Good morning and good afternoon, ladies and gentlemen, and thank you for holding. Welcome to the NTG Q1 2013 Results Conference Call. For your information, today's conference is being recorded. 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 presentation slides on MTG's website atmtg.se. Before we start, 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 MCG 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 new technologies and competitors. These risks and uncertainties are described in more detail the 2012 Annual Report, which is available from the group's website at www.mtg.se and in the group's registration statement on the Form 20 F, which is available from the website of the U. S.
Securities and Exchange Commission. I would now like to hand the call over to Jurgen Manson Linderman, MTG President and CEO, who is joined on the call today by group CFO, Matthias Hermansen. Please go ahead.
Thank you, operator, and good morning and good afternoon, afternoon, everyone. Q1 is a seasonally smaller sales period, but our results do indicate a clear positive momentum across the business. The standout points from these results are the higher than anticipated growth in the emerging market feature operations and the clear improvement in the performance of our Scandinavian free CV operations. Both of these have been achieved despite continuous soft ad market environment. Viably has continued to report strong subscriber intake and achieved record numbers of daily viewers again this quarter.
We raised guidance for our ViaPlay top tier package in both Sweden and Denmark during the quarter, and we have continued to make adjustments across the organization in order to improve our operational and financial performance. And we have also continued to innovate so that we can further accelerate our development. It is still early days in 2013, but we can see that the changes we have made over the past 6 months to strengthen the group are having the desired effect. We're also on track with investments that we are making to drive the future growth of the business and to build the media house of the future. Group sales were up 2% at constant exchange rates and up 5% for our continuing operations, if you exclude the business that we have closed and sold since the beginning of last year.
Profit is very down as expected given the investments that we are making, but we have a high cash conversion level and our cash flows were boosted by the ongoing dividend stream from CTC Media. We therefore ended the quarter in a net cash position. Let's start our review of the operation with the Scandinavian FreeTV business where segment sales were down 1% at constant exchange rates. We grew our sales and took substantial ad market share in Denmark, but reported lower year on year sales in Sweden and Norway. I'm has not yet published its Q1 data for the quarter, but we expect that the Norwegian market continue to grow in line with the I'm forecast of 3.5% up from the original 2% growth projection.
I'm has changed its Q1 forecast for Sweden market the Swedish market from plus 2% to minus 2% and also reported that January February were down 4.7% on a combined basis. No independent numbers are available for the Danish market as usual, but energy handling invoicing on a gross basis as measured by DRRB was most probably down by around 10% in Q1 according to media comments. The vast majority of our annual agreements have now been signed at higher net prices than in 2012 in each of the markets. Sweden is our largest market and the combined order share for our 4 channels was significantly up quarter on quarter and increased sequentially during the quarter to the highest ever level for the month of March at 35.2%. Based on what we know today, we also think that we gained advertising market shares in the quarter.
TV3 and TV6 shares were slightly down year on year, but up quarter on quarter, while TV8 was stable and TV10 was up on both measures. This enhanced performance reflects the positive impact of the measures that we have been taking for several quarters now. Our show selection and execution have improved and we are reordering more formats than we have done for a number of seasons as well as achieving a higher success rate with new shirts. As we announced previously, TV10 will also have a higher penetration level from the middle of the year following the new distribution agreement that we signed with Telenor. Our goal is to increase our audience share and add market shares going forward as well as to expand our still low but fast growing retail advertising market share.
Turning now to Denmark, the combined target audience share for our Danish retail house was up year on year and quarter on quarter after TV3 was made available on the Boxer and Canadian Digital Terrestrial and Satellite BloodRay Homes. Our 2 now wholly owned TV3 sports channels were included in the METEORHOUSE offering for the first time this quarter. And Viacom's MTV and VH1 channels were also included in our MediaHouse advertising sales package for the first time. These factors resulted in a substantially higher reach and advertising market share. Underlying ratings were also good for TV3 as a number of reorder formats repeated their earlier success.
