Kudelski Group 1st half 2008 - migration to service mode on track

Friday, August 29th, 2008 
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92.3 million active devices for Nagravision conditional access; Digital TV with expanded global reach – new customer wins including China Satellite Broadcast Network; Successful OpenTV turnaround

CHESEAUX — The Kudelski Group (SWX: KUD.VX), a global leader in digital security covering a wide range of applications requiring access control and rights management today announced marginally increasing sales and an operating loss for its first half year ended June 30, 2008.

The Digital TV segment generated CHF 268.6 million sales, translating in a 4.2% decrease compared to the first half 2007. At constant rates it however increased by 5.4%. In the first half 2008, Nagravision expanded its global reach with 92.3 million active devices for conditional access.

Sales at constant rates in Europe increased by 3.1%. New customers such as Portugal Telecom, as well as established customers such as Virgin Media and UPC were among the growth contributors. While sales from digital terrestrial operators and Eastern European customers more than doubled in 2007, in the first half 2008, they went through a consolidation phase.

Besides renewing its contract with Premiere in Germany, several additional contracts were signed in the first half of the year.

  • Germany’s largest cable based television provider, Kabel Deutschland (KDG), selected Nagravision’s latest CAS version to protect the content rights and revenues for its forthcoming commercial deployments. The companies entered in a new long term agreement to support KDG’s business model and the expected business growth. KDG will deploy a new generation of smart cards in autumn 2008.
  • CANAL+ Group is adopting the newest version of Nagravision’s CAS and has completed the replacement of smart cards for more than 3 million subscribers. Nagra+ has also collaborated with Canal+ Group for the commercial launch of LA CLE CANAL+, the world’s first digital terrestrial pay-television device in high-definition integrated in a USB key that can be used anywhere, on personal computers. LA CLE CANAL+ allows subscribers to access CANAL+’ premium offering as well as 18 DTT free-to-air channels and local channels. In particular, Nagra+ has developed the USB device as well as the content protection solution, and was in charge of for the integration of the solution on PC.
  • Net Serviços de Comunicação S.A., the largest cable company in Brazil expanded its Nagravision CAS to protect the pay TV services added by its acquisition of Vivax. Two new regional headends and 10 additional cities will bring the number of pay TV subscribers accessing content through Nagravision’s CAS to over 2 million.
  • Quative end-to-end interactive turnkey solutions were selected by B.NET Croatia for its broadband cable system. The integrated solution features the Quative Service Delivery Platform and Lysis Content Management System. As the end-to-end systems integrator, Quative is combining industry leading systems from Harmonic and Technotrend to create a comprehensive and seamless on-demand cable and IPTV solution.
  • Dish Network is the first pay TV operator worldwide offering all standard and high definition programs in the MPEG-4 market. The Dish signal secured by Nagravision technology is available to new customers in designated markets in the eastern half of the US, who sign up for a Dish HD package.
  • Using the Nagravision CAS to protect its pay TV content and revenues and Lysis Traffic and scheduling system, StarHub Digital Cable of Singapore has launched its suite of true on-demand services called Demand TV. With Video-On-Demand, StarHub Digital Cable customers can make one-off purchases of content and view the selected content whenever and as many times as they wish, over a specific time period.

New businesses

In this first half 2008, sales in new business areas were roughly in line with the first half 2007. Having more than doubled in 2007, Digital Terrestrial maintained the revenue base achieved last year. In the PCMCIA market, first half sales were under the revenue base of the first half 2007, yet the order book is significantly stronger. Both the IPTV and the mobile TV markets continued to generate new contracts however, still not translating into a material revenue base. Overall, net contribution from new business areas in the first half was still in the negative high single digit million range.

  • China Satellite Mobile Broadcast Limited (CSM), a company held under Wireless Bureau of China’s State Administration of Radio, Film, and TV (SARFT), selected Nagravision as the sole conditional access provider for a nationwide mass-market Mobile TV service. The services were launched in time for the Beijing 2008 Olympic Games, in major province capitals and in the six Olympic sites covered by the signal. The Mobile TV service is available on a range of devices including handsets, portable media players and computers.
  • Building on Nagravision’s leadership in Mobile TV over DVB-H, Nagravision is extending its Mobile TV footprint into the DVB-SH market by supporting two important trials: Eutelsat in Europe and ICO in the US. In Europe, Eutelsat, the leading satellite operator, will conduct a Mobile TV DVB-SH trial. They are preparing for a commercial service launch in 2009. In the US, ICO Global Communications Limited is developing an advanced hybrid system, combining satellite and terrestrial communications services to offer voice, data, and Internet services throughout the United States on portable devices.
  • Alsumaria TV, the independent broadcaster Iraqi Satellite TV Network selected Nagravision’s CAS for its DVB-H services. Alsumaria TV’s Mobision is the first ever Middle East Mobile Pay TV DVB-H bouquet to be based on Nagravision’s MicroSD Cards with embedded security. The Nagravision cards allow Alsumaria TV to offer Mobile TV services to consumers with both connected and unconnected devices such as mobile handsets, media players and GPS systems.
  • Continuing the strong momentum of TV manufacturers using SmarCAM Italia, SmarDTV announced that Samsung has completed DGTVi certification and will be offering SmarCAM Italia together with its TV sets in Italy. Samsung has also bundled a Mediaset smart card with the SmarCAM, thus providing consumers with superior ease-of-use and many hours of premium TV viewing.

Successful OpenTV turnaround

The turnaround initiated in the second half of last year resulted in a strong improvement of OpenTV’s profitability. Compared to the first half 2007, Middleware and Advertising segment operating income contribution improved by CHF 10.0 million reaching CHF 7.3 million, corresponding to an operating income margin increase of 15.4%. OpenTV continued to build on its strength by expanding the business with existing customers as well as acquiring new customers and had more than 111 million enabled devices as of the end of the first half 2008. This footprint is spread across more than 50 customers around the world with a strong mix among satellite, cable, and terrestrial markets. In addition, OpenTV continues to equip customers with the solutions to address the growing market demands for advanced services, such as PVR, High Definition TV, Video on Demand, advanced user interfaces, and other emerging digital technologies.

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