Good morning and good afternoon, ladies and gentlemen, and thank you for holding. Welcome to the MTG Second Quarter 20 12 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 presentation slides on MTG's website at mtg.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 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 environment 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 in the 2011 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 Hans Holger Albrecht, MTG President and CEO, who is joined on the call today by group CFO, Matthias Hellensson. Please go ahead, gentlemen.
Thank you, operator, and good morning and good afternoon, everyone. Before I start, I trust that you all have by now seen that we have made some changes to the presentation of the result statement in order to make it easier to read and to include relevant forward looking information. Let me maybe start this conference call with a quick overview before we dive into the operating areas. Our sales were stable year on year in the Q2 as the growth in our Nordic and Emerging Markets Pay TV business offset the decline in our advertising finance free TV business in Scandinavia and the emerging markets. However, Q2 operating costs were only up 1% as savings in the emerging market free TV operations and healthy operational gearing in the emerging markets pay TV business balanced the investments in the Nordic free and paid business.
As a result, the margin of 16% for the Free TV Emerging Markets business is the highest for more than 3 years. The Pay TV Emerging Markets margin more than doubled to 21% and the margins of 23% 18% for the Free TV Scandinavia and Pay TV Nordic Business are amongst highest in the industry. As we described at our recent Capital Markets Day, this is the moment to invest further, we believe, to drive subscriber intake in our pay TV business, but we do not see the need for the same level of investment on the free TV side, where it is more to do with execution in markets that have not changed in terms of outlook in the last 3 months. We have like always work to do in Scandinavia to take back and increase our advertising market shares, but we have taken further advertising market shares the majority of our emerging market territories. And last, financially, we are in a very strong position like always with the low gearing and substantial available liquid funds.
Our cash flows have enabled us to reduce our net debt by 55% or almost SEK 1,000,000,000 since the end of Q2 last year. And this also includes the payment of an increased annual dividend payment of DKK 600,000,000 in Q2 this year. And we have done some deals in the first half of the year, for example, disposing of the non core betting operations as well as buying the complementary L and T free TV business in Latvia and the Paprika Latino Emerging Markets production studio. And you should obviously expect more from us. Moving forward, so much about the general overview, if we then dive into the operations and starting as usual with our free TV business in Scandinavia.
And as you have seen, probably the official market data are not out yet. But we expect that the Swedish and the Norwegian TV markets have been growing in the Q2, while the Danish market is expected to have declined. Our sales were down 3% at constant exchange rates, as we lost TV advertising market share in Sweden and in Norway, but still we increased our share if it comes to Denmark. Our Swedish ratings were negatively affected by the fact that both the ISOC award championships and the Europe 2012 football were shown on competing channels in the quarter, whereas we showed the Isoppy last year. That's mainly affected obviously our ratings on TV3 and on TV6.
In Norway, the Euro 2012 was less of an issue as the national team did not qualify, but competition has increased with the growth in the new channels that has been launched. The measures that we are implementing have started to have an impact and our audience shares are more stable quarter on quarter. And in Denmark, our combined Danish Mediahaus audience share is slightly up compared to the Q1 Year 2, we saw some effects from the year 2012, but we continue to focus on enhancing our execution and work with the programming schedule and sales initiatives. In the Q4, we have presented our 4 program lineup to advertisers and media in each of the countries and have received positive feedback so far. But as all of you know, the proof obviously will be in the ratings and the sales delivery in the fall, which will start after the summer break.
In terms of cost, segment OpEx was up 4% in the quarter, which was substantially less than the 14% growth in cost we saw in the Q1. We have been making programming investments, but as I've mentioned, we did not broadcast the ISO key this year in the Q2. The big increase in Q1 was largely due to the fact as you remember that we launched our spring schedules much earlier this year. All of this did, of course, mean that our operating income was lower than last year, but please be aware that both Sweden and Denmark delivered higher profits in Q2 this year than last year. If we talk about the outlook, the outlook for the remainder of 2012 is for continued TV advertising market growth in Sweden and in Norway, but the picture is less clear if it comes to Denmark.
