Thank you, operator, and good morning, everyone. We have today announced the intention to split MTG into 2 separate listed companies through the distribution of the newly formed company, Nordic Entertainment Group. The purpose of this call is to provide you with the background, the rationale and process. We will also briefly cover the structure and the investment case of each of the entities before ending with time line and Q and A. So if I can ask you to turn to Slide number 4, you can see that 2017 was the best year ever in the history of MGG.
We delivered 8% organic growth and 19% profit growth. It was an outstanding achievement in an industry where most companies are struggling to adjust to the shift from linear to on demand during and from traditional distribution to streaming services. So how is this possible? Yes, the key factor is that we have dared to disrupt ourselves through early and aggressive investments into next generation entertainment services. We have VIA Play, VIA Free, ESL, DreamHack and Inno games.
Splay are more popular than ever, and we now have even stronger online than offline market positions. Digital sales were up 68% in 2017, and digital accounted for 31% of the group sales compared to 22% only a year ago. Our strategy has also paid off for our shareholders with a 33% total shareholder return in 2017, following a 31% return in 2016. So this proposal we are now making comes from a position of real strength. Now is the right time.
We have a very inspired workforce, great products, skilled and experienced leadership teams and proven relationships with customers, partners, employees and owners. If you turn to Slide number 5, the current model is clearly working, and we do not have to do in theory anything. But the world keeps changing, and we want to continue to reinvent NTG in order to make sure that we capture the opportunities that new consumers behaviors is creating. We have been on a 30 year long transformation journey, so this comes very natural to us. It is part of our DNA and not the first spin off we have undertaken spin off we have undertaken.
And given the recent process with TDC, our Nordic operations are already set up and structured for this transformation. You will see a new blue logo for the Nordic Entertainment Group to the right of this chart, which you can read more about in today's press release. Going to Slide number 6, we have in more recent years been managing the transformation of a leading traditional broadcaster into a leading global digital entertainment provider. This has included substantial investment in our own homegrown services such as via Play and Via Free and has also been accelerated by very active portfolio management. We have made a number of acquisitions, primarily in esports and online gaming, while at the same time exiting our international broadcasting business.
We are today a combination of a Nordic entertainment powerhouse and a global digital entertainment player. Going to Slide number 7. We have now and we now plan to take the next step by spinning MTG into 2 separately listed companies through the distribution of the newly formed Nordic Entertainment Group. New NGG would then be a pure play in the digital entertainment space and will primarily comprise our e sport and online gaming businesses as well as our boxing IP project and venture investment funds. We'll be a one of its kind listed entity in the Western Hemisphere.
I'll continue to be the CEO with Maria Areddin as CFO. The company will continue to be based in Sweden and the shares will continue to be listed on NASDAQ Stockholm. Anders Jensen, who you know as CEO of our Swedish operation and Chairman of our Nordic Entertainment Management Board, will be the CEO and President of the new Nordic Entertainment Group, which will compromise our Nordic Entertainment, MGG Studio segment as well as Play Networks. The plan is for the shares to be distributed to MGG shareholders and listed on NASDAQ Stockholm in Q4 this year after approval by shareholders at an EGM in the second half of the year. If I can ask to you to turn to Slide number 8, we see this split as a natural next step in our strategy.
We create 2 strong companies with sharp and strategic focus that will be able to serve customers even better aligning security rewards and results more closely, make it easier to recruit and retain highly skilled talent, providing free flexibility when it comes to the capital allocation and enable faster decision making, all of which should accelerate growth and value creation. We will also provide investors with 2 distinct but inherently different investment cases. The end game is, of course, to drive incremental and sustainable shareholder value. I will now hand the call over to Anders for his comments.
Thank you very much, Jurgen, and a very good morning to you all. First of all, let me start by saying how super excited and very honored I am about the opportunity to lead Nordic Entertainment Group into the future. In my perspective, we have built a business that is the perfect match between heritage and future opportunities. And speaking of the opportunities, there are so many of them right now, and we have almost all of the fantastic team that I've been privileged to work with for some years now in place to make sure we fully capitalize on these opportunities. If you please turn to Slide number 9, where you have an overview of Nordic Entertainment Group.
