Good morning and good afternoon, ladies and gentlemen, and thank you for holding. Welcome to the MTG Q2 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 Q&A session will be given. If any participant has difficulties hearing the presentation, please press star zero for operator assistance. May I also remind you that you can find presentation slides on MTG's website at mtg.se. Before we begin, may I remind you of the forward-looking information and safe harbor statement under the U.S. Private Securities Litigation Reform Act of 1995, that this report contains forward-looking information based on the current expectations of MTG management.
Although management deems that the expectations presented by such forward-looking information are reasonable, such forward-looking information is subject to risks and uncertainties, and no guarantee can be given that these expectations will prove correct. Accordingly, the actual future outcome could vary considerably when compared to what is stated in the forward-looking information due to such factors as the prevailing economic and business environments in certain markets and the impact of the Eurozone crisis, in particular. Commercial risks related to expansion into new territories, political and legislative risks related to changes in rules and regulations in the various territories in which the group operates, exposure to foreign exchange rate movements and the U.S. dollar and euro currencies in particular, and the emergence of the new technologies and competitors.
These risks and uncertainties are described in more detail in the 2012 annual report, which is available from the group's website at www.mtg.se and in the group's registration statement on Form 20-F, which is available from the website of the U.S. Securities and Exchange Commission. I will now hand the call over to Jørgen Madsen Lindemann, MTG President and CEO, who is joined on the call today by Group CFO, Mathias Hermansson. Please go ahead.
Thank you, operator, and good morning, and good afternoon, everyone. Our second quarter results show a clear positive momentum across the business as we invest in our business to drive future growth and build our market positions for the long term. The highlight of the quarter come from the free TV operations in the emerging markets, which delivered exceptional sales growth and continued market share gains despite a soft advertising environment in the majority of our countries. This was the second quarter in a row when we reported higher TV advertising market shares than the commercial incumbent in the Czech Republic. It is also worth noting that we were profitable in Ghana on a quarterly basis for the first time. Our Scandinavian free TV media houses reported higher viewing shares in all territories, and revenues were stable year-on-year at constant exchange rates.
Our Nordic pay TV business reported accelerated growth, which reflects the strategic investment that we've been making in content and technology, and Viaplay has continued to deliver very healthy subscriber growth with its market-leading content offering. Our pay TV business in the emerging markets delivered good growth, and the higher than anticipated profitability levels did include some positive one-off timing and currency related items in the quarter. We will therefore outperform our previous break-even expectation while we are continuing to invest as planned in the further development of the business. We have made significant content investments over the last year, and the benefit of this can be seen in the important strategic partnerships where we have renewed and extended these partnerships with the leading third-party content distributors in the Nordic region. These companies such as Telenor, TDC, Box, TV 2 Norway, and RiksTV.
We, of course, encouraged by the fact that these long-term partners see the value of our strength in content and product portfolio and package offerings of channel-specific relevant content for their customers. These deals will further increase the penetration of our channels with our partners. We launched MTGx, our digital accelerator in June as a group-wide initiative to provide platform for the development of our existing and new digital offerings. We have led the way in this field with our free TV AVOD services and pay TV SVOD services and exciting new products such as light TV and Viagame. Now is the time to step up the speed and ambition for the group, and MTGx will provide the X factor for us in this key area. We have also now enhanced our studio presence with the acquisitions of DRG and November Film.
These are important deals for us, as was the acquisition of Paprika Latino last year. We are committing to creating, producing, owning, and distributing more high quality, original, local, and relevant programming in all of our markets, and you should expect us to do more in this area moving forward. With half of 2013 behind us, we can see that the actions we are taking are having the desired effect, with significant momentum in our core operations. We will continue to develop and invest in this momentum, despite the fact that we are now in the smallest sales and earnings quarter of the year. We continue to generate healthy cash conversion levels, boosted by the ongoing quarterly dividend from CTC Media. We paid out our highest ever annual dividend in May and still ended the quarter with very low gearing.
