Kudelski completes transition of CA to a service model

Friday, August 28th, 2009 
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CHESEAUX, Switzerland — The Kudelski Group (SIX:KUD.VX), the world’s leading provider of media content protection and value-added service technology, announces today its half year 2009 results. During this period, the Group started to reap the fruits of the migration of a significant share of its digital TV conditional access deployed base to the service model. In 2008, the Group delivered over 25 million new generation upgrade smartcards to key operators including Dish (Echostar), Bell and Sogecable. In the first months of this year, the migration was completed. Moreover, since June of this year, the cards deployed at Echostar started to yield the full monthly service fee.

With the completion of the transition to the service model, the Digital TV division has materially improved its operating profitability in this first half and is expected to further recover in the second half. Together with a strong resilience of our Public Access division and with substantially stable economics in Middleware and Advertising, this results in a growing revenue base and a material improvement of the Group operating profit.

Total revenues and other operating income are 7% higher than in the first half of 2008, reaching CHF 454 million. The “Margin after cost of material” (a pro forma non-IFRS item) is CHF 18.2 million higher, due to new agreements with strategic partners. With an operating income of CHF 8.5 million, the Group reversed the loss of last year’s period, improving its operating margin by CHF 27 million. Compared to the same period of last year, personnel expenses grew by CHF 8.3 million reaching CHF 185.2 million, while net income for the first half year was marginally positive at CHF 0.5 million

Strong Digital TV Momentum

The Digital TV segment generated sales of CHF 301.3 million, delivering a strong 12.2%, growth rate. Profitability recovered with operating profit improving by CHF 33.2 million to reach CHF 20.9 million.

European net sales increased by 7.9% to CHF 168 million. Among the highlights of this first half, the Group Italian business did particularly well, both due to a strong growth of Mediaset Premium cards as well as increasing sales of SmarDTV Common Interface modules. Furthermore, Canal+ and TVCabo experienced high double digit growth rates compared to the same period of last year.

American net sales soared with a plus of 42.7%, as the final delivery of upgrade smart cards at Echostar more than compensated slower sales in Latin America.

Asian sales declined by 12.9% reaching CHF 43.6 million, as some large operators slowed down investments in new operations and for subscriber acquisition due to the economic downturn.

Middleware And Advertising In Line With First Half 2008

The Middleware and Advertising top line growth for the first half was at 1.3%, with net sales reaching CHF 65.4 million. Asia/Pacific and Africa were the largest sales contributor at CHF 23.4 million, representing a strong growth of 22.6% compared to the first half 2008. On the other hand, both Europe and Americas were down by close to 8% compared to the previous half year, reflecting a slow down in set-top box shipments observed at selected customers.

Middleware and Advertising segment contribution is regressing compared to the first half of last year, with an operating income at CHF 5.4 million, representing a decline of CHF 1.9 million compared to the first half 2008.

Client Wins

During the first half of 2009, the Digital TV division has continued to win new contracts in both traditional and new business areas. In addition to the already announced contracts, the following deals are communicated in this press release:

HD+ (Germany)
Nagravision expands set-top box integration and certification program to insure multiple HD+ set-top boxes availability at commercial launch. Nagravision proven retail model combines smart cards with set-top boxes for pre-paid viewing. HD+ is a subsidiary of the satellite operator SES ASTRA, the leading direct-to-home (DTH) system in Europe. HD+ is a new and additional program offerings in HD via satellite for the German market bringing attractive TV offerings in high-resolution. The first commercial channels to be carried by the HD+ service are RTL and VOX, which will start to broadcast their HD programmes in autumn this year. In January 2010, the channels Sat.1, ProSieben and Kabel eins will follow.

Abertis (Spain)
Nagravision has consolidated its clear conditional access solutions leadership in Spain by having been selected by Abertis Telecom – the leading technology operator in Spain offering Pay TV retail services to broadcasters – to protect its “TDT Premium” white brand horizontal retail platform. Nagravision delivered for Abertis Telecom an end-to-end ecosystem ensuring a retail market of devices (STBs, iDTVs and CAMs) closely collaborating with leading manufacturers like Samsung, Sony Corp, Philips, Panasonic, Vestel, Pace plc, Sagem, Siemens-Gigaset, Zinwell, ADB (Advanced Digital Broadcast) and more.

Canal Overseas (Vietnam DTH)
Through a competitive tendering process Nagravision has been selected as Vietnam Satellite Digital Television’s (VSTV) sole provider of conditional access technology. VSTV is a joint venture between the Canal+ Group and Vietnam Cable Television, a subsidiary of Vietnam’s public service broadcaster VTV, which aims to bring satellite pay television to Vietnam

Growing momentum in the Americas

  • DISH Mexico, a partnership between Telmex, MVS and Echostar, has launched end of 2008 a satellite offering in 15 cities of Mexico using NAGRA Media ACCESS. In July this year, Dish México reached 530,000 subscribers expecting to double its current subscriber base by year end.

Several additional contracts were signed in the first half of the year:

  • In Panama, América Móvil selected NAGRA Media ACCESS to protect their 6th deployment in the region
  • Claro Puerto Rico DTH will launch this year a NAGRA Media DTT end-to-end solution including conditional access, middleware and DVRs
  • Oi Brazil a major Brazilian telecommunications company selected NAGRA Media DTH solution for its DTH platform
  • Cable Magico Peru will deploy more than 100,000 STBs with NAGRA Media Livewire OS ecosystem to address the growing need of providing cost effective solutions for cable subscribers
  • Brazil second largest telecommunications company, Embratel, is deploying NAGRA Media ACCESS solution to secure the content and provide access to over 100’000 subscribers over its DTH platform
  • In the US, Globecast has launched NAGRA Media Livewire OS for their new STB

TV 2.0: Nagravision Brings Widget Services To Pay TV Operators

Nagravision will disclose at the IBC 2009 (September 10-14, 2009) its new NAGRA Media widget publishing platform. A widget is a smart, intuitive, easy-to-use software application that lets consumers play with graphics and information online. It creates a targeted and familiar environment with recommendation of relevant data for users. Delivering personalised services to the users increases the usage rate which translates to direct revenue, ads revenue, cross selling opportunities for the operator. Embracing widgets as the starting point for Internet-enabled TVs allows operators to attract new subscribers, retain existing ones, and utilize Internet social networks and content for viral promotions. The platform allows operators to jointly develop with content partners, advanced Widgets services in relation to live or on-demand content for pay TV subscribers. Additionally, operators can incorporate Internet ad serving services to complement traditional broadcast media revenues.

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