And it is a truly unique footprint that we have created compared to what you see out in the more traditional broadcast and media world and the peers that we are usually compared with. We have created an integrated ecosystem with a range of both of and online content and services that is actually envied a lot by our peers out and around the globe, comments that I receive a lot when I travel and speak to colleagues in the industry. There's also a model that many of them are increasingly adopting, but it takes time and it's hard to copy. But why is it so that they are aiming to copy what we are doing? Well, I would say that it is because the changes that are now sweeping through the industry has already impacted our home markets in the Nordics some years ago.
The Scandinavian broadband superhighways have changed the media and communication landscape forever. And there are 3 key things that we can capitalize from and that we will now build based on this integrated structure that we have created. We are a robust media company. We have agility, both in terms of operations and willingness to invest. And we combine, like I said, heritage and established platforms with innovation.
Our business today is both robust and flexible enough to deal with these issues and challenges as and when they may come. We also have a super talented organization that constantly challenges the status quo and creates new ideas and revenue streams in this fast changing environment.
I can
ask you to please turn to Slide number 10. And as you will see from this slide, we are humble enough to call ourselves the Nordic powerhouse in terms of entertainment and media, and we have leadership positions in both content and digital. This position that we have developed over many years has allowed us to deliver a compound annual sales growth of 6% and an EBITDA growth of 8% over the past 3 years. And this has been achieved despite the structural declines that we are experiencing in linear viewing and people using television KPIs going south and also traditional pay TV subscribers changing the way they consume and pay for content. In addition to this, we have absorbed FX transactional headwind of some SEK 450,000,000, especially due to the U.
S. Dollar inflation. So one might ask itself, how is this possible? Well, firstly, I would like to say that the pay TV markets are far more stable than many has given it credit for. And FreeTV's return on marketing investment is more resilient than also being credited for.
But I would say that the primary key to success is clearly our market leading streaming products, which together with an undisputed content leadership has allowed us to very quickly and efficiently capitalize on the changing consumer behavior. So again, and very, very important to emphasize, our model, which is quite unique, is working, and we have shown that we can deliver even when the markets have its ups and downs. If you please turn to Slide number 11, you will see that our underlying performance is very strong and is driven by our digital revenues. They grew with some 31% in 2017 and now accounts for near 20% of our total Nordic revenues. And we are very confident that this trend will continue to move forward into the future with very, very healthy growth rates.
Via Free, launched not so long ago, has been a great success. We are now north of 2,500,000 downloaded apps, very active customers. And the platform that we have developed in combination and in parallel with the ViaPlay platform is what we would argue best in class and the consumers love the product. It's important to understand that this is not just a traditional catch up service. It is rather a standalone service where we are investing in unique content and is made for specific user groups.
And in the future, it will also be made for specific devices. ViaPlay, as you will know very well, is the one leading Nordic subscription streaming service when it comes to the breadth and the depth of the content that we offer. We offer unique products with features, functionalities and formats that set us apart from competition, also global ones. Acquired TV series and movies, original drama and more sport than anyone anywhere has, all this is placed on a cutting edge technology platform that provides high quality experiences on any screen or device. And as you will very well know, we also operate under our own ViaSat brand as a triple play service provider now also in Sweden, where we have what we think is the best product out there for a combined broadband and content offering.
Our premium content will continue to drive preference when it comes to connectivity. So we believe that the combination on ViaSat, ViaPlay, ViaFree is extremely strong and will grow also in the IP context. If you please turn to Slide number 12 to summarize our focuses and how we see things going forward. Obviously, I am very bullish about our opportunities. I believe we have a bright future.
The key priorities for us going forward will be to further capitalize on our content and digital leadership positions. We consider ourselves to be a digital entertainer. We have great products that our customers love. We will continue to be very strict when it comes to cost control in an efficient way and reinvest in products where, if and where it makes sense and take out cost where if and where it makes sense. So we can allocate our capital in those areas that move the needle for us.
MTG Studios that is now becoming a part of the new Nordic Entertainment Group is the leading production company in the region and we look to further strengthen our position within especially scripted drama. And we see also significant opportunities to accelerate our digital first production capabilities with the help of Splay Networks, where we are aiming to take a leading position in content marketing and made for specific device production development. We want to expand. We've talked about this before. We want our product offering in each of the 4 markets to grow into more areas.