We continue to review a number of organic and M&A driven opportunities to invest in the future growth of the group and shareholder returns. As usual, let's briefly review the performance of each of our businesses and start with the Scandinavian free TV operations, where sales were stable at constant exchange rates. Sales were down year-on-year in Sweden and Denmark, but were up in Norway. No independent market data has been published for actual TV advertising market performance in Q2 at this stage, but we expect the Danish market to have declined again in the quarter, the Swedish market to have been at around the same level as last year, and the Norwegian market to have grown again. Our combined audience share in Sweden, our largest market, showed clear improvement year-on-year and was up from Q1 2013, underscoring the positive momentum in our programming schedules.
We still have work to do, but the challenge, of course, and are focused on making further improvements. The new distribution agreement with third party operators that I mentioned earlier has enabled us to secure additional distribution for TV10 through inclusion in Canal Digital's digital cable offering. In Denmark, our combined target audience share was up both year-on-year and quarter-on-quarter and achieved its highest commercial share viewing level since Q2 2001. Again, the distribution agreement that we have signed has made TV3 Sport 2 available to an additional 600,000 YouSee digital cable subscribers this month, and TV3 Puls has now been included in the Boxer terrestrial network. Finally, turning to Norway. We delivered sales growth at constant exchange rates for the first time since Q3 2011.
Our combined audience share also improved versus last year and the previous quarter. As previously announced, we will launch a new and thus a third free TV channel in the second half, and we have now signed a number of carriage agreement to secure penetration for the new channel. Our award offerings have continued to grow in each of the three Scandinavian countries, and we increased both revenues and traffic year-on-year in all three countries. Our Danish operations reported another quarter with more traffic during the three-month period than in the whole of last year.
OpEx for Scandinavian free TV business were up 4% at constant exchange rates in the quarter, and we expect our full year OpEx at constant exchange rates to be in the higher end of the mid-single digit percentage point range, which we previously communicated, as we invest to further increase our audience share and gradually regain advertising market shares. Let's move on to the Nordic pay TV business. Revenues were up 7% at constant exchange rates, which reflect the consolidation of the TV3 Sport channels in Denmark, Viasat subscriber intake, and rise in premium satellite ARPU. The overall subscriber base continued to grow when including Viaplay, but the satellite subscriber base was down in the quarter as anticipated. On the other hand, premium satellite ARPU continued to grow in the quarter as anticipated, following year-on-year growth in the HD subscriber base and price increases.
We do still expect that the number of third party subscribers will be higher at the end of 2013 than at the end of 2012. We have also launched a new product for our DTH subscribers and enhanced their TV entertainment package by making Viaplay available as a multi-screen service as a part of our Viasat satellite offering in Sweden, Norway and Denmark. We raised prices for the standalone top tier Viaplay package earlier in the year, and we have now raised prices for the combined Viasat and Viaplay package. The Viasat platform has meanwhile been further strengthened since the beginning of the year with the inclusion of two SBS free TV channels and two C More pay TV channels in Denmark, Sky News HD in all the countries, and TV2 Zebra channel and on-demand library in Norway.
At the same time, our football channels have been made available on the Canal Digital cable platforms in Norway. OpEx increased significantly year-on-year as expected, as a result of our investment in premium movie and sports content and the evolution of Viaplay, as well as the consolidation and the expansion of the TV3 sports channel business. The operating margin of 11% in the quarter is in line with our 10%-12% outlook for the full year. Moving on to the free TV emerging market business where the segment delivered another quarter of outstanding growth with 31% sales growth at constant exchange rates, driven by very healthy underlying sales growth and higher advertising market shares in almost all of our territories, boosted by the sales cooperation and the consolidation of LNT. This was an exceptional performance, and to be clear, this overall growth level is unlikely to be repeated moving forward.
As we discussed on the last quarterly call, and it's worth reiterating now, the sales corporations are structured in the way that we acquire partners' commercial inventory at fixed annual wholesale prices and then sell the inventory as part of the media house offering at the seasonal price variations. This, of course, creates a substantial sales and EBIT seasonality, so please remember this for Q3, which is the weakest sales period of the year. OpEx was also up significantly in the quarter, driven by the effect of the sales cooperation as well as the launch of Prima ZOOM and further investments in programming to drive the ongoing momentum. We expect a similar level of OpEx growth in the second half of the year as in the first half.