Our objective is, of course, to take back and increase our Scandinavian advertising market shares. This is as I mentioned earlier has more to do with the execution of the full schedule than incremental investment. And therefore, we anticipate that the full year OpEx for the Scandinavian free TV business will grow at a normalized mid single digit percentage point level rather than the previously anticipated mid to high single digit percentage point levels. So much about the free TV in Scandinavia. If we then move to our Nordic LTV business where we have seen revenues up 5% at constant exchange rates and premium satellite subscriber ARPU was up 7% following the previously introduced price increases and the continued take up of our value added services.
Our overall premium subscriber base was down compared to the Q1, but our 3rd party network subscriber base continued to grow. The satellite subscriber base was down in Denmark and in Norway, but was stable in the biggest market Sweden. Our ViaPlay online pay TV subscriber business has continued to grow as we further enhance the service and the content offering. The newly launched fireplace set top box in Sweden offers customers a unique proposition of fireplace streamed on demand content, 24 stream linear viaduct channels and on top access to 6 DTT FreeView channels via an additional area connection. The near 18% operating margin in Q2 reflects both the healthy top line growth and the ongoing investments we are making in ViaPlay and our overall premium content and channel portfolio.
Overall, therefore, profits were stable year on year. If we go to the outlook for the Pay TV business in Scandinavia, we continue to expect sales growth to be driven by rising satellite premium ARPU and third party network subscriber growth. Now is the time we believe to invest in our linear channels and the wire play on demand service to drive further growth, which is why we are adjusting our anticipated full year operating margin from approximately 18% to approximately 17%. If we then move to the free TV Emerging Market business. We took TV ad market share in the majority of the emerging market territories, but we have not seen any shift in competitor behavior or overall media spending trends due to the adverse macroeconomic situation and the environment there.
Sales for Emerging Markets 3 TV operations went down 1% at constant exchange rates when you exclude the contribution from the Slovenian Broadcasting operations that we discontinued in February this year. And bear in mind that the LNG operations were only included by the beginning of June this year. Looking at our largest operations in the Baltics, Czech Republic and Bulgaria, sales were actually stable year on year. Operating costs for the 2nd were down 11% in the quarter, which reflects again the discontinuation of the Slovenian operation as well as the ending of the depreciation of our broadcasting licenses in the Czech Republic and Bulgaria and ongoing cost optimization measures, which were offset to some extent by the selected program investments and the launch of TB8 in Lithuania last October. As a result, operating profits were up 26% year on year for the segment and also for the 3 largest markets.
If you look at those 3 large markets in turn, maybe let's start with the Baltics, Where we have seen that the Estonian TV advertising market is estimated to have grown slightly in the Q2, the Latvian market to have been stable and the Lithuanian market to have been down year on year. Sales for our combined Baltic Frittic operations were up 5% at constant exchange rates, and we estimate our TV ad market share to have increased in both Estonia and Latvia and has been stable in Lithuania. Our pan Baltic audience share was stable at 40.5% as audience share gains in Latvia were offset by a slightly lower combined European share in Lithuania. And as I mentioned before, we have completed the acquisition of the L and T 3TB group of 3 Latvian channels and have consolidated the operation from the beginning of June. If we then move to the Czech Republic, where the Czech TV ad market is estimated to have declined year on year in the quarter, our sales were down 2% at constant exchange rates, but we estimate that we took further at market shares in the quarter.
And please also remember that we launched the PrimaLux channel over a year ago now, so the numbers are comparable for the first time in this respect. And it reflects obviously the kind of increase the substantial increase in audience share we have seen, which was up over 7 percentage points, over 20% year on year and over 2 percentage points quarter on quarter. So very strong performance as it comes to the ratings in the Czech Republic. And last but not least, if we move to Bulgaria, where our combined media sales were stable in the quarter and the TVS market is also estimated to have been stable. Our ratings were slightly down in the quarter, which was mainly due to the Euro 2012 coverage being broadcast on the state owned 3 DB channels, which also sell for that market Just Remember You advertising.