The broadband market in Sweden is one example. Mobile that we have also mentioned a couple of times is another. But it could also be smaller, but still very important organic steps. Earlier this week, as a good example, we added Disney, a fairly well known brand, to our existing sales corporation that we already have with Viacom, Fox and History Channel. And this is across Scandinavia.
And it gives us a very high reach product for advertisers where we can compete also in the context of the linear viewing going down. Radio, we have invested successfully in. And following the recent radio licenses in Sweden, we are now in an excellent position to basically position and build our radio franchises in Sweden in the same fantastic way that we have done in Norway. And we also will continue to look for convergence opportunities. The merger the intended merger with GSE made a lot of sense.
I would say that it is a missed opportunity, but we still believe and expect that we will see both vertical and horizontal consolidation in the Nordic markets for years to come and we will be part of it and we will embrace the opportunities that it brings. We have a very skilled, very experienced and very dedicated management team. The workforce is super motivated and they have already shown that they are more than agile enough to capitalize on changing consumer behavior and actually moving the needle ahead of the curve. We can, of course, as always, improve even further, faster decision making, sharper focus, more investments, more new products and more great content. And we will do exactly that.
So for now, that's it for my comments. Back to you, Jorgen.
Thank you, Anders. And now to Slide 13. So you can see the new MTG will be a pure play. This is an entertainment company. The key focus areas are e sport and online gaming, but the company will also compromise Zoom NTV and other investments such as the Engage Digital Partners, the BOARD BOXING Super Series and our 2 VC funds.
Now moving on to Slide number 14. One of the key attributes of MDG will be that we are one of few companies in the world that offer meaningful exposure to e sport. We are the world's leading e sport company through globally recognized brands such as ESL and DreamHack. We operate national and international tournaments as well as amateur cups, leagues and festivals, and we are already the preferred choice for viewers, players, partners and publishers. The other big piece of MGD is online gaming, where we have 2 proven concepts in InnoGames and Kongregate.
And while Esports is primarily an organic growth story from here on, we do expect further acquisitions on the gaming space. These two areas account for close to 95% of 2017 pro form a sales. The capitalization of both MGG and Norg Entertainment Group is work in progress, but it goes without saying that MGG will need to have a strong financial position in order to be able to fund organic investment, pay scheduled earn outs and make further acquisitions. The enterprise value of MGGX businesses that we have acquired totaled to DKK 5,300,000,000 at the time at which we bought them, of which we have paid approximately $3,500,000,000 for our shareholding. Reported sales amounted to $2,800,000,000 with a small EBITDA profit before central cost.
Sales would have totaled $3,500,000,000 and EBITDA before central cost would have been over $200,000,000 if we had consolidated Innogames and Kongregate from the start of the year. I think it's safe to say that we have demonstrated the ability to pay value through M and A in digital space. This also supported by the analyst sum of the parts valuation, which are significantly higher than our acquisition values. M and A will continue to be a central part of the MTG X and also, of course, the new MTG story. If you move to Slide number 15, you can see that the key focus moving forward is to further establish MTG as Europe's preferred partner for dealers entertainment companies around the world.
We already have a strong deal flow, and we think that the split will further add to this. We continue to be super excited about esports. We are seeing the birth of a new mega sport, and this is still just the end of the beginning. We want to establish ESL as a super brand in the world of sports, up where the NFLs and Formula 1 and UFCs and so forth are. We will use M and A to further develop our position in online gaming as well as exploring opportunities in new verticals.
And finally, of course, we will look for strategic partnerships to drive further value creation. So please turn to Slide 16, which outlines the time line. I'm not going to spend much time on this now, but simply point out that the publication of information brochure is expected during the second half of the year, which will be followed by an extraordinary general meeting. The publication of the listing prospectus for the Nord Entertainment Group, the distribution of the shares and the listing is expected to come later, most probably during Q4. We go to Slide number 17.
So in summary, create 2 listed companies, leading brands in their respective industries. The split will provide improved focus and agility, which will drive further growth and shareholder value. MGG and Nord Entertainment Group are 2 very different investment cases that will now be able to operate with separate capital structures and incentive models. And finally, this proposal comes from a position of strength, robust operational performance, strong leader teams and an Inspire workforce. So we are convinced that the timing is right and that this will create additional value for both companies.