Q3 Pulse Audio share was stable on both measures and will also benefit from inclusion of the BOXR and Knell Digital platform during the year. Q3 plus during was down, but we expect a pickup when the channel begins to air English Premier League Football from the start of the new season in August. We expect to continue to take significant advertising market shares going forward. Turning finally to our smallest retail Refinery region in Scandinavia, the combined target order share for our 2 channels in Norway was also up quarter on quarter and stable year on year. Key new local productions and new series of established shows rated well on TV3 and Ryerson IV continued to grow its audience share.
The combined target audience share was also up year on year in March from 18.6% to 19.3%. As in Sweden, the measures we have taken are having an impact, but we are small in Norway and the tide takes longer to turn. We are working on our plans to invest in a 3rd channel, which will be launched later in the year and provide the opportunity to really build and extend our market presence in Norway. We also continue to develop our ABAR offering in all three countries. Our Nordic traffic levels are growing and the Danish operation had more traffic in the Q1 of 2013 than during the whole of 2012.
We launched a new sports clip site in Sweden in January called and we will roll it out on new platforms this year. We're also adapting the way we commission local content to fully embrace the opportunities provided by the combination of our viewers' engagement in linear and online on demand TV with social media and second screen usage. OpEx for Telenator and free to free business was up 2% at constant exchange rates. We have announced that we plan to launch a 3rd channel in Norway during the second half of the year, which means that upticks at constant exchange rates will be in mid single digit percentage point range for the full year. Given the quarter on quarter development 2012 and the planned channel launch, we expect the cost growth to gradually accelerate through the remaining quarters of this year and with the clear weighting.
Segment operating profits were down year on year, but we still delivered an operating margin of almost 30% in this seasonally low sales period. Now let's move on to the Nordic AsiaV business, where revenue were up 3% at constant exchange rates and primarily reflected the inclusion of 100% of the result of the Danish TV3 Sport channel business. Underlying sales, excluding the TV3 Sport revenues, were slightly up year on year at constant exchange rates. Fireplace continued rapid expansion ensured that the total subscriber base continued to grow with the service achieving record new numbers of daily viewers in the quarter. The services are now available on almost all types of Internet connected devices.
The top tier price increases in Sweden and Denmark have not resulted in lower sales or increased churn levels. The satellite subscriber base continued to decline in the quarter as expected and mainly due to the competitive pressures in the Danish market. However, Nordic premium satellite subscriber ARPU continued to grow as expected due to the higher HD penetration levels and previously introduced price increases. The development in the 3rd party network subscriber base was impacted by a downwards restatement of subscriber volumes by a distribution partner. We continue to expect that the number of third party subscribers will grow during 2013, but not offset the satellite decline.
Our platforms and offerings are now stronger and more available than ever before with more HD and catch up services, more buyout that channels including TV3, Sport 1 and 2 and Premier League and more third party channels including the SBS channels, the C More Canal 8 Sport and Canal 9 in Denmark, TV2 set by Norway and Sky Sports News across the Nordic region. We're also gearing up towards the Olympics next year and have already launched a dedicated Olympic channel called ViaSat 2014 on our satellite platform in Sweden. Segment OpEx increased significantly year on year as planned as we invested in premium movie and sports content and the development of VIA PLAY and also consolidated and expanded the Q3 sports channel business. Segment progress were therefore down and we reported operating margin of 11.1%, which is in line with our outlook for full year 20 13 margin of approximately 10% to 12% and then a higher margin in 2014. If we move on to the 3 gigabytes emerging market business, this was again the standout performance of the quarter with 25% sales growth at hypersistant exchange rates.
The growth was driven by the sales coverage in the Czech Republic and Bulgaria, healthy underlying sales growth and increased advertising market shares in almost all of our operating territories, as well as the consolidation of the ships in Latvia from June last year. The sales corporation is structured in a way that we acquire partners' commercial inventory at a fixed annual wholesale price and then sell the inventory as part of the media house offering at the seasonal price variations. While this is boosting our numbers, I still want to stress that even if we strip up these effects, the growth at constant exchange rates were in the double digit territory. Headline OpEx was also up significantly, highly driven by the sales corporation, but also by further investments in programming in order to capitalize on the ongoing momentum. The successful launch of our 4th channel Prima Zoom and the consolidation of LNG.