In terms of the overall outlook for the emerging market 3 TB operations, as before, we are yet to see any trend shift in competitor behavior or a return to growth in advertising spending or pricing. However, clearly costs are down and we do not see the need to increase our level of investment beyond what we have already done ahead of a return to sustained market growth. We are now restructuring and integrating the recently acquired LNG 3T operations in Latvia. So the reduction in operating costs will be lower in the second half of the year than the first half. And now last but not least to the PayTek operations in the emerging markets where we have seen sales up 12% at constant exchange rates following continued subscriber growth for our satellite platforms in the Baltics, Russia and Ukraine, and as well the mini based subscription growth in Russia in particular.
We have added a net total of 96,000 new satellite subscribers over the last year and nearly 12,000,000 wholesale mini pay subscriptions. Operating costs for the segment increased by just 3% and reflected the balance between the ongoing investments we are making in the development of our satellite platforms and lower cost for the wholesale mini pay channel business, which included a number of positive currency effects this quarter. Techland's profit therefore more than doubled year on year. Outlook for this business area. We do expect obviously continued subscriber intake in 2012 on the satellite platforms and continued growth in the number of MiniPay subscriptions.
As before, we also continue to expect higher full year profits in 2012 than in 2011, but that the increase in the second half of the year will be lower than the more than 200% increases you have seen during the first half of this year. This reflects the fact that now is the time to invest again in our premium content and channel offering and the rollout of fire play in Russia in order to drive future growth. And finally, just a quick word on the other business segments where we have a few significant impacts. Firstly, we sold the Bet24 operations at the beginning of May, so that reduced sales and costs for the segment when compared to last year. Secondly, the sale did give rise to a net gain, but it was offset to a large extent by a resulting write down of goodwill and trademarks.
Firstly, both our Swedish radio and MG Studio business reported lower sales, which were not fully offset by the growth in the Norwegian operations. And fourthly, we are investing in the MG Studios business, which also increased our costs. In terms of outlook for this other business, we do not expect any major changes moving forward this year other than the consolidation of the profitable Paprika Latino business in Q3 or early Q4. So much about the operational side. I will hand over now to Matthias to run you through the figures.
Thank you. The translation effect of currency movement largely disappeared for the group as a whole in the second quarter, although it had some effects within the different segments. For example, both sales and cost growth for free TV media markets were higher at constant exchange rates than at reported rates, whereas the opposite was the case for the pay TV Emerging Markets segment. Our net income for the quarter was impacted by a number of non operating items and I'll let you know there's 3 of them that I'll let you talk to you about. The first one is the depreciation and amortization charges were lower and will now remain lower after we ended the amortization of the Bulgarian and Czech broadcasting licenses.
Secondly, the change in the value of the option element of the CDN Group convertible reflected a change in CDN's group's share price between the balance sheet dates Q1 and Q2. The effect is included in the financial net items and gave rise to an DKK88 1,000,000 negative non cash impact in the quarter compared to an DKK 81 1,000,000 positive effect in the Q1 of this year and a SEK 30,000,000 positive effect in Q2 of last year. And thirdly, our tax rate looks lower in the quarter at 23%, but this included some positive tax impacts from prior periods and the underlying effective tax rate during the quarter was 27% when you exclude the CDN effect as well that I just mentioned. For the 1st 6 months, the same underlying tax rate was 24%. And this is slightly lower than our full year expectation of 25% to 30%.
But we still expect the full year to come out somewhere between 25% 30%, but probably closer to the 25 percent based on where we are today. Group sales were stable year on year in the quarter, but operating income excluding associated income was down for the reasons as Holger just mentioned. However, we converted 77% of our EBITDA into operating cash flow when we exclude the CTC media earnings and EBITDA. And this is still very high, and I think we discussed that at the Capital Markets Day as well. We also reported higher positive change in working capital in the Q2 than we did last year.
