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BSkyB will beat UK recession
BSkyB released its Q3 numbers on April 30. The market had mixed views of its results, and whether Sky is wise to pursue Tiscali’s assets. One May 1 report also says Sky will be “very resilient” to the UK’s economic downturn.
By and large City analysts were positive despite the impact of Sky’s heavy investment in broadband, which by any measure is beginning to pay off. The broadband service now has 1.4m customers who tend to be long-term and not quick to churn. Investec’s advice to its clients was to hold to its “buy” rating, saying BSk*B had achieved a decent result against tough comparatives. At the end of the day Sk*’s shares had risen a fraction (4.5p) to 545p although during the day the share price had fluctuated to as high as 557p.
We’ll know in a week whether Sky’s interest in Tiscali is real, but meanwhile its own broadband and telephony plans continue apace. Morgan Stanley, in a May 1 note to clients, reminds readers that consumer advice site uSwitch has recently highlighted Sky as “as the provider of the home phone service most highly rated by consumers and as the winner of the ‘Best Deal for You’ and ‘Joint Best Value for Money’ awards.” This is good news for Sky, and in time will take them well beyond the description of simply being a pay-TV business. Broadband is also good business. While it is possible to have a wholly free broadband supply from Sky (for existing subscribers), the company says two-thirds of its 1.4m subs trade up to a paid-for package. Sky Talk (telephony) clients grew 180,000 in Q3 and now top 1.1 million connections.
Moreover, Morgan Stanley does not see Sky being too bothered by the current UK economic downturn. “The environment for the UK consumer has already weakened but there are no signs of this yet in the Sky model. Total new product sales (taking each services as a separate product) at BSkyB have totaled 4 million year to date, up 40% yoy. Churn at 10.5% is low for a mass-consumer product. ARPU has steadily risen year on year. BSk*B reports no signs of changed consumer behaviour in response to economic hardship in terms of churn or spindown, a claim seemingly borne out by the numbers.”
NDS: 'Spygate' should wrap in May
Conditional access specialists NDS has had a superb 3Q, with revenues up 20%, operating income up 21% and a record 87m active smart cards in use.
However, NDS president and CEO Dr Abe Peled (pictured, left), while not discussing the ongoing “Spygate” litigation between NDS and Echostar, said he hoped the trial would finish later this month.
Amongst the results highlights, NDS revealed it now has 12.1m DVR players deployed using its technology (6.4m a year ago), 83.1m boxes (57.3m) using its one or other of its middleware products and 86.9m smart cards in use (72.9m). Revenues and net profit have increased commensurately, as has the firm’s headcount which over the past year has expanded from 3460 staff to 3886 today.
Dr Peled listed the major client gains achieved during the three months:
• Premiere DTH (Germany)
• Digital Ent. Network (DEN, India)
• TeleColumbus, Germany
• Canal+ deploying latest MediaHighway
• Hathway (India) using NDS DVR
• Viasat (Scandinavia) extending contract
NDS’ operating income was US$43.3m, or 20% of revenue, for Q3 ended March 31, 2008, compared to $35.8m, or 20% of revenue (same period last year). Operating income was $151.1m, or 24% of revenue, for the nine months ended March 31, 2008, compared to $117.8 million, or 23% of revenue (same period last year).
NDS’ statement said there was no intention of using the now-large cash reserves ($696.2m) to pay dividends, saying: “Our accumulated cash is being held with the intention of using it for the future development of the business”.
Dr Peled said, with typical understatement, that the quarter had been “good” and that he was “comfortable” with the way business was moving. He said the German market was progressing well, as was India. Staying in Germany, Peled said NDS was having on-going discussions with Kabel Deutschland and Unity Media, but RFPs were not on the table.
He explained that Hathway, already a client in India would now be rolling out NDS XTV (DVR) product. Digital Entertainment Network was another growing cable business in India and taking a full portfolio of NDS products. Bharti, the cellular operator, had chosen NDS for its pan-Indian DTH service. “We’re bullish on India, although the regulatory environment is a bit unpredictable. Taking a five-year view it is perfectly possible that the market could win 40m subs, and we could take around 50% of that total.” Peled admitted that the Indian revenues might be a little more modest, but the margins remained attractive.