Despite losses in Hungary and investments in Ghana, segment operating profits improved year on year for the 6th consecutive quarter and more than tripled year on year with an increased operating margin. Looking at the 3 largest market in Germany, let's start with the Board of Things where our sales were up 20 3% at constant exchange rates and includes the newly consolidated LNG operations in Latvia as well as year on year sales growth for the Estonian operations and stable sales in Lithuania. The Latin and Estonian TV ad market are both estimated to have grown in the quarter, while the LatAm Ethiopian market is estimated to have declined. We are the largest media house in each market and our Latin media house audience share has been substantially boosted by the addition of the LMT channels. As we indicated last quarter, our smaller channels are benefiting from the recent digitalization of the Lithuanian market, while we are facing increased Russian language program competition for the TV3 plus sorry, for the 3 plus channels in Estonia in particular.
Secondly then to the Czech Republic, where our sales were up 29% year on year at constant exchange rates in a TV advertising market that is likely to have declined in the quarter. This clear and substantial outperformance reflect a number of factors. Firstly, the sales coverage in material brand of, which has boosted our audience share by over 6 percentage points to approximately 44%. Secondly, organic sales growth and advertising market share gains and thirdly, the successful launch of our new channel, Prima Zoom, which has already achieved a target audience share of over 3%. Q1 was a major milestone for our Czech business as we became the largest free TV media house in the country for the first time on a quarterly basis when measured by advertising market share.
And finally to Bulgaria, where our sales were up 29% at constant exchange rates in a cheap advertising market that we estimate to have continued to decline due to the uncertainty surrounding upcoming elections.
The combined audience share for
the Media House increased significantly from 29% last year to 34%, following successful performance of a number of key local producers. We also took substantial advertising market shares when combined with our strategic sales cooperation with 9 third party channels in Bulgaria. Let's move on to the pay TV operations in the emerging markets, where segment sales were up 10%, a constant exchange rate following continued year on year subscriber intake for the satellite platforms and wholesale mini pay channel business. The satellite platforms in Baltics, Russia and Ukraine have added 49,000 net new subscribers in the last year. The subscriber base was slightly down compared to Q4, but this reflects the usual seasonal effects.
We have just added 7 new Ukrainian free to be channels to our Ukrainian satellite offering, which together account for over 20% share of viewing in the market. We now have virtually all Ukrainian feature preview channels on our platform and we have also launched additional time sales services for key Russian regions, including Siberia. The wholesale MiniPay business has added more than 19,000,000 subscriptions over the past year and more than 1,000,000 subscriptions in the last quarter at 11. We also launched a new cooperation with Poloz Olsson around 3 new co branded channels in Poland in March, based around our popular Explorer, history and nature formats. Sales of the premium package of 4 HD channels in Russia, Ukraine and the CIS, which started at the beginning of December, are progressing according to plan and the package is already available on several leading networks.
Segment OpEx was up substantially year on year or stable quarter on quarter as expected and in line with the previously outlined investment program. The Shekma therefore reported a small operating loss in the quarter and we continue to expect a breakeven result for the full year and rising profitability levels back in 2014. We are continuing to review our UATV TV satellite package and pricing structure in Ukraine in the absence of any timeline for free TV channel encryption, which would be a clear catalyst for rising pay TV penetration. And finally, just a quick word on the other business segment where the reported sales and cost decline mainly reflects the sale of Bet24 operations in May last year. Segment sales were, however, still down 17% at constant exchange rates when excluding BEP24.
This mainly reflected the impact of MTG Radio Sweden no longer operating the 20 energy licenses from the beginning of 2013. This was offset to some extent by the growth in the Norwegian radio business and we have said all along that SBS should not be able to take over the operations of the 20 LNG licenses and assure a dominant position in the market with some regions of Sweden now only having 1 commercial radio station. This potentially sets the markets back to conditions not seen since the early 90s when it comes to lessens choice, and we are pushing this case with the regulatory authorities in Sweden, of course. Tank and operation costs have been reduced across the board, but the segment still made an operating loss for the quarter. In terms of outlook for these other businesses, the radio, the 3rd radio cost base have now been adjusted.