Our net operating cash flow was therefore up by more than 8% year on year in the quarter when excluding the lower dividend payment received from CTC this year. As Asolgy mentioned, we invested around SEK 100,000,000 in shares from the acquisition of L&T in Latvia. And we also sold BEP24 for 13,500,000 of which we received the main part in the 2nd quarter. And then the last part of that was received in the 3rd quarter. Group CapEx remained low still and this overall resulted in a net cash flow used in investing activities of DKK58 1,000,000 during the second We increased our ordinary dividend by 20% to DKK600 1,000,000 and this was paid to the shareholders in May.
The net of this resulted in the net debt level of DKK778 1,000,000 which is a reduction by 55 percent or almost DKK 1,000,000,000 since the end of last year second quarter last year. The net debt EBITDA level has been largely stable at around 0.3 times net trailing EBITDA over the last 3 quarters in a row right now. We had almost DKK 5,700,000,000 of available nickel tonnes at the end of the period when we include unutilized credit and overdraft facilities. And on top of that, the stock market value of our shareholding in CTC was over DKK 3,300,000,000 at the close of trading on the last business day of the quarter. We are therefore clearly in a strong financial position and we will continue to invest both organically and through F and A transactions in the group's growth and development as well as of course to continuously monitoring the shareholder returns moving forward.
Now back to you, Hans Horne.
Thank you, Matthias. And maybe before we come to the Q and A, just a quick summary of the key highlights from my point of view if it comes to this conference call. As you have seen stable sales as the long term growth in the pay TV business is offset by a short term decline in the free TV business, which we expect to be fixed obviously going forward. It demonstrates one more time for me as well the kind of benefits of being an integrated broadcaster with kind of model of a fifty-fifty split of revenues between advertising and subscription. However, as well only 1% of group OpEx growth.
Again, it shows a kind of balance between the lower cost and a healthy operating leverage we have seen in the emerging markets and the investments in the Nordic markets and clearly a lower level than we have seen in the Q1. So that is something which is moving in the right direction as well and shows the strength of the integrated model. If you take a kind of helicopter view, the results are amongst the best in class if it comes to margin for Nordic Free TV and Pay business. And we have substantially increased the profitability levels in emerging markets, which indicates again once growth returns to those kind of places, we are in a very strong position in terms of profitability there as well. We don't see any change in the ad market outlook if it comes to our Scandinavian free to pay business, but of course anticipated market share gains across most of the emerging territories and a better position if it comes to our ratings in the fall if it comes to Scandinavia.
And we believe it is time to invest in the Pay TV business to drive further subscriber growth, but no need for more investments or increase of investments if it comes to the free TV business at this stage since all this is about execution as I mentioned earlier and not money. And overall, I think the company is in a very good shape financially and operationally. And with a strong cash flow and the substantially reduced net debt, we have a lot of flexibility going forward what further the world will bring. And some key deals done and more is to come if it comes to the growth in terms of organic growth and M and A growth. And we're going to focus as always on investments if it comes to content, technology and countries as we have done it in the past.
That concludes my comments and 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 allow to allot some time, please limit yourself to no more than 2 short questions, if possible. Operator, can we have the first question then please?
Thank you, sir. Ladies and gentlemen, we are now ready to register The first question today will come from Stefan Nelson of SEB and Schilder. Your line is open. Please go ahead.
Thank you. I'll limit myself to the pay TV area then. Just on your new guidance, could you give us a bit more flavor what is it you're going to invest in? And do you expect this to lead to any revenues in the short term? Or is this completely long term
investment? It is the kind
of normal level we have and the normal investment areas we have. So it's via play obviously. It is in combination with via play and via start investments in content and to a certain extent as well if it comes to sports rights obviously there as well. And but last but not least since we believe it will be a bit more competitive in the fall in terms of OTT players in the market, we have reserved some more money to be able to spend on the marketing side in particular if it comes to higher play. So there is nothing structurally more kind of short term initiatives as
well. Okay. Got it. And the second question is more referring to your other pay to business and the continued decline of the paid subs and which is not compensated anymore by 3rd party subscribers. So should we expect this trend to continue that the growth in sales will have to come from Viaplay to offset your other subscribers?
Or is there any kind of nonrecurring thing here that we should take into account?
