Industry Trend Analysis - MTG Baltics Sale To Be Transformative For Seller And Buyer Alike - JUNE 2017

BMI View: MTG ' s sale of its Baltic broadcast media businesses to Providence Equity is a further sign that TMT players are altering their business models to suit the new media age. De clining advertising revenues have accelerated MTG ' s transformation into a specialised, network-agnostic digital services provider, while Providence ' s disparate telecoms businesses can better exploit the broadcast assets.

In March 2017, M odern Times Gro up (MTG) agreed to sell its free-to-air, pay-TV, digital TV and radio businesses in the Baltic region to Providence Equity Partners, owner of several important telecoms businesses in the region. The transaction values the businesses - which reported 2016 revenues of USD113mn - at approximately USD122mn. We expect the deal to be transformative for both parties for several reasons.

Weakening advertising revenue growth, in part driven by the emergence of low-cost, advertising-free online 'access anywhere' services such as Netflix and Amazon Video, is impacting on all broadcasters and MTG is ahead of its peers in recognising that consumer engagement opportunities now lie elsewhere. The company has launched streaming video platforms such as Viaplay and Viafree, enabling it to deliver content directly to end-users, leveraging the appeal of limited or zero advertising to target paying customers. Reduced spending on advertising will free up capital to invest in content and, by creating a new growth pillar targeting specialised content such as eSports and associated social media opportunities, MTG is assured of long-term sustainable revenue growth. Including sponsorships, media rights and merchandising, the global eSports market is expected to be worth USD1.128bn by 2019, according to Newzoo.

Mobile Networks Are New Media Channels
Latvia & Lithuania 3G/4G Mobile Market Forecasts
e/f = BMI estimate/forecast. Source: BMI, operators, national regulatory authorities

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