 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 play out 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%, and 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 write payments and particularly some key football rights this quarter. As you all know, these changes do swing quarter to quarter and we are also moving away from an all time record low 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 described to you several times. And we continue to benefit from the strong dividend stream we get from CTT Media in Russia. We have invested in shares as I mentioned earlier, but our total borrowing levels changed just a little bit in the quarter to DKK 1,100,000,000 growth. And our cash balances were stable at DKK 450,000,000 in the quarter. Therefore, our net debt position was DKK 373,000,000 at the end of the period, which is equivalent to 0.2x trailing 12 month EBITDA, which is still very low.
We continue to have one of the strongest balance sheets among our peers, and we also have over SEK 6,000,000,000 of available liquid funds at our disposal. We have traction with our M and A activities as you've seen and we have a clear strategy to invest into all of these 3 core strategic areas that we have mentioned. We are committed to continue to deliver a balance of investments in growth together with rising shareholder returns over the next few years. And now back to you again, Jerrvan.
Thank you, Matthias. That concludes our comments on the results and 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. So to allow time, please limit yourself to no more than 2 short questions, please. Operator, can we have the first question, please?
Thank you, sir. Ladies and gentlemen, we are now ready to register We will now take our first question, which comes from Lisa Yang of Goldman Sachs. Please go ahead.
Hi, good afternoon. So two questions from my end. First one is on the 3rd party subs, which declined by 14,000 in the quarter. And I remember that previously you said you expect an increase in the second half given the recent partnerships you signed. So just wondering if you can give us any color on that?
And why do you think that should basically improve in the next few quarters? And then the second question is still on the pay TV Nordic. So you narrowed your margin range slightly to 11% to 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? And 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.
Yes. I can take your first question. You referred to the 3rd party networks and partnerships. And 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. So that is the partnership which we have created recently.
When it comes to the 3rd 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, so have a good sale in the Q4. So therefore, the campaigns that we can see they're launching should give us hope that we will also will increase in the 3rd party network in Q4. But 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 30 part network and buyer play in the Q4 like we did here in the 3rd quarter as well.
Okay, Lee. Then I'll try to answer the second question on the margin range. I think the simple answer is that if you look at the 3 Q1 this year, we always came in above the 11 percentage point range. So it would be strange for us to keep the guidance below that, I think. I think the second part of the question, so it's much more a housekeeping question actually, just to make sure no one misunderstands what Q4 will 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. But we also tried to tell you a little bit about the Olympics right now that will impact the margins in Q1 on pace. So expect Q1 margins to come down a little bit, but for the full year, we should be fine.
And sorry, just on the Olympics. How are you planning to allocate the cost between free tour and pay to you next year?
As you know, we have the Olympics the Winter Olympics in Sochi and the Summer Olympics in Rio. So overall, we We take most of the cost in free TV as opposed to pay TV as 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, we take the costs in the quarter where we played out. That's really where you get the main benefit. And when it comes to the pay TV, we take the cost across 2 years, because this is not only a 1 quarter event for pay TV, something that hopefully will benefit from for a longer time.
So the cost is spread over 2 years for pay TV and in the quarter for free TV. I hope that helps a little bit.
Great. Thank you very much.
Our next question is from Adrien de Santillier from Exane BNP Paribas. Please go ahead.
Questions.
Jorgen, you just mentioned that you expect 3rd party subscriber to rebound in Q4. In Q3, you've had 7% growth despite declining number of subscribers on 3rd party. So is it fair to assume that growth in Pay TV Nordics would accelerate in Q4 because you will have better subscriber numbers? That's the first question. And 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 toppish.
But 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? And do you believe that you can come back to a level north of 20%? These would be my first two questions, please.