[SPEAKER STEPHEN ROBERT BINNIE:] Yes. For us, it's nothing or for me, it's nothing which worries me really at this point. It's the kind of normal process we see in the kind of value chain and sales channels we have currently where DTH is declining and will decline structurally obviously in the next coming years, whereas virtual operator model is still growing, but of course on a slower pace going forward as well. And then we have seen the pickup in terms of new customers as it comes to ViaPlay. And we are not providing any subscriber numbers at this stage for many reasons.
1 is the competitive situation. But if we would tell you the subscriber figures you would be I'm sure you would be a positive surprise. So we can see that there is a positive trend on the OTT side, which offsets the kind of negative trends we have on the DTH side. And therefore, it's a normal process. Obviously, we can always argue if it comes to ARPU and margins.
But the fact that we have a kind of low price strategy today on Yoplait doesn't mean we're going to have it in the next 10 years.
But you think still that the 3rd quarter operator subscribers can offset the DTH decline in the next 2, 3 years? Or is that no longer the case?
Yes. I mean it depends of course on how far the DTH is moving out to new distribution programs. But if you have a kind of trend a bit like in the past, I'm positive.
Okay. Thank you. Our next question today comes from Bile Dhar of Danske Bank. Your line is now open.
Yes, thanks. I have a couple of questions about the pay TV in Europe. Could you please elaborate a little bit more on what kind of investments you've been making in the second half
for this year? Yes. Just to repeat it, it's mainly in Via Play and there's a combination of content and particular marketing. So as we were playing some one off marketing campaigns, it's normal content if it comes to ViaSat in itself and it's some impact of sports rights. But one of the deviation is marketing.
No. I was actually referring to Pay TV Emerging Markets. You're guiding for lower growth for the second half of this year compared to the first half. Is that mainly due to higher cost inflation rather than slowing top line?
No, this is really investment opportunity we see in new business and growth opportunities. So it's not the kind of investment in a kind of static business. And it's 2 things or 3 things. It's content, premium content, particularly in the combination for Ukraine and for Russia, because we believe there's an opening to drive business even further. And it is investments we are doing in Via Play in Russia, which we believe has a big opportunity long term going forward as that.
So it is those two areas, which are the kind of key investment areas we see for PayEASE.
And finally on top line growth in PayTV Emerging Markets. At one which point would you say that you would start to focus on ARPU? Focus has been on volumes in the past couple of quarters. And obviously, there's room for growth from a volume perspective as well. But do you see any time where you can actually be more aggressive on price?
Yes. We are strong believers of entering new markets with more attractive pricing or aggressive pricing and then eventually increased prices. And it's the same kind of trend we have seen in Scandinavia as well. So the focus is still a lot on subscriber intake rather than the ARPU growth, but it moves gradually as well of course. So you will see in the next 2 or 3 years ARPU price or ARPU is coming up as well.
But if you look at the kind of most important thing at this stage and the bigger opportunity is subscriber intake.
Okay. Thanks.
Thank you.
Our next question today comes from Adrien de Saint Hilaire of Exane. Your line is now open.
Good afternoon, everyone. Quick questions, please. So given that Q3 is showing a similar comp base than Q2 in free TV Scandinavia, Should we expect a similar growth rate in Q3 than in Q2, I. E. Around minus 3%?
Or are you seeing any benefits from your investments already? That's my first question.
No. As you know, we don't give any concrete forecast and not even for a small quarter like the Q3. Structurally, of course, the Q3 should be better because you don't have an impact terms of year 2012 and the ice hockey. And at least the ratings have been moving a bit more positive. The downside can be always we don't know want to see if stupid things like good weather in Scandinavia puts the foot level drastically down.
So it's hard to forecast on the spot, but structurally of course, Q3 should be even in the Q3. Right.
And then I have two questions around costs. Can you give us the OpEx growth in Free TV Scandinavia if you exclude Ice Hockey?
I'm afraid we can't do that. I'm sorry.
Okay. And maybe another one. What's the net impact on costs in the FreeTV Emerging Markets from the integration of L and T and the closure of Slovenia?
