new frontiers
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Irina Gofman, CEO MTG Russia & CIS &Ulrik Bengtsson, CEO Pay-TV Emerging Markets. Capital Markets Day 2010.TRANSCRIPT
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 1
2010 Capital Markets Day
Irina Gofman, CEO MTG Russia & CIS
Ulrik Bengtsson, CEO Pay-TV Emerging Markets
New Frontiers
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 2
Non-stop Development
Year 2003
Countries 7Channels 2DTH platforms
2004 2005 2006 2007 2008 2009 2010
11 15 22 23 24 25 253 5 6 7 8 10 12Baltic Ukraine Russia
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 3
Strong Financial Performance
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
-100
100
300
500
700
900
1100
Y 04 Y 05 Y 06 Y 07 Y 08 Y 09
mln
SE
K
Total Pay TV Revenue, EBIT and margin
Revenue EBIT EBIT Margin
• All times high sales in
2009, close to 900 million
SEK
• Growing EBIT margins at
20%
• Hard prove for the
successful business
model based on
incremental growth and
scale
Source: MTG company data
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 4
Our markets are still far from saturation
Source: Screen Digest, RTL, MTG company data
• Roomy growth potential across most of the markets
Digital TV HH as % of total TV HHPay TV Penetration vs Pay TV HH
• Low Digital TV penetration gives another dimension for multi-channel Pay TV
development
17%
54%
29%
59%68%
32%
46%42%
29%23%
46%
25%
4%0
2,000
4,000
6,000
8,000
10,000
Russia
Pola
nd
Ukra
ine
Rom
ania
Hu
ngary
Cze
ch
Bulg
aria
Slo
vakia
Serb
ia
Cro
atia
Slo
venia
Macedonia
B&
H
Pay TV HH % Pay TV penetration
0%
20%
40%
60%
80%
100%
UK
Fra
nce
Ge
rma
ny
Ro
ma
nia
Bu
lga
ria
Po
lan
d
Hu
ng
ary
Ukra
ine
Ru
ssi
a
Terres tria l S atellite C able IP TV
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 5
Pay TV in East is structurally different from West
• Build volume first and fast
• Adjust business models from Scandi experience
• Pre-paid business model for DTH businesses
• MiniPay as a stand alone business in some CEE countries
Structure
Platforms
Packages
Pricing
• Larger Geographical Footprint, multi-channel free viewing environment
• Growth in Pay TV & Digital-TV Penetration
• Small variety of packaging
• Free viewing packages
• High price sensitivity • Sometimes price in the
hardware vs content
• Smaller Geographical Footprint, multi-channel pay viewing environment
• Stable Pay TV & Digital-TV Penetration
• Premium-, basic-, larger & smaller packages
• ARPU stable with high base consumer spending on Pay TV
Eastern Europe Western Europe
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 6
Pay TV East – Rules of Engagement
Geographical Expansion
Localization
Revenue Maximization
Diversifyingrevenue streams
• Expanding Existing Viasat Brands into the new territories
• Creating localized content brands: TV1000 East, Russian Kino
• Bundling and packaging to maximize revenues and promote Viasat Brand to end customers
• Serving B2B and B2C segments (DTH) and introducing advertising in the selected markets
Channel Business is the
MTG Trojan Horse to the DTH
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Channel Business in Eastern Europe
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 8
Pay TV Channel Business at a Glance
• ~ 44 million subscriptions sold in 2009, but higher potential is still ahead
Revenue, EBITChannels Subscriptions (mln)
and ARPU
• Revenues at all time high in 2009 • Channel business is the major EBIT driver
for Pay TV East so far
0
20
40
60
80
100
120
140
04 05 06 07 08 09
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Subs (m illions ) ARPU (SEK)
Ad
dre
ssab
le m
ark
et
-100,000
0
100,000
200,000
300,000
400,000
500,000
Y 04 Y 05 Y 06 Y 07 Y 08 Y 09
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Revenue (TSEK) EBIT (TSEK) EBIT magin (%)Source: MTG company data
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 9
Presence across all major Eastern European Countries
• Poland is the ARPU leader, but the majority of the revenues are still coming from Russia
Subscriptions Revenue
• Russia, Romania and Bulgaria are the highest volume drivers
7%
5%
4%
9%
6%
5%
3%3%
1%5%
52%
RussiaPolandBulgariaSerbiaRomaniaUkraineHungaryCzech RepSlovakiaSloveniaOther
13%
6%
6%
5%
5%
4%
3%3%
2%6%
47%
RussiaPolandBulgariaSerbiaRomaniaUkraineHungaryCzech RepSlovakiaSloveniaOther
Attractive incremental margins due to the multi territory footprint
Source: MTG company data
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 10
Russian Example: Consolidation and New Platforms Growth
0
10
20
30
40
2002 2003 2004 2005 2006 2007 2008 2009 2010
DTH
Cable
Pay
cable
IPTV
• Cable has still the highest penetration
• First consolidation stage is over, now focus is on the network modernization
• Satellite TV entered the boom phase through mostly free viewing (Tricolor TV)
Mobile Dig Dispay Fix line Broadband Pay TV
% HH Penetration Russian Consumer Spend (USD billion)
Wild East Boom New Reality
• Pay-TV was the fastest growing segment in 2009 despite the telecom market stagnation
• Mkt growth will be driven by penetration and operators’ ARPU increase
Source: IKS Consulting 2009, Json&Partners, April 2010, MTG company data
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 11
Russian Example: MTG on Top
• TV1000 East and TV1000 Russian Kino are the most watched Pay TV movie channels in Russia according to TNS Gallup
• Viasat is the leading Channel Group in Russia in penetration and revenues
• High EBIT margin
• Russian Pay TV revenue CAGR 2004-09 was 31% (US$)
• Viasat Pay TV Revenue CAGR 2004-09 was 76% (US$)
Top
ChannelsGroup
Top
Channels
Out-
performing Russian Pay TV
Market
Sept. Sept.