The Norwegian radio business is expected to continue to grow and the revenue and cost flow in the production business will continue to fluctuate depending on production schedules and format sales. And now over to Hubertias.
Thank you. Group sales for our continuing operations grew 5% year on year at constant exchange rates. The reported results were yet again impacted by the exceptionally strong Swedish krona that we will see right now. Just to give you some flavor that in the end of the quarter, the Czech krona, for example, was 9% weaker than a year ago, and the euro and the euro related OPEC currencies were around 5.5 percent weaker against the Swedish krona, which clearly impacts both profitability and growth when you report our numbers. Our sales performance was a lot better in constant exchange rates than at reported rates for all our business segments, especially for the emerging market segments.
The overall sales growth was driven by the emerging markets operations, as you heard, and particularly the 3 TV operations, which benefited from the Q1 impact of these new sales cooperation agreements, both in Czech and Bulgaria. But we'd like to stress again that even without these contracts or agreements, we saw underlying double digit sales growth in the area in virtually declining markets across the border. Group operating expenses was up as expected as we pursued the pay TV investment plan that we outlined last October. These investments are all about driving future growth of the business and our Nordic and Emerging Private City Market operations have performed. OpEx was also up slightly for the Free TV's Canadian operations as planned and reflected selective programming investments and the usual inflation in our normal Hollywood output deals, while the substantial increase in free TV emerging market costs primarily reflected the impact of these new sales agreements that we discussed earlier, as well as the launch of PrimaZoom and the consolidation of L and T.
And as you will see, this year on year impact will, of course, be different over the course of this year when the comps become easier later on the year. As previously discussed, group's profits were reduced year on year due to these investments. Also combined and very in line with the continued weak advertising markets across our territories. If we then look at depreciation and amortization, they were up quarter on quarter year on year, primarily reflected CapEx associated with the move to a single U. K.
Office location in London. The new and improved state of the art London Playhouse facility is right now being developed over this year and will be fully functional early next year. This will obviously impact CapEx levels this year, which are still expected to be modest and represent less than 2% of group sales. So even if we invest, we keep them at a low level. As previously indicated as well, the increase in CapEx also reflects the acquisition of the more capital intense CTS business from last September and the ongoing investment in our technical development of the ViaPlay service.
The CTS business, just as you know, has won 2 out of 3 major landlord tenders in Stockholm just recently and is developing according to plan. And obviously, the more successful we are, the more we will invest in that business. Our effective tax rate was 29% in the quarter or actually 26% if you exclude the higher tax rate coming from the Russian CTC business. And we continue to expect the full year 2013 overall tax rate to be in the middle of the range 25% to 30% that we discussed before. Our asset light operating structure enable us to generate high cash conversion levels and 80% of group EBITDA for our wholly owned operations was converted into operating cash flow in the quarter.
This excludes an all impact from dividends and associated income from CTC. We reported the usual seasonal negative working capital change in the Q1, but we ended the quarter on the lowest working capital level in relation to sales ever for the Q1. Previously indicated, you should expect working capital to increase overall this year due to the scaling of the group and also the increase in our proven investments that we talked about for the last 6 months. We made no investments in shares in the Q1 of this year, and we ended the quarter with a net cash position of DKK 17,000,000 compared to a net debt position of DKK 1,000,000 last quarter. We already announced that we are proposing to increase this year's annual dividend by 11% to TON 10 per share, which is equivalent to a 42% dividend payout ratio.
Given our ambition to be one of the fastest growing media companies in Europe, we continue to focus on investments that will accelerate the group's future growth and development in order to create long term sustainable value. And now back to you,
Thank you, Matthias. A quick summary before we move to the Q and A. Q1 is a seasonally slow sales period, but we have shown clear outperformance in the emerging markets free delivery operation and improvement in the Scandinavian free delivery operations despite low ag market growth at this stage in almost all territories. We will invest in our new channel in Norway during the second half in 2013. We are addressing the investment that we are making in the Nordic and Emerging Market Page Corporation and both businesses are growing their top lines.