I think the closure of Slovenia is around €30,000,000 per year. But and then you will have in the Q3, we'll take some one off costs in terms of when we start merging L and T into the business. And L and T sales will be loss making in the Q3 as well since that's a very small quarter.
Right. And we agree that these are €30,000,000 costs per year saved? Or is it EBIT. EBIT. Okay.
All right. And then last question on M and A. There has been some noise recently around some assets being for sale in Russia including Tricolor or including POF Media. Can you tell us what is your view on those assets and more generally on M and A given that well the decline in equity markets means that valuation is cheaper. So what is your view on M and A in Eastern Europe?
Yes. Obviously, we're monitoring the situation in Russia and the whole of Eastern Europe because that's the kind of choice where we would like to invest if we find the right opportunities. If it comes to the Russian pace side, it indicates 2 things. A, of course, the market is getting more interesting and more and more players are seeing good potential there. Hence, the interest from local players, but as well as international players like HBO is going up.
We are if it comes to Pay Russia, we are in a very strong position, because we have been there for more or less than 10 years now. We have a strong portfolio in terms of premium channels. We have our own satellite platform in a fifty-fifty venture with Raduga. And we as I mentioned before, we invested we invest more into premium content in combination with Ukraine and launch via base. So we control very well our destiny there.
And we are just to remind you, we are the largest basically channel operator in terms of ratings, for example, in the Russian market. So if there's an opportunity we look at it. And we can look at it from a kind of pure business perspective. We are not forced to do any structural deal in order to achieve any kind of position. But if opportunities are coming up, obviously, we look at them.
If it comes to other phase in Eastern Europe, we haven't seen that kind of trend yet that assets are coming up in the current environment. 1 of the suspects where you could have expected some has to be sold was rescued by one of the shareholders. So it's to be seen. But once again if it comes up we look at it and we take those opportunities. But it will be more midsized deals than large sized deals if you talk about the impact on the balance sheet.
All right. Thank you very much.
Our next question comes from Filippo Lofranco of JPMorgan. Your line is now open.
Yes. Hello, everyone. So I have three questions. The first is on free to activity in Scandinavia. You say that you want take back and increase Scandinavia advertising share, but more with execution than incremental investments.
Can you give us a couple of example how you're going to get this?
Yes. It sounds very simple, but it's sometimes the best solution you can have. The first thing of course is that we have finished all the kind of production lines and order to in order to get the best out of it. So to be ready in order to broadcast, we are much more advanced this time than we have been in previous years. 2nd point we did then is we focused a bit on the kind of things which has been working very well for us.
So shows like Top Model, for example, or Swedish Hollywood Wives, Formula 2 Champion running very well. We continue to run and we've extended the number of episodes. So you have a much safer bet terms of what kind of shows you're getting in. And the third point is, if you look at the kind of lineup of new productions like Pyotracanal or whatever, there's a long list of new things. We have a larger variety of shows.
So it's not like in the fall last year when we were betting everything on a similar format like Hollywood, not sure, speaking of talent, we are much broader this time in terms of genre. And therefore, I'm pretty convinced we should see a positive impact if it comes to Sweden. And if it comes to Denmark in terms of ratings, In Norway situation, it's a bit more complicated because we are the number 3 there and that number 3 is tougher to defend the position. And therefore, we expect more kind of stable situation if it comes to Norway. But to put all three things together, I think we should have a more positive outlook ourselves for the fall.
Okay. And then the two questions on Pay TV. The first is a very simple one. Do you think that with additional investment, the net subscribers base should increase in the future or should be stable overall?
Yes. If you balance and in one point of time and the point will come pretty soon I guess as well once we have a clear picture of what the competition will do. But if you take a holistic approach for the future how you look at the Pay2B business, you have to combine our TTH customers with the virtual TTH customers with the virtual operator or 3rd party channel distribution networks and the OTT customers and the wireframe customers. And in that three combination, you're going to see positive subscriber movements going forward. And that's the kind of fundamental belief.
Obviously, as I said earlier, today, the kind of importance of a customer is still an OTT customer and a DTH customer, but that will become more even as well over the next coming years. Okay.
