Swedish media group Modern Times Group has agreed to sell 100% of its TV, digital and radio businesses in the Baltic region to private equity group Providence Equity Partners, for approximately €115 million. The completion of the deal is subject to the approval of the local regulators.
Key operations included in the sale:
- Three free-to-air (FTA) TV channels in Estonia (TV3, TV3+, TV6)
- Five TV channels in Latvia (TV3, TV3+, TV6, Kanals 2 and LNT)
- Three TV channels in Lithuania (TV3, TV6, TV8)
- Viasat pay satellite operations in Estonia, Latvia and Lithuania
- A number of commercial radio stations
- Digital assets and an online advertising consultancy operating across the Baltic region
In recent years MTG’s Europe-wide strategy has shifted its focus away from traditional broadcasting and pay TV businesses towards digital media, and this week’s sale is not the first of its kind. In 2015 MTG sold off FTA channels in Hungary and pay TV channels in the entire CEE (Central and Eastern Europe) region. Furthermore in 2016, the media group sold off its 38% stake in Russia’s biggest media company CTC Media, divested both of its Ukrainian Viasat and UA.TV pay TV operations, and in 2017 sold a 50% stake in FTV Prima, a local broadcaster in Czech Republic. MTG’s recent announcement to sell its Baltic businesses indicates the conviction in its strategy, and confirms that its 2016 asset sell-offs were not entirely caused by changes in Russian ownership law capping foreign ownership of media companies to 20% and the military conflict in Ukraine. Where MTG has invested in recent years relates to innovative digital media and content. In 2015, the media group invested in Zoomin and Splay (multichannel networks), and in the same year expanded its esports portfolio by acquiring 100% of DreamHack and 74% of Turtle Entertainment. Last year, MTG spent an estimated €100 million to acquire 35% of InnoGames, a German games developer.
The TV advertising market in the Baltics has been challenging for MTG, due to declining TV advertising revenues, which in turn have been affected by poor audience ratings – a result of changing viewing habits, as audiences shift towards online video consumption. For the 14 CEE advertising markets IHS Markit monitors, the average TV advertising market share is 44.8%. Of the Baltic States, only Lithuania is above the average, with 46.3% TV ad share for 2016. Latvia’s TV ad share was 43.3%, while Estonia is the last market in the CEE group with 30.2%. The Estonian market in particular is undergoing another form of market transformation with the budgets from legacy print to be directed to online. This shift will further suppress the TV ad share in the Baltic regions. IHS Markit forecasts that the TV advertising market in Estonia will decline to 28.4% by 2021 from 30.2% in 2016. The combined average market growth for all three markets currently looks set to expand by 2.5% (Compound Annual Growth Rate) over 2016 to 2021. This is significantly lower than the CEE average CAGR of 7.6% for the same period. This suggests that the Baltics no longer fit in with MTG’s current strategy, which tends to seek markets characterised by strong performance.
Overall, Viasat TV subscription revenue in Estonia, Latvia and Lithuania has been declining for the last three years. According to IHS Markit, Viasat’s TV subscription revenue in 2016 fell by 21.1% year-on-year in Estonia and 10.2% in Lithuania (if measured in US dollars) and increased by 4% in Latvia. The falls in revenues were driven by declines in subscribers - since its subscriber base peak of 213,000 in 2012, Viasat has lost 45,000 subscribers in the Baltic region overall. Over the same period subscription revenue for all three Baltic countries (in US dollars) declined by 31%.