All of the operations except Hungary were profitable in the quarter, with our Ghanaian free TV business reporting its first-ever quarterly breakeven result since launch in 2008 and ahead of our launch in Tanzania in the second half of this year or beginning of the next year. Now to our pay-TV operations in the emerging markets where sales were up 9% at constant exchange rates following continued growth in the wholesale mini-pay business as well as further year-on-year satellite subscriber growth and growing advertising revenue for our Russian channels. The satellite platform in the Baltics, Russia, and Ukraine added 28,000 net subscribers in the last year. The total satellite subscriber base was down from the first quarter, but up year-on-year. The different Q1 to Q2 growth trend last year was driven by the Euro 2012 football championships, which were co-hosted by Ukraine.
Overall, with the satellite platforms in both Russia and Ukraine, subscriber intake in January is very Q4 weighted, and this is expected to remain the case. The wholesale mini-pay business has added more than 17 million subscriptions since last year and over four million in Q2 alone. Sales of our Viasat Premium HD in Russia, Ukraine, and the CIS, which began at the beginning of December last year, are progressing according to plan, and we are making it available on an increased number of third-party networks. OpEx was up significantly year-on-year, but was down from the first quarter of the year, driven by some positive one-off timing and currency related items. Operating profitability improved significantly compared to the previous quarter and exceeded the previously provided expectations for break-even EBIT results for the full year 2013.
However, please note that approximately half of the Q2 EBIT is attributed to be positive one-off timing and currency related items. The rest of the improvement relates to growing contribution from Russian advertising sales, which are heavily seasonal, and higher subscription revenues from the mini-pay business. We are continuing to invest as previously indicated, there is no change to the expectation for rising profitability levels in 2014. Finally, just a quick word on the other business segment where the reported sales and cost decline primarily reflect the sale of Bet24 operations in May last year. Sales were actually up 9% in the quarter at constant exchange rates when excluding the contribution of Bet24, but including the contribution from acquired businesses. Sales for our Swedish radio operations have continued to decline, and the operations remain loss-making.
The acquisition of Digital Rights Group in the U.K. and November Film in Norway will contribute to the performance of MTG Studios operations going forward, but revenues for the segment will fluctuate depending on production schedules and format sales. Our investments in MTGx, our group-wide digital acceleration initiative that I highlighted earlier, will be included in this segment from Q3. As we announced at our Capital Market Day, we expect this to add up to SEK 50 million of incremental operating costs in the second half of this year. Please remember that the majority of revenues generated by our digital operations will be accounted for in our broadcasting segment. Now over to you, Mathias.
Thank you. We reported 3% revenue growth in the second quarter as you've seen in our report. When adjusting for the 3% negative currency impact and all our M&A activity, our underlying organic growth at constant exchange rates was actually 7%. As you have seen, the Swedish krona continued to be strong and for the first half of the year, the euro and euro related currencies were 4% weaker than last year, and the US dollar was 5% weaker. Overall, OpEx grew as planned by 9% at constant exchange rates. We are on track with the investments we announced to you last year, we can already see that the investments, particularly the investments in content, are valued by our distribution partner and our consumers, which has also been visible in our Q2 top-line growth.
As a result of the investments, our group profits were lower year-on-year, but we still reported an operating margin of 13% in the quarter when excluding associated companies. The cost for our central operations were higher in Q2 than prior quarters. This reflects mainly two things. One is our increased M&A activity, which drives additional costs. The second point is that share price related costs for our long-term incentive plan has also been impacted by the strengthening of the share price. These are two factors that you should probably consider when we move forward as well into the second half of the year. Our effective tax rate in the quarter was 29%, and we continue to expect the full year 2013 overall tax rate in the P&L to be in the 25%-30% range, as we discussed earlier quarters.
Our asset-light operating structure continues to enable us to generate very high cash conversion levels. 80% of the trailing 12-month EBITDA for our wholly owned operations was converted into cash flow in the quarter. Working capital today is at an all-time low level, and we expect it to increase from that level throughout this year due to the overall scaling of the group and also from our increased programming investments. We ended the quarter with a net debt position of SEK 206 million, following the payment of SEK 666 million in the dividend payment to our shareholders in May. This represented a 42% dividend payout ratio and was the highest in the history of the group. Our ambition continues to be that we want to be the fastest growing broadcast entertainment company in Europe.