That concludes our commentary on today's announcement. So over to you now, then operator, to start the Q and A session, please.
Thank you. The first question comes from Mikhail Lassine from Carnegie. Your line is open. Please go ahead.
Okay. Good morning. Thank you. I have a couple of questions. First of all, if you can say something about the balance sheet for these two entities.
Is it fair to assume that the Nordic side will have net debt? And of course, MTDx will have a strong net cash position? And can you say something about approximately what type of net debt to EBITDA that you think is fair?
I don't think we're going to go into the levels right now. I mean, today, we propose our ambition to do the I mean, your assumption is fair that the net debt will, of course, go to the Nordic Entertainment Group and we will be on a cash position on MTG at the RemainCo as the ambition is to do further M and A within the MTG.
Okay. And basically the same question regarding central operations and expenses. First of all, if you can just remind us how much nonrecurring costs you had in 2017? And what will happen to that line once this is completed? I guess that it will be higher than you're at today given that it's and to the ex, it's not really doesn't have that those type of resources that's a listed company requires or needs, I guess.
Yes. I mean, you're right to conclude. I mean, we will set up 2 central operations. Of course, we have one headquarter that runs the total growth now tomorrow in the split world, you will definitely have 2. Then we need to right size both organizations to make sure we set off both company in the best parts of the way.
We had the 1 off cost, which we discussed, I mean, we had quite high LTIP cost for 20 17, which was high normally, and then we had the M and A cost, which was the sort of extraordinary cost, if you want to put that way, for 'seventeen. Okay.
And how much was it?
I think the M and A cost was roughly $40,000,000 if I remember right. And then we had LTIC cost, which in totality was $100,000,000 which is normally not that high, but you would, of course, have incentive program costs in both companies going forward.
Okay. And just a final one. You have Splay in the Nordic side. Why is that?
I think to answer that very simple because it's actually a perfect fit. Splay has become sort of the leading provider of both content marketing and made for various devices productions. And that fits perfectly with our ambition to serve our customers better in new and innovative ways. And I think Splay together with the capabilities that we have in our studios operations will be a very, very valuable asset for us in the Nordics. It's all about video and serving our customers and Sling is doing exactly that.
All right. Thank you.
Thank you. We will take the next question from Rasmus Engeberg. Your line is open. Please go ahead.
Yes, hi, good morning. I wanted to ask you whether we should consider the possible disposal of the broadcasting business a closed case? Or are you still sort of running this as a dual track or something like that? What can you say about that?
No, it is a close case. Now it has to go to EGMs and so forth, but it is an outspoken strategy as you also can see from today's announcement. And the Board has decided that, that is a way to go and to make sure that we have 2 distinct and 2 clear equity stories where we have this Nordic powerhouse and you have the global digital asset. So the ambition is definitely to carry this through, and the Board is supporting it. And we have consulted, of course, the main shareholders as well, and they are positive to the split as well.
But are you exploring are you open for a suggestion for a takeover anyway?
We don't want to go into that. Now we have a case today where we talk about how we think we can drive both companies even faster going forward. And that is what we know, and that is what we will try to what we will execute on.
Okay. Thanks.
Thank you. We will take the next question from Martin Arnott from DNB. Your line is open. Please go ahead.
Thank you, operator. Hi, everyone. My first question is to Anders. If you could just mention elaborate a little bit on new organic growth initiatives in Nordic Entertainment that you see
going forward. Yes. Good morning. Happy to do that. On the organic side, we see a number of opportunities, especially obviously in the digital areas, where we see very, very good traction in both Via Free and Via Play.
In 2017, we grew our customer base in Via Play with more than 20%. Our users, they really like the product. They consume more than 1 hour per day. It's a very, very strong proposition, and we have started the year very, very strongly. Via Free also grows rapidly, and we are now moving more and more money into developing those 2 products here both in terms of tech and content.
So that is something that where we see opportunities to add even more investments to harvest even more growth. The penetration of SVOD services around the Nordics is actually still on fairly low levels. So this is a growth area where we intend to take more than fair share. Then there are other areas that may be less expected, but still very, very, very interesting. I would like to mention radio in Sweden, where we basically sort of cleaned out the license auctions right now.
