Thank you, operator, and good morning, everyone. We have today announced the intention to split MTG into two separate listed companies through a distribution of the newly formed company, Nordic Entertainment Group. The purpose of this call is to provide you with the background, the rationale, and the process. We will also briefly cover the structure and the investment case of each of the entities before ending with timeline and Q&A. If I can ask you to turn to slide number four, you can see that 2017 was the best year ever in the history of MTG. 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 viewing and from traditional distribution to streaming services. How is this possible?
The key factor is that we have dared to disrupt ourselves through early and aggressive investments into next-generation entertainment services. We have Viaplay, Viafree, ESL, DreamHack, and InnoGames. 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. 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 five, the current model is clearly working, and we do not have to do, in theory, anything. The world keeps changing, and we want to continue to reinvent MTG in order to make sure that we capture the opportunities that new consumer 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 spinoff we have undertaken. 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 six, 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 Viaplay and Viafree, 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 seven, we now plan to take the next step by splitting MTG into two separately listed companies through the distribution of the newly formed Nordic Entertainment Group.
New MTG will be a pure play in the digital entertainment space and will primarily comprise our esports and online gaming businesses, as well as our boxing IP project and venture investment funds. We'll be a one-of-a-kind listed entity in the Western Hemisphere. I'll continue to be the CEO with Maria Redin 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 comprise our Nordic entertainment, MTG Studio segment, as well as Splay Networks.
The plan is for the shares to be distributed to MTG shareholders and listed on Nasdaq Stockholm in Q4 this year after approval by shareholders at an AGM in the second half of the year. If I can ask you to turn to slide number eight, we see this split as a natural next step in our strategy. We create two strong companies with sharp and strategic focus that will be able to serve customers even better, aligning executive rewards and results more closely, make it easier to recruit and retain highly skilled talent, provide increased flexibility when it comes to the capital allocation, and enable faster decision-making, all of which should accelerate growth and value creation. It will also provide investors with two 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, Jørgen, 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. 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 nine, where you have an overview of the Nordic Entertainment Group.
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 off 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. It is also a model that many of them are increasingly adopting, but it's hard to copy. Why is it so that they are aiming to copy what we're doing? 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 super highways have changed the media and communication landscape forever. There are three 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. 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 these fast-changing environments. If I can ask you to please turn to slide number 10. As you will see from this slide, we are humble enough to call ourselves the Nordic powerhouse in terms of entertainment and media.
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 three years. 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 paid TV subscribers changing the way they consume and pay for content. In addition to this, we had absorbed FX transactional headwind of some SEK 450 million, especially due to the U.S. dollar inflation. One might ask oneself how it is possible. Firstly, I would like to say that the paid TV markets are far more stable than many has given it credit for. Free TV's return on marketing investment is more resilient than also being credited for.
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 change in consumer behavior. Again, and very important to emphasize, our model, which is quite unique, is working, and we have shown that we can deliver even when the market has 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. We are very confident that this trend will continue to move forward into the future with very healthy growth rates. Viafree, launched not so long ago, has been a great success.
We are now north of 2.5 million downloaded apps, very active customers. The platform that we have developed in parallel with the Viaplay platform is what we would argue best-in-class. The consumers love the product. It is 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. It is made for specific user groups. 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 a unique product with features, functionalities, and formats that set us apart from competition, also global ones. Acquired TV series and movies, original drama, 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. 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. 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 think 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 if and where it makes sense and take out costs if and where it makes sense. 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. We look to further strengthen our position within especially scripted drama. 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 devices for production development. We want to expand. We've talked about this before.
We want our product offering in each of the four markets to grow into more areas. The broadband market in Sweden is one example. Mobile, like we have also mentioned a couple of times, is another. 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 cooperation that we already have with Viacom, Fox, and The History Channel. This is across Scandinavia. 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. 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.
We also will continue to look for convergence opportunities. The intended merger with GEC made a lot of sense. I would say that it is a missed opportunity. 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. We will do exactly that. For now, that's it for my comments.
Back to you, Jørgen.
Thank you, Anders. Now to slide number 13. You can see the new MTG will be a pure-play digital entertainment company. The key focus areas are esports and online gaming, but the company will also comprise Zoomin.TV and other investments such as the Engage Digital Partners, the World Boxing Super Series, and our two VC funds. Moving on to slide number 14. One of the key attributes of MTG will be that we are one of few companies in the world that offer meaningful exposure to esports. We are the world's leading esports company through globally recognized brands such as ESL and DreamHack. We operate national and international tournaments, as well as amateur cups, leagues, and festivals. We are already the preferred choice for viewers, players, partners, and publishers.
The other big piece of MTG is online gaming, where we have two proven concepts in InnoGames and Kongregate. 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 forma sales. The capitalization of both MTG and Nordic Entertainment Group is work in progress, but it goes without saying that MTG 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 MTGx businesses that we have acquired totals to SEK 5.3 billion at the time at which we bought them, of which we have paid approximately SEK 3.5 billion for our shareholding. Reported sales amounted to SEK 2.8 billion with a small EBITDA profit before central cost.
Sales would have totaled SEK 3.5 billion and EBITDA before central cost would have been over SEK 200 million 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 create value through M&A in digital space. This is also supported by the analysts' sum of the parts valuation, which are significantly higher than our acquisition values. M&A will continue to be a central part of the MTGx 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 digital 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 the Formula One and UFCs and so forth are. We will use M&A to further develop our position in online gaming, as well as exploring opportunities in new verticals. Finally, of course, we will look for strategic partnerships to drive further value creation. Please turn to slide 16, which outlines the timeline. 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 Nordic Entertainment Group, the distribution of the shares, and the listing is expected to come later, most probably during Q4. If you go to slide number 17. In summary, create two listed companies, leading brands in their respective industries. The split will provide improved focus and agility, which will drive further growth and shareholder value. MTG and Nordic Entertainment Group are two very different investment cases that will now be able to operate with separate capital structures and incentive models.