We have continued to make adjustment across the organization in order to improve our operational and of course financial performance and we have also continued to innovate so that we can further accelerate our development, new products, new services, new channels and new collaborations. We bringing new talent and expertise to help us build the media house of the future. We ended the quarter in a net cash position and are reviewing a wide range of organic and M and A led expansion opportunities. It is still early days in 2013, but we can see that the changes that we have made over the past 6 months to strengthen the group are step by step having the desired effect. That concludes our comments on the results and 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. So to allow time, please limit yourself to no more than 2 short questions each. Operator, can we have the first question, please?
Thank you, sir. Ladies and gentlemen, we are now ready to register questions. The first question comes from Stefan Nelson from SEB. Please go ahead.
Thank you. Hi, Georgi Matias. Two questions then. First a question on FreeTV where it seems that you've started to turn the corner in terms of ratings at least stabilizing. However, obviously, profitability wise, you're down at maybe 2,005 level.
So could you kind of try to help us out to understand how you hope to achieve higher margins or if we should actually expect lower profitability for the free to be business going forward as well than in the past?
When it comes to the FreeTV and to the performance, of course, as you say, we have seen some improvements in the way that we have selected shows and so forth. But still, it's very important to underline that, that is something that we constantly are working on. Obviously, the more shows which will work for us, the easier it would be for us to come in seasons to pick the right shows, of course. And we don't need to go out and event so many new shows, of course. So that is quite important for us.
And as we say as well, Sweden had a good March, where we saw actually all time high in terms of share for the media house.
Okay. But I mean now you're investing mid single digit. But I mean what are your assessments on the growth potential for this business ad market wise and market share wise from here? Is it possible to kind of comment on that?
When it comes to advertising market, of course, it is very difficult to say, as you saw yourself, Devin, that you have seen that IAM has downgraded the Swedish market from plus 2 to minus 2. We see good trends in the Norwegian market, which of course is good for us going forward also due to the fact that we will be launching the 3rd channel in the Norwegian market. But the Danish market came out with a 10% probably or comes out with a 10% increase decrease as we see it right now. So it is very difficult to estimate. What we pursue now is that we will continue, of course, to see opportunities.
And the 3rd channel in Norway will increase our spending, and you will see that accelerate during the quarters going forward now with the highest level in the Q4 in 2013, of course, on the base of on the back of the new channel notes in Norway.
Okay. Fine. Thanks. My second question is regarding the comments Matthias had on and in the report about that you are a growth company and are considering a number of growth targets like acquisitions. Could you comment on where you're looking?
And maybe more specifically or hypothetically, do you think you would be allowed to buy C More?
First of all, what we of course, what is interesting for us is to look as we sit all the time in the emerging markets. We have very good traction right now in the emerging markets and there we're looking at free TV opportunities, pay TV opportunities, production companies, online businesses as well. And the same, of course, goes for Africa, which also is always going to develop very fast as we see right now. Also our future operation in Ghana had a very good traction this Q1. So in terms of M and A, it is mainly in Eastern Europe and is in Africa where we're looking.
Okay. And on Seymour, would you be allowed, you think, hypothetically for competition authorities to acquire that business?
I don't know. I've not seen I've read I've seen some writing about it and it depends I don't know what it is and the rumors of flowing around and let's see what it is and what kind of what they want to do with it. That is not something that we have been that that we have seen yet. So it is difficult to comment on it.
Okay. Okay. Thanks, Renaud.
Our next question comes from Adrian de Saint Hilaire from Exane.
Yes. Good afternoon, everybody, Georgen, Matias and everyone. I've got two questions please. So first of all, about Pay TV Nordics. I've seen that TDC is it intends to have a new pay TV offering in H2 2013, which seems to be a lot more unbundled.
So I was wondering if you have any answer to that offering and how you think it will impact your pay TV business? That would be my first question.
Yes. I think what from what I've heard at least is that they would keep, to a large extent the structure that they have today, but then they will keep opportunities for a la carte as well where you can choose different channels. Obviously, these channels will be these probably be priced differently than they are priced if you accumulate all the channels that they have in the Pangas right now. So I don't know. It is I've not seen it completely and we need to see that.