Conditional Access sales still had plenty of upside, given that 2.9m cards have been delivered but not yet activated, to players like Dogan Group (Turkey), Astro (Malaysia) and others. These will be recognised over the upcoming months.
Legal expenses are up reflecting the current Echostar litigation, now dubbed “Sk*gate” by one analyst and likely to be in use by the community. However, Peled did admit that the Echostar litigation was “watered down” compared to the original, and that NDS was expecting the trial to wrap this month.
NDS nudging 90m active smart cards
NDS has announced an increase in third quarter revenues of 20% bringing in $213.3 million to the News Corp technology division. Nine-month revenues were up 25% to $633.1 million.
The company now has 86.9 million active digital TV smart cards, 83.1 million cumulative middleware clients deployed and 12.1 million cumulative personal video recorder clients deployed (NDS prefers the term DVR).
Revenue from conditional access increased by 21% in the three month period and 25% over the nine months. The rise comes ahead of the commencement of the recently announced CA contract with Germany’s Pr*mi*re. NDS is benefitting from an increase in subscriber numbers for its customers. The same factor has also produced a rise in EPG royalties.
“This has been another good quarter for NDS. We are particularly pleased with our continuing progress on entering the German pay-TV market, said President and CEO Dr Abe Peled. “ We continue to invest in our business to support our customers and offer them the technologies and business solutions to allow them to remain competitive in the evolving media distribution landscape.”
One number of note is an increase in the cost of goods and services of up to 23%. Caused in part by increased royalties paid to third parties for the use of their technologies, though offset by lower smart card costs.
Costs cap Canal Digital
The expansion of the Canal Digital product portfolio helped increase first quarter sales at the Nordic pay-TV platform from NOK1,396m to NOK1,477m. However, higher content and hardware cost contributed to a near halving of profits within the Canal Digital Group to NOK61m.
DTH subscribers fell by 18,000 to 1,124,000 million on March 31, 2008. This was compensated in part by an increase of cable TV subscribers of 10,000 to 710,000 and cable TV internet access of 40,000 to 140,000.
Total operating profit within the Telenor Broadcast Division fell from NOK223 to NOK210, though EBITDA climbed slightly from NOK375m to NOK386m. The cost of the new Thor 5 satellite, successfully launched in February, was included in first quarter capital expenditure.
The transmission and encryption division, including Norkring and Conax, benefitted from the introduction of DTT in Norway. Operating profit climbed from NOK127m to NOK206m.
UPC Beijing to launch 27 digital pay channels from May
China DTV Media Inc. Ltd. (CDM) official announced on April 28 that with cooperation with Gehua CATV Network CO., LTD, they will launch 27 digital pay channels as of May 1 in Beijing, covering programs like popular world TV drama series, films and documentaries made at home and abroad, pop concerts, global top songs list, the international fashion trends, football and tennis, and so on.
The CDM is an integrated operations center for pay-TV authorized by the State Administration of Radio, Film and Television.
Astra opens new orbital position
SES Astra has announced the start of a new orbital position at 31.5 degrees East.
Following on from the successful launch of Sirius 4 at the end of last year, it will allow the company to operate satellite services at up to 40 new broadcasting frequencies (BSS) and allow for the strong development of markets in Eastern Europe and the Middle East.
With the introduction of the new position, SES Astra and SES Sirius will have a total of five orbital positions with their fleet of 13 Astra and two Sirius satellites.
Belgium wants independent TV5Monde
Interviewed by daily Les Echos, Belgium’s Minister of Culture and Audiovisual for French community Fadila Laanan said her country hoped TV5Monde’s new managing director would be really independent.
“We mainly hope for TV5Monde a managing director endowed with a full autonomy, with full powers and fully responsible in front of the administration board of the channel as well as in front of the ministers he will depend from.” This general manager “can be French” but “he mustn’t be a puppet” near President Alain de Pouzilhac.
According to Fadila Laanan, “France has made efforts and given up the idea of a newsroom common to TV5Monde, France 24 and RFI, as well as agreed to make of TV5Monde a partner more than a mere subsidiary of the new holding, whose stakes into French-speaking channel have been limited to 49%.”
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