20082008
May May
20042004
Oct. Oct.
20052005
Nov. Nov.
20032003
March March
20032003
Nov. Nov.
20062006
Summer Summer
20102010
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 12
DTH Business in Eastern Europe
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 13
STAR High market share in fast-growing marketSTAR High market share in fast-growing market
CASH COW High market share in mature marketCASH COW High market share in mature market
QUESTION Low market share in fast-growing marketMARK
QUESTION Low market share in fast-growing marketMARK
DOG Low market share In mature marketDOG Low market share In mature market
High Relative market share Low
Lo
wM
ark
et
gro
wth
rate
H
igh
DTH Scandi
1997DTH Scandi
1992
Model shows MTG’s DTH development from 1992 untill today. Dotted arrows indicate direction of MTG’s development in the coming years.
DTH Ukraine
2008
DTH Baltic
2004
DTH Baltic
2008
DTH Russia
2010
DTH Scandi
2008
Virtual IP
2010
DTH IntroductionDTH has been very profitable for us in Scandinavia and given us leverage to move into the virtual operator business. We anticipate the same journey in our Emerging Markets
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 14
0
50
100
150
200
250
300
350
Y 04 Y 05 Y 06 Y 07 Y 08 Y 09 Y 10
Su
bscrib
ers
(000')
Subscribers
Premium DTH subscribers Basic DTH subscribers
2010 subscribers are Q1 values
-13500
-3500
6500
16500
26500
36500
46500
-150000
-50000
50000
150000
250000
350000
450000
550000
Y 04 Y 05 Y 06 Y 07 Y 08 Y 09
EB
IT
Reve
nu
e
Revenue and EBIT (000' SEK)
Revenue EBIT
DTH at a glanceSteady subscriber growth accelerated on back of Raduga acquisition. EBIT growth despite investments in Ukraine.
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 15
77%
48%
4%
12%
12%
19%
7%18%
0%
20%
40%
60%
80%
100%
Q1 09 Q2 09 Q3 09 Q4 09 Q1 10
Market share total Baltic development in non cabled universe
Analogue Terrestrial DTT IPTV Viasat
DTH BalticViasat has gained significant market share in the last year. We are the largest pay TV platform in both Lithuania and Latvia. In Estonia we are part of the IPTV growth due to our
Elion agreement.
0%
20%
40%
60%
80%
100%
Est Lat Lit
Average market share in non-cable universe
Viasat
IPTV
DTT (pay)
DTT (free)
Terrestrial (analogue)
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 16
Baltic Gold package around 45 channels
Monthly fee: 305 EEK (24 USD)
Entrance fee: 505 EEK (40 USD)
DTH Baltic - positioningDuring the last 2-3 years Viasat has developed into a true premium player with the launch of Viasat Sport Baltic, Viasat Golf, Viasat Hockey, TV1000 premium and TV1000 action.
� Price leadership – higher TV ARPU than any competitor
� Content leadership – controlling the regions only premium sport
and movie channels
� 13 own produced channels
� Premium position with HD and PVR products in the markets
� Full box subsidy.
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 17
0
50,000
100,000
150,000
200,000
250,000
2005 2006 2007 2008 2009 2010
Total Subscriber Base
1000
1500
2000
2500
3000
3500
Y 06 Y 07 Y 08 Y 09
Total ARPU (EEK)
DTH Baltic – subscriber baseAfter continuous growth since 2004 we faced a decline in the recession 2009, primarily due
to bad payments. However, the situation has now stabilized and we are back to growth
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 18
� Viasat have acquired a significant share of Ukraine’s Pay TV market and are already larger than NTV+ that have been on the market for 10 years
� Also Viasat brand awareness are already exceeding that of NTV+
94%
95%
96%
97%
98%
99%
100%
Q2'2009 Q3'2009 Q4'2009 Q1'2010
Market shares in DTH segment (non terrestrial or cable)
Free satellite TV NTV + other
Tricolor Poverhnost' TV Viasat
42%4%8%2%
45%
Average market share Pay DTH
NTV + other
Tricolor Poverhnost' TV
Viasat
DTH Ukraine – market development and markets shares DTH market has historically consisted of 2 million FTA satellite installations. However, this base
is declining and are providing one of the best sources of growth for Viasat.