We continue to focus on investments that will accelerate our future growth and development. In addition to that, bolt-on acquisitions that we announced in June continue to reflect this ambition to drive growth both organically and through our M&A. Now back to you, Jørgen.
Thank you, Matthias. That concludes our comments on the result. We will now be happy to answer your questions. We have 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 each. Operator, can we have the first question, please?
Thank you, sir. Ladies and gentlemen, we are now ready to register questions. If you'd 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'll now take our first question from Adrien de Saint Hilaire from Exane BNP Paribas. Please go ahead.
Good afternoon, everybody. Thanks for sharing all those information, especially group organic growth, much appreciated. I've got a few questions, please. The first is related to free TV Scandinavia. I think in the past you used to give us by country how you performed versus the local ad market. I was wondering if you could do the same again. The second sub-question on this topic is, can you give us your outlook for your ad revenues going into Q3 and potentially Q4, if you can see as far as Q4? That's the first question. The second question is about Czech Republic. Jørgen, you mentioned that the increase you had in Q2 was obviously partially, not let's say one-off, but driven by what happens to your competitors. Local press was saying that now Nova has struck agreements with media buyers.
What do you expect as a consequence for Prima in terms of ad growth in H2? A third question on this topic of Czech Republic, given that profits have now nicely rebounded in Czech Republic, would you consider buying out minorities given your solid financial position? Thank you very much.
On the first issue, when it comes to the market development for Q2, we believe that the Danish market will be down in the second quarter. It's important to note, of course, that there's no official figures yet, but we expect the Danish market to be down, and we expect to have outperformed the market. We have gained market shares in Denmark. When it comes to Norway, of course, we're happy that we managed to increase now the year-on-year sales, but we have, again, no official market figures there yet. On the other hand, IRM forecast a higher growth in Q2 than we performed. We believe that we will lose market shares in Norway in the second quarter. When it comes to Sweden, it's difficult to say, but we believe that the market will be somewhat around the market last year.
Again, I think IRM will come out the 3rd of September with the second quarter results. We have to wait and see how we have performed on the market, but we expect the market to be plus minus the same as we saw in the second quarter in the Nordics. When it comes to the outlook for the market here, what we can relate to, of course, is the forecast from IRM. It is also important to notice, of course, that it is the smallest quarter of the year. What is for sure, though, is that we believe that the Danish market will continue to decline. According to IRM, we will see a small increase in the markets in Sweden and in Norway. I can't give you any more outlook than that, unfortunately.
When you look at Q2 in Czech, it was an amazing performance, 47% sales growth, and it is unfortunately unlikely to happen again. Of course, it was on the back of the sales cooperation, as we said, it was on the back of the launch of Prima ZOOM and on the back of right pricing towards the media agencies and the agencies, of course. For us, it's important to continue to have this strong product. That's, of course, our focus. We have a very strong reach now. We have a very strong lineup of channels, and that, of course, should make us able as well to grow in the third quarter as well for the visibility. The visibility, of course, is, as we said, for all the markets is not that easy. Therefore, it is difficult to say.
Yes, we do believe that we continue to grow in Czech. When it comes to whether we want to buy out the partner, we have a very good partner, and we have had the partner for many years now, and we have a very good cooperation, and we are happy with the partner. I think that is something which we will continue as well going forward. I think just one thing on the Scandinavian market as well, also when we now are happy about the fact that we managed to gain viewing shares, which of course is very good for us. Of course, that is the whole assumption for coming back to gain market shares in Norway and Sweden as well. You just are clear, there will be a lag as well.
It is not just because as you perform in two months, then automatically the market will follow you. That is unfortunately not the case. The assumption for increasing your market share is, of course, that you continue to increase your commercial share viewing performance. That is our focus right now. The good thing is that we are increasing, and that of course gives us hope as well that the things that we invest in going forward also will do well.
Okay. Thank you very much.
We'll now take our next question from Stefan Nilsson from SEB. Please go ahead.
