A major report on Modern Tines Group (MTG) from banker Morgan Stanley says that even though the broadcasting giant faces “intense competition” in its home Scandinavian market (in particular from Discovery’s entry into the market), the group is performing extremely well with its Central & Eastern Europe businesses.

The challenges include those from the limited upside growth in its home markets from pay-TV. The bank states bluntly that while MTG’s Viaplay service delivers good subscriber additions, “it is difficult to forecast the required revenue growth without evidence of reduced DTH churn and/or improved customer acquisition on third-party cable/IPTV networks.” Indeed, the bank says MTG needs to deliver five percent growth in its pay-TV business in 2014-15 to see meaningful margin recovery.

On the much firmer upside of the equation, the bank sees solid growth in MTG’s CEE investments. “MTG has been a beneficiary of advertiser switching in its largest market, Czech Republic, following efforts by CME to put through significant price rises. MTG’s market share gains have accelerated since the start of the year. This has more than offset the effects of a tepid advertising TV environment (low-single-digit growth),” says the bank. As far as CEE pay-TV is concerned, the bank expects continued DTH subs growth in Ukraine and Russia.

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