Source GFK and internal analysis
0.0%
1.0%
2.0%
3.0%
4.0%
0%
20%
40%
60%
80%
Viasat NTV+ Poverhnost' TV
Awareness and intention to connect
AidedSpontaneous
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 19
Ukraine Prestige Package around 70 channels
Monthly fee: 168 UAH (21 USD)
Entrance fee: 599 UAH (75 USD)
� Positioned with low entry barrier for customer but relatively high
monthly fee
� Only supplier in the market offering customer service
� Partial box subsidy model
� 7 own produced channels
� First premium sport channel launched in September in
cooperation with TRK Ukraine
� DTH exclusive movie and sport content
� MPEG 4 gives us beneficial cost structure
� Still not full fledged Premium position
DTH Ukraine – positioning Strong offering but market still not ready for full fledged premium positioning.
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 20
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
J 08 M 08 M 08 J 08 S 08 N 08 J 09 M 09 M 09 J 09 S 09 N 09 J 10 M 10
Total Subscriber Base
DTH Ukraine – subscriber base Our customer base have grown steadily even throughout the Ukrainian crisis.
800
900
1,000
1,100
1,200
1,300
1,400
Y 09 Y 10
Total ARPU (UAH)
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 21
Total HH 54 mln Mostly Cable Mostly Non cable
City HH 37 mln
Cities High Rise Apt Blocks
24 mln
Cities Low Rise apt blocks
13 mln
Small settlements 17 mln
Recreational (dachas), second homes
10 mln
Addressable 24 mln 40 mln
Current Pay TV 12 mln 5 mln
To capture * 8-10 mln 10 mln
*Adjusted to disposable income, adoption rate, ARPU increase of the current networks and
current competition in DTH
DTH Russia – market potential Russia represents a large untapped DTH market which should be growing when disposable incomes increase.
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 22
Raduga TV Package around 55 channels
Monthly fee: 300 RUB (9,7 USD)
Entrance fee: 5900 RUB (190 USD)
� Prepaid model
� Card sales model with no proprietary boxes
� No box subsidy
� Positioned with high entry barrier for customer
but low monthly fee
� Positioned right in-between high end NTV+ and
extremely low end Tricolor
� 8 own produced channels
DTH Russia – positioning Raduga is positioned neatly right in-between the existing two big players. This caters to a lower ARPU segment than NTV+ and our Ukrainian platform, but also a higher volume segment
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 23
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
feb 2009
mar 2009
apr 2009
may 2009
jun 2009
jul 2009
aug 2009
sep 2009
oct 2009
nov 2009
dec 2009
jan 2010
feb 2010
mar 2010
apr 2010
Total Subscriber Base
DTH Russia – Subscriber base This positioning is providing a significant growth potential and since feb. 2009 base has grown to over 85 000 subscribers
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 24
Description Relevance
Structurally lower
content cost
� Given the economy of scale in our own channels our platforms can access this content at a very low price, this is particularly true for the expensive premium content
1
Cross promotion
� Lower marketing costs due to cross promotion access at our FTA and pay TV channels. Highest relevance where we have FTA channels
2
Market knowledge
� We have good understanding of the market we enter with DTH because we have had local presence for years.
3
Market Leverage
� The more channels we have in a market the more leverage we create which is a value that can be used to strengthen the platform either by giving it exclusive content or by entering virtual operator agreements
4
Very relevant
Not relevant
Synergies between our minipay and DTH businesses There are proven synergies between our channel minipay business and our DTH platforms, our Scandinavian experiences has given us the blueprint on how to use them
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 25
Summary
Mini pay
Next
� Russia still represent our single greatest growth potential
� Growth will come primarily through volume growth
� Main driver in volume growth will be through selective new channel launches
� Ensure success in our Russian and Ukrainian DTH business
� Look for selective opportunities to extend current DTH businesses into new territories
� We are currently evaluating the opportunity for both mini pay and DTH in Africa
DTH
� Baltic countries are still expected to provide growth for Viasat
� We have two additional new platforms both of which represents a great future potential
� A multi-platform strategy focused on 3rd party networks (large digitised cable and IPTV operations) still represents a more or less untapped market for Viasat in our Emerging Markets.
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 26
2010 Capital Markets Day
Irina Gofman, CEO MTG Russia & CIS
Ulrik Bengtsson, CEO Pay-TV Emerging Markets
New Frontiers