Yes. On your first question, when it comes to the 3rd party networks, and of course, what we base that on is that 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. So that is why we anticipate that we will grow 3rd 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. So there's no doubt that to go back to the high
Okay
Okay. And if I can just sneak in a follow-up question is on MTG X. How much of the original SEK 50,000,000 has been spent in Q3? And also, have you seen any revenues coming from MTGX in this quarter? Or is it just for now and upfront investments?
Thanks.
If I ask the first question, I think roughly 40 percentage of the SEK 50 has been spent Or actually, right now, it's we now discussed SEK 70,000,000 up to SEK 70,000,000 in the second half and around 40% of that as we start to
be clear. And around SG and A, as we say, it is a big long term to make sure that we will be strong on the whole digitalization of our products. So it is early stage for them and the record is building up his team and the capabilities right now. So we will see hopefully a good impact going forward, but that is nothing you will see short term.
Okay. Thank you very much guys.
Our next question is from Stefan Nielsen 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? And 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 1 to 2 years?
Hi, Stefan. On the first question on the price the impact on the price hikes, I think the main effects are already right now in the business as we stand. Of course, there are some year on year effects coming through, but the main part is already in.
And when it comes to Cord Shaving, we don't see that right now. We see that it is 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. And so far, it is not what we see around the world. We are talking about an addition to already existing subscriptions.
That is what we see right now.
Okay. Great. Just a follow-up there. I mean given the trends we're seeing in the Pay2 business, do you see any chance of reaching your historical Pay2 margin levels before the next rights cycle in I guess 2 years?
As it looks right now, it doesn't really look like that, no.
Okay. But 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 all have seen, it's a competitive market for rides and for the consumers, as Jurgen said. So 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
And 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. It seems, as Matthias 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.
So it is about to stay relevant with the right content offering.
Great. I probably used my question. Just want to clarify the pay to the Eastern European guidance on lower growth. I mean, 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 would balance up?
Just to be clear, is it free? It's free you're talking about free TV
emerging markets? Yes, just free TV emerging markets. Where are you talking about tougher comps?
I think as you have seen in the last three quarters, we have had very strong growth on the back of course of strange behavior from the competitor in the market and that is not going to continue unfortunately. They have a new management team at CME right now and I do foresee that they will behave a bit different. So and then we are struggling a bit right now with the ratings on Prima as well. So 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. But 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. And 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 Q4 now I can see that all the channels are doing great now as well. So 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. And but again, the visibility is very low. And just 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 Michael Lassine of Carnegie. Please go ahead.
Yes. 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 Just to clarify.
What we're saying is that the Olympic rides themselves are loss making in the Q1.
Okay. So that will be a loss making event basically, but the total segment will
For the individual quarter and for free TV, yes.
Yes. Okay. Yes. That's my first question. And maybe if you could comment also on the pay TV emerging market side, what's going on in Ukraine and the dynamics there?
Yes. I think what we have seen is, of course, fierce competition when it comes to the free digital offering. And we have now enhanced the platform by making a new custom deal with the local important 3 gs view of Eraser, a free to be media house and that hopefully should enhance the offering. But it is basically that there has been a very strong there has been a very strong free TTT offering. And 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.
But we have put on Inter, which is a big media house. We have launched our HD channels and also Via Play is launched in Ukraine to our DJ customers. So that combined should give a better offer.
Okay. And 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 to be Nordics and Via Play. Do you see a chance to continue to raise pricing here in the medium term, I mean, considering that the product has improved or results cannot good product enough for?
We I think the way that we always do our price analysis is, of course, that we are constantly analyzing the I think that the I think that the Alsveinska is, of course, it is 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. So it is something Martin we constantly are analyzing if we are priced the right way. And I think that is what we can say at this stage also due to competition.
Can you comment anything on the impact from when you added that product in Sweden this summer?
Yes. We see 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 Altra, it kind of goes without saying. So it's a sweet treat for them. So the impact is positive.
That goes without saying.