We got a very good national license. We took 17 out of 21 licenses in the local license auctions. That will allow us to basically grow market share and share of listening in the terms of double digit percentages. So that would be a very, very strong organic opportunity for us. And then of course, there are other new product ideas that we have that will sort of gradually add to this.
So the combination of these organic opportunities and other sort of moves into new areas and smaller and larger bolt ons in terms of our strategy, that creates a very solid platform for continued growth and profitability.
Great. Thanks a lot for that. And on the MVNO initiative that you commented on before, anything you can say there?
Yes. The interest from our side remains. We believe that there is an opportunity to use our know how around content and technology from a user perspective to create new interesting services. We have no interest to enter a mobile market to put pressure on prices and just become 1 among many connectivity providers. We want to do it from a service proposition point of view.
And we believe there is an opportunity in the market for something like that. And also to aggregate other content providers' content and not just create walled gardens, but to be the super aggregator of aggregators, if you will. So we're going to continue to pursue that opportunity.
Okay. Thanks. And just final question. Could you just firstly remind us on how long your distribution agreements last, the ones that you signed in 20 16, are those 3 years signed?
We don't comment exactly. It's contracts between 2 parties. So it's not only for us to comment on. And they vary a little bit, but minimum 3 years, yes.
And just finally, any thoughts on Premier League ahead of the negotiations this summer? Yes.
We look forward to the process. Think it's a fantastic property. We expect competition. We always do. We're prepared for it.
And as always, we have both alternatives and ways and ideas on how to develop the product further with and without Premier League. So that is you could say business as usual and something that we have done successfully for many, many years.
Thanks. Excellent.
Thank you. We will take the next question from Robert Burke from Berenberg. Your line is open. Please go ahead.
Hi, yes. Thanks guys. A question for you actually on the digital asset. I'm just wondering whether after your previous announcement to split the business in 2 and the TDC deal didn't occur, whether you considered or saw any interest from a third party to acquire the digital asset? Or were you solely kind of determined to keep the digital asset as a listed company?
Yes. You can see from the announcement today, we are the digital assets will remain listed, and that is what we're looking at. I think the job that we have as management is, of course, to make sure that we constantly develop those businesses and make them even more relevant, so we will have interest for people to invest into our company. So that is the focus area that we're having.
Okay. Thank you.
We'll take our next question from Henrik Mawby from Nordea Markets. Your line is open. Please go ahead.
Hi. Thank you for taking my question. Maybe a bit of a repetition about Martin's questions here, but to Anders Jensen. You mentioned that you are keen to grow in the broadband offering and also eyeing a mobile opportunity. Can you comment a little bit on where you are in that process now, specifically in the mobile?
Opportunity
and there are various ways to go about this. When it comes to our opportunity and there are various ways to go about this. When it comes to our readiness and our preparations for how we would actually create such a product, we are fairly advanced. So it's a matter of timing for us if and when we think it's the right time to move forward. We have some very, very specific ideas on how we can utilize our technology and content in a very interesting way.
And I would also say that it's it is actually so that there is a fair degree of interest from some MNOs that have reached out proactively. So I think we're in a good position. There is no reason for us to rush into this. We have no ambition to just go out there and try to grab market share. We want to add value to the market and to the partner that we decided to partner up with.
It's about utilizing content and technology in a new smart way, and that needs to be done sort of as diligent as Can
you elaborate a little bit on what you mean by that? Well, I think Can you elaborate a little bit on what you mean by that?
Well, I think we have a very, very distinct interest to grow our customer bases. We are in very many ways a subscription business and I profoundly believe in our ability to grow customer basis to monetize on it is key to us. So we will be seeking to add those kind of assets to our portfolio, Whether they are large or small tickets or what kind of opportunities they are remains to be seen. But I can think of a couple of opportunities, but we'll get back to that a bit further on in our short process here.
Okay. Thank you very much.
That concludes the question and answer session. I will now hand the call back to Jorgen Lindemann for his concluding remarks.
Yes. Thank you all for your time today. We will, of course, keep you updated as we progress this process and, of course, welcome any further questions you may have. We will announce our Q1 result on April 23. So look forward to seeing you then, if not before.
So it's goodbye from us for now, and have a great day.