Thank you. Hi, Jørgen and Mathias. I'll start with one question on the pay-TV side. Could you update a bit on the subscriber trends? We see the DTH continues to decline. Is it still due to Denmark, or are you seeing increased churn in Sweden? Also, the third-party sub base is declining a bit now. Were you expected to improve to the end of the year? Obviously also, if you have seen any impact on churn rates from your price increases, which I guess should support your sales going forward.
Yeah. When you look at the loss in DTH, it is still Denmark. The good thing is that Sweden continues to have a very strong platform, and of course, we are very optimistic now as well when we have launched a new product where we include Viaplay now as a multi-screen service. It is, of course, a very strong product. The loss is Denmark still. When you look at the third-party partners, as I said, we have just launched or just negotiated a wide range of new partnership, a new contract. Of course, we do expect to have even a closer cooperation with our partners there. Also, as we said, we do expect that we will have a higher outgoing base of third-party networks in 2013 than we had in 2012. We do believe that we will increase the third-party networks.
The price increases and churn, we have not seen anything. Of course, it has just been announced, but still, I think important is that it is a price increase because you enhance the product. We see very good traction on the product, particularly as we mentioned on Viaplay as well, but also on DTH platform in Sweden, which is very strong. We do not anticipate churn as such because of the price increase.
Okay, great. My second question comes to the costs in Eastern Europe in general. First of all, given that you're actually losing some ratings in the Czech Republic, if this means that you will invest more in order to protect your, at least, commercial share viewing. When it comes to pay TV cost in Eastern Europe, if you know this new guidance means that you're actually going forward not going to invest as much as you anticipated, and we should also expect lower growth due to that.
Yeah. When it comes to free TV East, it's the same growth in the second half as we have in the first half, obviously in terms of OpEx. Of course, we will look at how to improve, of course, the Czech ratings. We want, of course, Prima to be strong as it used to be. There's no doubt about that. It would be the same growth in the second half as we had in the first half. Then it was pay TV-
Pay TV, yeah.
Yeah. Can you repeat the question again, sorry?
No, just apart from the one-offs, if you're basically implying that profitability should improve again next year on these higher numbers, this means that you're actually not investing as much as you have previously anticipated.
No, I think the good thing, as we said as well about pay TV East, is that it is on the basis of more subscribers intake in the quarter. Good, we have made some enhancement of the contract. It is also on the basis of better advertising sale. As you know, it unfortunately sometimes goes up and down with advertising sale as well. Looking at the visibility as well when it comes to pay is, it is a bit difficult. Obviously, we are very happy with the development of the second quarter, but we continue to have the strategy about enhancing the product. The country is about to be digitalized, as you know, it is a long journey for us. We will continue the path which we have laid out when it comes to investment in pay TV.
Okay. I shouldn't read too much into the slower growth rate and the declining DTH sub base quarter by quarter in that case, or?
No, I think what we, of course, as we said as well, one of the things was this one where we had the year 2012, of course, which had the last, the sales, therefore we see a bit higher churn on that one. We expect to be relevant in the market. We have invested in the content. We are the leading premium pay movie supplier in the market. Of course, it's good news for us that we see also on the mini pay side that we can continue to attract more and more customers. 4 million subscriptions intake in Q2 is, of course, very good.
Okay. Thanks so much.
We'll now take our next question from Lisa Yang from Goldman Sachs. Please go ahead.
Hi, good afternoon. My first question is on your cost guidance. Can you give us a little bit of color of what you're thinking in terms of content spend in the second half of the year in both free TV and pay TV Nordic? Especially in pay TV Nordic, given that you have the phasing out of the new Champions League, Premier League and the cost of the HD channels. Should we expect much easier comps? Also on next year, just thinking, you can give us any color on how you expect to allocate the cost of the Olympics and to what extent that could be another hit on your pay TV margins, for example. Second question is regarding your distribution agreements that you just renewed for your free-to-air channels.
Is that going to change the level of carriage fee we have seen so far, and what level of growth do you expect for this year and next following those renegotiations? Thank you.
Hi, Lisa. Mathias here. I'll try to answer your first question, I leave the next to Jørgen. I think second half cost guidance, if you start with pay TV Nordic, I think the easiest angle on that question is probably to say that the margins we expect to continue to be in the same range as we outlined over the last six months, I think. There is no change to that. Then once you've seen that we have some better traction on the top-line side, of course, as well. Margin guidance stays the same, so that should be fine. On free TV Scandinavia, I think we were quite clear on the overall full year cost guidance, the higher end of the mid-single digits at constant exchange rates. When it comes to weighting, I think the weighting is heavier towards the fourth quarter than the third quarter.