I think for our own channel, we are present in the UC package and in the high penetrated packages. So that will of course continue. Okay.
And my second question is about CTC Media. So obviously, Hensel Gerhardweicht has stepped down as Chairman and the new co Chairman will be Lorenzo Grabow, if I'm not mistaken. And I was wondering if you could comment on his nomination with regards to your M and A ambitions in Eastern Europe?
No, it is the nomination committee of the CTC who has nominated Lorenzo and there's an AGM coming up the 30th April where we believe or we expect him to be related to the Board. So more CTC cannot come in general, of course. The Russian market, of course, is utterly interest. No doubt about that. So everything you read is that we have a strong growth in the advertising market.
I believe that the margin 2014, think it seems to be the biggest in Europe as is predicted right now for many of the media agencies, which of course is fantastic. Then you have the whole digitalization taking place right now in Russia, which we of course are part of with our mini pay channels and also our HD offering. So of course, Russia as such is very, very interesting for the group.
Sure. My question was actually more given his former role as an M and A banker in media, should we view his nomination as a mark of greater interest for you to potentially buy out your minority partners?
You should see the nomination of him that he can add value to the company in the further development of CTC. And that is the CTC nomination committee who have asked him to step in. And of course, that is that much better.
Okay. Thank you very much.
Our next question comes from Lisa Yang from Goldman Sachs. Please go ahead.
Hi, good afternoon. First question is on the Pay TV Nordic. Just wondering what was the impact of the restatement of subs by your 3rd party partner in Q1 and in which country does that relate to? And secondly, just on the your performance in the Frito emerging markets. Can you is there any one off that impacted your performance in the Q1?
I know that CME tried to increase their prices and that might have benefited you. So just wondering how if you think that share gain is sustainable going forward? Thank you.
Hi, ladies. It's Mathieu here. On the first question, I think the impact of the restatement is that without that restatement is the one off effect, then it would be largely stable, the 3rd party
subscriber base. And on your second question, when it comes to free to air in emerging markets, no, there's no one off. I think underlying you can see that we have improved our ratings in our media houses in Czech and Bulgaria. Bulgaria is very strong. And of course, we continue to focus on our performance when it comes to rating in the media houses.
I think the good thing is, of course, that the inclusion of the partnerships that we have done into our offering has been received so positive. So we have a very strong traction with a strong sales growth and declining margin growth going forward. Of course, what the competition we do, we don't know, but we are strong when it comes to our reach, when it comes to our commercial share viewings due to our own performance and partner performance. And therefore, we do believe that we should take our fair share of the market going forward.
Great. Thank you very much.
Our next question comes from Dividar from Danske Bank. Please go ahead.
Thanks. Two questions, if I may. Firstly, with regards to the satellite subscribers in the Nordics, could you give us some flavor on where you are losing subscribers and the visibility in the customer base for the rest of the year? Thanks.
Yes. It has not changed since we talked last time the call in India is Denmark, which is our main issue, meaning that the competition in Denmark is very strong and we're losing subscribers in Denmark, Sweden, which is our by far the biggest market, the platform is doing well. And also after the inclusion of our new Olympic channel, full dedicated Olympic channel, Viasat 2014, of course, that has strengthened the platform as well. And also with the inclusion of Sky Sports News on the Swedish platform as well. So the decline we see unfortunately coming from the Danish market, and we expect 2013 to decline in DTH segment.
We do expect it to grow with the 3rd party networks, but the 3rd party networks will not offset the decline we will have on the TTH. But still, we are growing combined when you include ViaPlay. So we are having very strong traction when it comes to pay subscribers, GTH combined with 3rd party networks and combined with wire play.
And one final question on the ARPU. Looking at the sort of value adding services like Mataram subscriptions and Viasat Plus, it seems to have flattened out or leveled out in the past couple of quarters. Could you just give us any indication of how much contribution those kind of services have added to ARPU growth? And secondly, is ViaPlay cannibalizing on those kind of value adding services?