Finally, this proposal comes from a position of strength, robust operational performance, strong leader teams, and an inspired workforce. 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. Over to you now, then operator to start the Q&A session, please.
Thank you. Ladies and gentlemen, we are now ready to register questions. If you would like to ask a question, please press star followed by one on your telephone keypad, and you will enter a queue. Should you wish to cancel, please press star followed by two. The first question come from Mikael Laséen 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 MTGX will have a strong net cash position? 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. Today we proposed our ambition to do the split. 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 main co, as the ambition is to do further M&A within the MTG.
Okay. Basically the same question regarding central operations and expenses. First of all, if you can just remind us how much non-recurring cost you had in 2017, and what will happen to that line once this is completed. I guess that it will be higher than you are at today, given that MTGX doesn't have those type of resources that the listed company requires or needs, I guess.
Yes, you're right to conclude. We will set up two central operations. Of course, today we have one headquarter that runs the total group now. Tomorrow in the split world, you will definitely have two. We need to right-size both organizations to make sure we set off both company in the best possible way. We had one, of course, which we discussed. You had quite high LTIP costs for 2017, which was high normally. We had the M&A cost, which was the sort of extraordinary cost, if you want to put it that way, for '17.
Okay. How much was it?
I think the M&A cost was roughly SEK 40 million, if I remember right. We had LTIP cost, which in totality was around SEK 100 million, which is normally not that high. You will of course have incentive program costs in both companies going forward.
Okay. Just the 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 the sort of the leading provider of both content marketing and made-for-various-devices productions. That fits perfectly with our ambition to serve our customers better in new and innovative ways. I think Splay, together with the capabilities that we have in our studios operations, will be a very valuable asset for us in the Nordics. It's all about video and serving our customers, Splay is doing exactly that.
All right. Thank you.
Thank you. We will take the next question from Rasmus Engberg. 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, I don't know, a closed case. Now it has to go through EGMs and so forth, it is an outspoken strategy, as you also can see from today's announcement. The board has decided that that is a way to go, and to make sure that we have two distinct and two clear equity stories, where you have this Nordic powerhouse and you have the global digital asset. 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 this split as well.
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-
Yep
...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 execute, what we will execute on.
Okay, thanks.
Thank you. We will take the next question from Martin Arnell 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.
Yeah. 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 good traction in both Viafree and Viaplay. In 2017, we grew our customer base in Viaplay with more than 20%. Our users, they really like the product. They consume more than one hour per day. It's a very strong proposition. We have started the year very strongly. Viafree also grows rapidly, and we are now moving more and more money into developing those two products, both in terms of tech and content. 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. This is a growth area where we intend to take more than fair share.
There are other areas that maybe less expected, but still very interesting. I would like to mention radio in Sweden, where we basically sort of cleaned out the license auctions right now, 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 %. That would be a very strong organic opportunity for us. Of course, there are other new product ideas that we have that will sort of gradually add to this. 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. On the MVNO initiative that you commented on before, anything you can say there?
Yeah. The interest from our side remains. We believe that there is an opportunity to use our knowhow 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 one among many connectivity providers. We want to do it from a service proposition point of view. We believe there is an opportunity in the market for something like that. Also to aggregate other content providers' content and not just create walled gardens, but to be the super aggregator of aggregators, if you will. We're going to continue to pursue that opportunity.
Okay, thanks. Just final question. Could you just firstly remind us on how long your distribution agreements last, the ones that you signed in 2016, are those three years signed?
We don't comment exactly. It's contracts between two parties, so it's not only for us to comment on. They vary a little bit, but minimum three years, yes.
Yeah. Just finally, any thoughts on Premier League ahead of the negotiations this summer?
No, we look forward to the process. We think it's a fantastic property. We expect competition. We always do. We're prepared for it. As always, we have both alternatives and ways and ideas on how to develop the product further with and without Premier League. That is, you could say, business as usual and something that we have done successfully for many years.
Thanks. Excellent.
Thank you. We'll take the next question from Robert Berg, 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 announcements to split the business in two 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?
Yeah. As you can see from the announcement today, the digital assets will remain listed. 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. We will have interest for people to invest into our company. That is the focus area that we are having.
Okay. Thank you.
We'll take our next question from Henrik Mawby from Nordea Markets. The line is open. Please go ahead.
Hi. Thank you for taking my question. Maybe a bit of a repetition about Martin's questions here. 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?
Well, I think it's fair to say that it's still sort of early days if you consider how much dialogue we have with MNOs about the opportunity. 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. It's a matter of timing for us when we think it's the right time to move forward. We have some very specific ideas on how we can utilize our technology and content in a very interesting way. I would also say that it is actually so that there is a fair degree of interest from some MNOs that have reached out proactively. 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 decide to partner up with. It's about utilizing content and technology in a new, smart way. That needs to be done sort of as diligent as absolutely possible.
Okay. Thank you. You mentioned structural opportunities to drive convergence. Can you elaborate a little bit on what you mean by that?
Well, I think we have a 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 bases to monetize on is key to us. 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. I can think of a couple of opportunities, but we'll get back to that a bit further on in our sort of process here.
Okay. Thank you very much.
That concludes the question and answer session. I will now hand the call back to Jørgen Lindemann for his concluding remarks.
Yeah. 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 23rd, so look forward to seeing you then, if not before. It's goodbye from us for now, and have a great day.