It's obviously a step change compared to the first half if you see what the first half was. The third question, then I think Jørgen answered the question on free TV emerging market, we can take it afterwards if we didn't pick that up. When it comes to Olympics next year, we haven't discussed that yet internally, where the biggest impact will be and so on, over what time period. We will have to come back to that when we get there.
Thank you.
When it comes to the distribution agreement, I think what we can say about that is, for instance, when you get higher penetration like we have gotten now with, for instance, the TV10 inclusion in Canal Digital's cable universe, it is to a large extent up to us as well to make sure that we capitalize on it by getting more and more viewers in. Today, as you know, 75% of the revenue coming into free TV in Nordic is advertising and 25% is mini pay. The deals I have, and it give us opportunity to, of course, to reach more customers, which of course is very important for us going forward. Therefore also, if we do it right, should be able to help our advertising sale and the distribution as such.
Excuse me, can you hear me?
Yes.
Sorry. Just a follow-up question. Actually, my question was more on the distribution waiting for the free-to-air in the Nordics. All the distribution agreements you just renegotiated and what impact on the carriage fees will have.
Yeah. As I said, the distribution agreements, for the Nordics, they consist of different components. Some of them are, of course, that you increase the penetration of your channels in some packages, and by that you are getting, of course, more carriage fees as such. That's, of course, a good thing. I think the other thing is also where we get the opportunity to come out to a broader audience, which is very important with the penetration increases that we're having. There, the example. That example is up to us, of course, to make sure that we capitalize on the increased penetration. For instance, like we're doing in Denmark now, where we get a higher penetration in the Boxer, for instance.
That means we get higher cable fees in Denmark at the same time as we increased our commercial share of viewing, which also means that, of course, we can get higher advertising sales. The split between
Sorry, the advertising and carriage fees is 75% of the revenue comes from advertising and carriage is 25%, we don't expect that split to change.
Okay, great. Thank you.
We'll now take our next question from Baldar from Danske Bank. Please go ahead.
Hi. I've got two questions. Firstly, on pay TV Nordics, could you just tell us how much the acquisition of TV 2 Sport added to growth year-on-year in this quarter? That's the first question.
Give me a second there, Baldar. I will come back in a short while. I have to figure it out.
I can ask the other question meanwhile. Looking at the free TV Denmark and the various deals that you have in place with Boxer, Canal Digital, you are adding new channels to the Boxer platform 1st of July. Could you just give us a comment on how the dynamics work in terms of the mini-pay revenue flows? Will you start to collect revenues from Boxer 1st of July, or is it a postponement of three to six months on those kind of revenues?
As you correctly say, we have already TV3 included in Boxer, and we also will now have TV3 Puls included as well. We never comment on the actual deal and how the deals are set up. What we are saying is that we will have increased mini-pay revenue from the Boxer deals, and we will have increased penetration. Therefore, it should be so that we hopefully as well will increase our advertising market share. That is, of course, the whole idea that you get more viewers in. As I mentioned as well, the split will not change. It is still 75% of the revenue Nordic we estimate will come from advertising and 25% will come from these carriage fees.
All right. Thanks. Regarding TV 2 Sport?
Yeah, I think we have around 7% at constant exchange rate growth for Pay Nordic this quarter, and around half of that comes from TV 2.
All right. Thanks.
We'll now take our next question from Mikael Laséen from Carnegie. Please go ahead.
Hi. Yeah, just a quick question on the financial items, if you could comment and explain how the negative numbers that there in the quarter and what we could expect ahead. Any one-offs in the quarter?
Hi. It's Mathias here again. I think there is one-off in the financial net in the interest cost. This is a provision that we actually did this quarter. It was the provision interest on tax payments. One of our countries right now, we have a discussion with the tax authorities. We've been very prudent. We've put a provision in there, which you shouldn't expect to come back. It's a one-off right now. It's not cash. It's not even decided yet. We've been fairly cautious. It accounts for the whole negative in the financial net.