Perfect. And just a final question on the costs in free to vis 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 expected Olympics, you should not expect any material difference compared to the previous cost front levels we're seeing. But the Olympics clearly distorts that picture a little bit.
Okay. Thanks. Fair enough.
Our next question is from Rambus Ingburg of Handelsbanken.
Yes, hi. Almost right there. I wanted to ask you on the pay TV development in the Q3. Can you outline what the organic growth was?
Rasmus, it's Matthias. 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 Sport Channels.
I tried to calculate it backwards. It seems 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.
And considering that it was summer and all that, isn't that something that to be very happy about? I don't see you making a big point about it. So I'm just wondering whether I got it all wrong that given Via Play that you would sort of anticipate people to cancel during vacation or so?
I think as Jurgen said, I think the efforts we did not only the LSN can be the non bio play, for example, but also the download to go and the kids content, which was very strong. Of course, we made the summer churn of ViaPlay a lot less than previous years, so that obviously helped a lot.
And 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 flattish? Or how should I think about that?
I mean, to be clear based on the numbers that we are publishing, of course, you see that the traditional business, particularly the DCH, is not growing dramatically, if you put it mildly. So the key growth driver is absolutely right, it's Fireplay.
And would that be volume then, I assume?
Both volume and pricing.
Yes. All right. Can I just ask you also on this launch of a new channel in Norway? Why have you waited? I mean, 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 2 things which is important. Of course, we want to launch in the Q4 because it needs to be up running when we are presenting our advertising packages for 2014. So that is why we are launching now in the Q4 as well. And then we wanted to get the optimal distribution as well for the channel. And that is something we have in place and that is why we now have a date when we will launch the channel.
Okay. All right. 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 a bit close 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. And 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 on the Norwegian channel, actually, because it is slightly difficult because it's an integrated part of the Norwegian free TV offering we have. So it's slightly difficult to say to break it up stand alone. But as normal, I think it will drive 1 percentage points, 2 percentage points top line growth probably for the year. Sorry, not the growth, sorry, cost growth, sorry, to give you an indication of that. And within the next 1 to 2 years, it should break even in profits.
And on the markets, yes, I think if you look at IIM, then IIM estimate the Q3 in Sweden to be up by 5% 6% in Norway. And the Danish market, I read an article here on the Danish media side where some of the big agencies are believing the market would be down right 4.5% to 5%. So a sour margin in Denmark, which unfortunately continues into the Q4 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% to 6% is the estimate right now. And IIM believe that the Swedish market will be up 2.5%, which means lower growth than in the 3rd quarter and Q4 in Norway, IIM estimates would be up 5%.
Okay, great. Thank you. And 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, but 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 not that the answer for us is probably it's a little bit too early to say. And it's really a long board discussion that we need to have as well before we come back. But I will come back in Q4.
Okay. Thank you. Our next question is from Anders Windenburg of BOMB. Please go ahead.
Hello, Anders Windenburg here. I think most questions have been asked already. But 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 marketing advertising market share comps are getting tougher. Were you also talking about the market?
And what specific markets are you talking about? And I know you touched upon CMEs 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 not aggressive, but raised prices a lot? Has that changed?
Thanks. I'm a bit confused on the topic, sorry.
Yes. No, it is also it is 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, in particular, is, of course, a very aggressive move from the competitors when it comes to price increases. So basically, what we have seen and so we've discussed with you as well is that they price 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 and as you can see the growth for the last three quarters have been quite significant on the back mainly on Czech and of course Bulgaria has done fine and also Portuguese, but Czech is a big market for us of course.
And what we will see going forward, what we hear in the market, but again, it's not something that we can that's confirmed, but we hear that that will be more sensible, the new management when it comes to pricing and so forth. Still of course the Protivi product is very strong. It is a very strong advertising medium also in Czech. So of course we do estimate that the market leaders will increase prices, but not to the extent that they have done before. And that is of course why that we will, of course, not be able to have that free ride that we have had the 1st three quarters where we have done extremely well in terms of gaining market shares, Czech.