I think the first question there is it is if you see some of these we keep in the report, but actually they're not ARPU driving. So for example, Biophat Plus has not been ARPU driving for a while, but we still kept that in there for disclosure of what purpose. When you look at it, you see it's a little bit of a trend where actually we slap more of the ARPU increases into the normal headline prices. So for example, the ViaPlay TVF Aware solution for our customers is not charged extra for Denmark and Norway, for example. So and that's charged more in the headline price instead.
So they So and that's charged more in the headline price instead. So they these services kind of they drive ARPU, but not in the same way from what they used to do. So we have to think about how we disclose this in the future, I think. But and then the second question was you said if wireflakes is impacting this, yes or no. In Sweden, yes, we charge for VIABLA and HD together.
But in Denmark and Norway, I said no, we don't charge extra, but we look at points on the headline price and stuff.
Okay. Thanks.
Our next question comes from Mikael Larsson from Carnegie.
Hello. Hi. A couple of follow ups on the last question there. Can you just summarize what you expect for ARPU growth this year in PayTV Nordic and also the satellite subscriber development ahead? What is driving that?
Have you seen any impact from the new deals and that you made last year so far?
When it comes to the first question, what we expect from ARPA, I think we started talking about it last year even that we're expecting lower level growth than before in ARPA. And that is probably low to mid single digit ARPA growth. And I think that's going to stay like that.
Okay. Capital presented.
The second question, I wouldn't really hear also said.
If you have seen any positive signs on subscriber stability in your premium subscriber base from the recent deals that you've made?
I know. I think what we can say is in in general, of course, is that we have strengthened the product and that is what we are marketing right now. So now I think the game is to make sure that everybody understands that we have a much more enhanced product than we used to have. Of course, the inclusion of the Premier League as well from the fall 2013 now that we are going to that we have not Premier League on our sports channels on our Q3 plus of course, you'd make a better product as well. So combined, we do foresee a stronger product and we do foresee that we should stabilize the downturn in the DTH right now as we see right now.
That is, of course, something that we do expect from the Danish market. But right now, the messaging is about to make sure people understand that actually we do have a very strong offering, which we have not had to the same extent the recent years.
Okay. And just a question on ViaPlay. If you could comment and give more color perhaps on the trends that you see, for example, the typical subscriber, what is happening with the Vipay box, the Russian side, how that is developing?
Yes. If we take VIAVI as such, the product as such is doing very well. And we see that in many ways through many KPIs. 1st of all is, of course, that we have a higher subscriber intake, so more and more customers comes into Via Play. And that is, of course, great.
And we see the usage of ViaPlay also increasing, which of course is indication that people that they really like what then people really feel that they get value for money. And that's, of course, a very strong thing going forward that we hear we have a problem where people really believe that it is worth what they're paying for. So the traction for VIABLY is very strong right now. When it comes to Russia, then in Russia it is more used right now as a multi screen service for the deals that we are making with the cable operators or IPG operators in Russia. So when you buy our packages, our movie packages, you get also the same content on bioplait.
That is how we use it right now in Eastern Europe in Russia.
Okay. Thank you.
Our next question comes from Rasmus Engeberg from Handelsbanken. Please go ahead. Your line is open.
Yes. Hi, guys. Can I ask you about your expectations for the pay TV margin to improve in 2014? What is the driver for that growth? Is it that the high asset is going to stop declining?
Or is it that the cost growth is really lower? How should we think about that guidance really?
I think it's basically I guess as we discussed before, just to recap a little bit, I think what we talked about last 6 months ago or something is that we're taking the cost base up 1 notch basically because we're investing more in fixed cost content costs, etcetera, and biopoly. We don't expect that to be a massively change in 'fourteen. So of course, the upside of it is you start investing 1st in fixed costs and then you get the upside
in terms of increased revenues.
And that's what you're going to see, for example, in the case of IOPlay where the cost base is largely fixed in that way. And then obviously, in the case of Denmark, we believe that there is a natural level of customer base that we're moving towards, which means that the churn level should come down in Denmark.
