Buried in the Kudelski group half year results is the news that subsidiary Nagravision has won the contract to protect content on China’s Mobile TV system. The deal comes as not too much of a surprise given that EchoStar is operating the satellite portion of the system, once it goes live in 2009 and Nagra and EchoStar have a joint venture to operate conditional access for EchoStar’s old parent, Dish Networks in the US.
This will be the first major coup for Nagravision in China, which is dominated by NDS and Irdeto. Irdeto thinks there is so much growth in the Chinese market that it has moved its CEO there permanently.
However given that the Mobile TV service running in China is part of CMMB using the STiMi locally designed technology, it has only just been launched and for the first year the service will be entirely free, so there is no need for a DRM system to be installed at all, except for when part of the system goes over to being a paid service in 2009.
Nagravision says it is deploying a Chinese national conditional access system as well as 35 regional systems and the installed base will go to 338 systems by 2010. A joint venture, rather like the one operated in the US will be set up between China Satellite Mobile Broadcast and Nagravision.
In the half year results Kudelski still claims to be top of the pile in conditional access, despite the advances of aggressive rival NDS, claiming in it current set of slightly disturbing accounts that it now has 92.3 million active devices running its Nagravision conditional access. NDS showed in its recent accounts that it now had 90.3 at the end of its June 30 quarter.
But that’s where the similarity ends. NDS has revenue 20% up and operating income up 22%, while Kudelski, mostly driven by Nagra, was up just 0.4% and operating income slid backwards into a $36 million loss from a $25 million profit last time, which is it mostly blaming on exchange rates and the weakness of the dollar. Kudelski said that the revenue mix moved from higher margin Digital TV to lower margin Public Access sales and of course the weakness of the dollar.
The company said that it went through a series of cost reductions by buying more cheaply but was hit with personnel costs rising, adding $29 million in costs during the first half, which related to newly acquired companies. It also experienced what it called one-off costs related to smart card swap-outs.
Total revenue was the equivalent of $383 million which it says would have been a growth rate of 10.8% if currencies had not fluctuated. Out of this the digital TV segment (Nagravision and OpenTV) generated $243 million.
Nagravison talked about renewing its relationship with Premiere in Germany (NDS now supplies the middleware there and News Corp may be buying it), and said it signed deals with cable operator Kabel Deutschland for conditional access, CANAL+ Group for an upgrade and new smart cards, Net Servi’os de Comunica”o, the biggest cable company in Brazil for an expansion to include Vivax, an acquired operator and a number of other deals.
Kudelski says that it has successfully turned around OpenTV, achieving an operating income of $6.6 million from a loss last time, and confirmed its overall outlook for the year in the range of $903 million to $948 million of revenue with operating income around $4.5 to $9 million.