Thanks. And then finally, I mean so I mean, I did understand well that we should expect some kind of a growth in the number of net subscribers. And do you think that therefore that we should have margin and given the change in the mix of the subscriber, should we expect margin to go back to 18% or more? Or should they stay at 17%? I mean, my guess is that they should go up again in the medium term.
[SPEAKER SEBASTIEN DE MONTESSUS:]
Yes. I mean structurally the pay and just to be very clear Filippo on this point, it's a combined subscriber look of all 3 distribution forms I mentioned. And one of them we don't really need to figure out yet. We just need to be precise there. If it comes to the margin structure, the is a good margin business and you should have been or should be able to go back to margins of 18%.
But you always have and as you know as well, you always have investment periods or competitive issues like for example higher marketing spend for a quarter, which then can change the picture a bit. But structurally, it is a business which delivers margins around 18% as we've always said before and there's no change in the future in my point of view. Okay. Thank you, and sorry, good. Bye bye.
Thank you.
We take our next question from Mikael Larsen of Carnegie. Your line is now open.
Yes. Thank you. Hi. Just a quick question on the pay TV in body markets. If you could talk about perhaps the cost drivers, not only this fall, but also next year, how you manage the cost side?
Yes. I think the because somebody asked about the ARPU as well in those markets. And what obviously the driver for ARPU will be the investments we are doing like now in the fall in premium content and then technology like HD and those kind of things once those markets are ready. And therefore, the cost will go up, but it will be a very balanced approach. So you try to grow with the flow and then the more the revenues come through, the more you're going to invest into those kind of things.
And therefore, I would not I would foresee a pretty stable situation. Again, there can be peaks or differences for 1 or 2 quarters. But in general, the kind of situation you've seen so far is the kind of guideline going into the next year. Then once you increase prices, you're going to invest more into new services as well at the same time.
You should have a good scalability there in the coming quarters?
Yes. But again it's a bit as well on depending on competitive landscape. I'll give you one example. Will HBO launch in Russia or not, which has been always a long rumor, it will have of course maybe short term competitive issues in terms of marketing and those kind of things. So it's the world is a bit more complex in those markets unfortunately than it is in Scandinavia for example.
Yes, yes. Okay. Thank you. Thank you.
We take our final question today from B. Leidhar of Danske Bank. Your line is now open.
Hi. One final question on Pay TV Nordics. Could you give us an update on the competitive environment? Obviously, there's been some talks in the past 6 months about Netflix entering the Nordics and potentially also HBO launching channels or online platforms. Could you elaborate on your view about the programming strategy?
And what kind of implications that might have on pricing of those kind of assets?
Yes. If it comes to Netflix and their launch in the fall, we and when we see them as competitive, we take them serious obviously and we're going to welcome them with a nice marketing campaign as we indicated earlier. But it's nothing which concerns me at this stage, because we have secured most of the rights we want to have or a lot of movie rights for example. We have a superior offering, because we have sports which they don't have and we have a superior offering when it comes to TV programming. So they will make the entrance.
They're going to be probably a fact, but it's something we feel very well prepared. And most of the investments we need to take we have been taking already in the in that region. Plus the fact again, which they don't have, we can utilize content cost of sample across all platforms and not just one OTT platform, which makes us much stronger. But it indicates the second point obviously that that's the world PayTV is moving to and that's the competitive landscape we are going in. So I assume for example the old question was kind of what's kind of digital and tenant or won't be a question anymore in the future, because if you look at the kind of situation OTT is a much stronger distribution form for the future.
And therefore, the focus for us as a company is really on those kind of things and technologies and other structures. And that's the landscape we watch nowadays more than the old competitive landscape.
Okay. Thanks.
Thank you.
That concludes the question and answer session. I will now hand the call back to Hans Holger Eldrecht for his concluding remarks. Thank you.
Thank you, operator, and thank you all for your time today and for your continued interest in NTG. As always, we look forward to talk to you over the coming weeks and months, and we will keep you updated on our progress. In the meantime, thank you, and goodbye for now.
That concludes today's conference call. Thank you for your