Okay. Roughly how much will that be?
I think the financial net was minus SEK 28 in the quarter. I think it was very close to that.
All right. Okay. Just also maybe a comment on the other business. Sales were higher than expected there. Is this a new level? If you could maybe talk about the drivers for that segment. Thanks.
Yeah. That segment is fairly volatile, to be honest, meaning that it depends on the intake of orders that we have for our production unit and also as we said when it comes to DRG and November Film and so forth. Of course it is quite good that we are increasing, meaning that we are getting good orders in. Of course, the more renewal of these orders, you can say, the more renewals of the show, of course, we hope for it as well to make sure that we grow that area. That is, of course, the whole idea with going out and becoming broader with our product. That's why we have acquired DRG and also November Film.
It is very difficult to predict the growth there because it simply depends on the seasonality as well from the TV station, what kind of business, what kind of products do they order, what kind of shows do they order.
Yeah. What's the visibility for the second half?
Sorry, just to give you some flavor in the second quarter, it was our core Strix business who actually was the main growth driver. Just coming back to what Jørgen said it was.
Okay. The outlook for the second half, what's the visibility?
Yeah. We might know to a large extent what kind of TV shows would be orders. Still, hopefully, there will come more in. Therefore, it is difficult to say. I would rather not comment on that, to be honest right now.
The only technical thing you should remember as well, of course, we have acquired a couple of companies that we didn't have, for example, last year. DRG, for example, will come in and so on.
Yeah, exactly. Okay. Thank you.
We'll now take our next question from Rasmus Engberg from Handelsbanken. Please go ahead. Your line is open.
Yes. Hi. I had two questions. Firstly, on the pay TV side, can you sort of help me understand what drove the acceleration in growth there? You went from 3% growth in Q1 to 7% in Q2 in constant exchange rates? Was that an impact of your price increases or was it purely relating to Viaplay?
Hi. It's not one single thing there. It's a combination of a lot of things. We had Viaplay doing extremely well. We had the general price increases that's filtering through. We had a boxing event, a pay-per-view event as well, which was a little bit of a one-off effect. That was a fairly small impact on the overall growth. I think it's across the board.
Your price increases, Presumably, aren't most of your clients on 12-month contracts?
Yeah, previous price increases. Yeah.
Okay. These are price increases from 2012 sometime, or?
Yeah, no. I'm talking more about the price increases within the beginning of the year for Viaplay, for example, which was a fairly
Okay
decent price increase for the sports package.
Last year, your pay TV revenues declined a bit in the third quarter compared to the second. Is that a seasonal pattern or is it not?
Yeah, we had a very low sales quarter, I think, last year in the third quarter. Normally, we take start fees up front when we sell these packages. That had an impact that quarter.
Okay. Right. Then, on your new Norwegian channel, have you communicated anything when that will go live? Can you also say if those potential viewers are bundled at the same price as your existing Norwegian viewers?
Yeah. What we are saying about the channel when it goes live, it will go live in the second half of 2013. When it comes to the bundling, yes, we are bundling our sales. We are delivering the same target groups, the same views for all our channels. It is a bundle offering we'll provide to the market.
Okay. All right. I don't have any further questions at this point. Thank you.
We'll now take our last question today from Anders Winberg from Brummer. Please go ahead.
Hello, Anders Winberg from Brummer. Congratulations to a good quarter, in particular on the free TV emerging markets. I just have one question left, a detailed question. The minority interest was higher than normally. Is that connected with Czech Republic doing well, i.e., should we see that in connection with the strong free TV emerging markets business?
Hi. Yes, it's Mathias. Yes, it's entirely the Czech performance, which was extremely good.
We should basically model higher. Given that the strong performance in emerging market continues, we should model higher minorities going forward?
Yeah. If you assume the first, then you should assume the second.
Okay, thanks.
That concludes the question and answer session. I'll now 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 Q3 results on October the 22nd, and I very much hope to meet with as many of you as possible before then. Thank you for your continued interest in our work to shape the future of entertainment by delivering relevant local and digital products and services to our more than 100 million viewers in 37 countries across four continents. I wish you a good summer and say goodbye for now.
That concludes today's conference call. Thank you for your participation.