The underlying business for Eastern Europe Free TV, yes, we are strong and we are big in terms of ratings in Bulgaria, in Czech, in Lithuania. So far in Lithuania, I think we are up around 20% relative already now in the 4th quarter. But 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. And we the visibility is still very low to be honest.
And 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. And now we're looking at online businesses as well since now we have bought into net info in Bulgaria as well to make sure that we increase our presence and relevance in the different market. There's of course an opportunity that we have right now. But free GD, 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 Baildar of Danske Bank. Please go ahead.
Hi, guys. I had a couple of questions on FreeTV Denmark in particular. The market has been down for, is it 1.5 year now? Have you seen any changes in Q3 versus the first half of this year?
Yes. The market is still sour. As you can see, of course, we had a market decline was it around 10% I believe in the Q1 or Q2. So it is not the same speed. On the other hand, the market still estimate to be down around 5% to 6% when we talk to the market in Denmark in the Q4.
So nothing has happened there. It is not that we see change short term. That is not what we can see.
And with the deals with Canal de Guitar and Boxer, they had some free campaigns initially in the first half of this year and 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?
Yes. It is a mini pay market. And of course, the broader penetration that we're going to get, the more mini pay revenue, obviously, we will get as well. And that is of course something we constantly are working on is to make sure that they are constantly relevant and also that there is a reason for the cable operators or the DTC platforms or whatever to pay for our channels. So 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. So he's doing fine when it comes to relevance, I can tell you. But of course, it could be fantastic if the market started to grow the other way as well, so we can catch a lot on it as well.
And then finally on the churn, if I'm not mistaken, Denmark has been about 70% of the net subscriber loss in satellite in the past 4 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? Exclusion
of
course of Tier 3 Sport with the Premier League coming in and also exclusion of course of Tier 3 Sport with the Premier League coming in and also the inclusion of the SBS channels and so forth. So that we do see a lower churn. Still, it is a very competitive market and new offerings, of course, are popping up constantly. But the content has increased and therefore the churn we have seen is slow.
I actually got one final question if I may. In FreeTV Scandinavia, first half of twenty thirteen, there was some I'm not sure how to phrase it in English, but under deliveries in terms of have that effect is that effect behind us now? Are you sort of meeting unusually easy comps for the first half of next year?
That is there's more. I think, Denver, you can all advertisers in Denver, they're happy because they've got very good campaign deliveries. So what it is since the sold out ratio obviously, in spite of the fact that he took market share was not what it should have been, but he's gaining market shares in Denmark. In Sweden, Norway, we haven't had no issues when it comes to small swings, smaller campaigns, which are not delivered, then they deliver probably the 14 days in the new quarter. So that's fine.
Okay. Thanks.
Our next question is from Bianca Danel of Bank of America. Please go ahead.
Hi. Yes. It's Bianca from Merrill Lynch. Two questions please. Firstly on NTGX, you've guided to €70,000,000 of costs in the second half
of this year. Could you please help us to help
us to help us think about the additional costs for 2014? Would €140,000,000 be in a sensible assumption or should we have seen something less than that? And secondly on Pay TV Nordic margins, you've reiterated guidance of margin expansion next year. But 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, Vianca, Mathilde here. For the first question, FTGX, I think what we tried to explain in Q4 is slightly more cost than in Q3. So the run rate, if you try to double the 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 consensus, I think we'll pass on trying to I don't even know the consensus.
So if I would, I wouldn't have answered the question, unfortunately. But to confirm, I mean, again, we still think that 14% margin is coming up compared to 13% 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 Jorgen Mansen Lindeman for his concluding remarks.
Thank you, operator, and thank you all for your time today. We will announce our full year results on February 12, and I very much hope to meet with as many of you as possible before then. So thank you and goodbye for now.
That concludes today's conference call. Thank you for your participation.