Can you sort of would you say that as I recall now over the last 10 or so years, your content cost inflation in pay TV has I think been somewhere around 7% to 10% per year. Now maybe that is lower now, but do you really need 7% to 10% top line growth to see improving margins? Or would 5% be enough? Or how should we think about that?
I think it's a little bit too early to have a guidance on cost increases in 2014 already now. I think
The reason I'm asking is obviously that you're not growing at all now. And what we really should be penciling in for going for next year for margins to really go up? Can you help us somewhere on that line?
No, no. I think just to be clear, I think we are growing right now. So but the investments we're doing, we, of course, expect to have some impact on the top line moving forward as well. But as we said, if you invest 1st and then pay TV is normally a very slow type of business, it's sequential. So it's going to take a little bit longer time.
All right.
Okay.
Okay. And then secondly, now would you say that you have particularly easy comps in ratings in the Q2 compared to last year? I mean, of all the sort of weak ratings over the last 3.5 years, I guess, that was the low viewpoint. Is there anything sort of out there that we should be aware of that could sort of upset your ratings?
Yes. I think in general what we are of course, we want to focus on each of the slots, as you know, to make sure that we improve our ratings going forward. And we have some formats, as you know, are doing fine and some are not doing that well. Then we have IL-three coming up. And if the Swedes would perform very well, which they will, of course, the world championship, then you will have certain competition.
If they will go out early, you will have a different competition. So I think that is very difficult. I think it is for us, it is it's of course good to see that we are doing better on some of the shows. And as you know, that is then easier for us to take these shows into the coming years, so we don't need to invent so many new shows. So we're happy as is right now that we're performing a bit better.
But of course, as you know, Cosmos, there's still a lot of work to be done in order to ensure that we have very strong programs in all our slots.
But it's only the ice hockey, which is a sort of the out of the box event in this quarter?
I would love to sit with TV4s and can have 5 SBS program plans right now. I don't so I cannot say that. I can't say what they will do. So, of course, that is very difficult. I think focus is, of course, for us to beat and that is on time slot on the day to be better than last year.
And then hopefully, we'll see good traction going forward.
All right. Thanks.
Our next question comes from Johan Graber from Nordea. Please go ahead. Your line is open.
Hello. Just more or less a philosophical question maybe. Have you identified any behavioral change among your viewers where via players or some other OTT alternatives are actually stealing viewers from freeTV? And when do you think this perhaps will be a growing problem?
No, we have not seen that they are stealing. I think the good thing in Sweden, for instance, is that the online viewing is measured. So when we take our programs linear and we take the same program online and we combine these 2, then we can see that we grow our reach. So that is actually to the better what we're seeing right now. That's of course a big focus area for us is to make sure as I said as well in my speech that it is important for us to make sure that we embrace this new world and that all our programs that we have online components.
So that is what we're focusing on a lot right now to broaden the presence of and availability of our programs. So we would like it to we'd like to embrace it and do not see it as a great threat at all.
Okay. My second question is perhaps related. When will you
start to live stream your free TV channels?
Yes, as it is right now, I think what we are doing is looking at opportunities how to make sure that the product we've talked about live streaming is not a joke about the real live stream of our channel, it is about to have the right product in general. We have a very strong product when it comes to our 3rd party networks and to DTH, and we have a very strong product on buyer play for the people who would like to see movies now and then and sports now and then and so forth. So it depends when the day that we have a product online streaming product, that is something we will look at the day that we can perform that. But that is not the case right now. And therefore, the full focus for us is, of course, to roll out bioplane to as many houses as possible in the Nordic and, of course, to grow our partnership, basis we have with our partners and pay TV and also our DTH platform.
Thank you.
That concludes the question and answer session. I will now hand back to Jurgen Madryn for his concluding remarks.
Thank you, operator, and thank you all for your time today and for your continued interest in MTG. I would like to remind you that we have our Capital Markets Day on the 13th June in Stockholm and where we very much hope to see as many of you as possible then. Today, we'll feature presentations by the management team and as always, HGTV Entertainment at its very best. So thank you and goodbye for now.
That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.