Emerging Pay-TV Players Driving NDS Business
[11-01-07 – Satellite News] NDS, the conditional access and middleware vendor which generates around 80 percent of its revenues from satellite players, has signed another deal with a start-up direct-to-home player, adding leading Indian cellular operator Bharti Airtel, to NDS’s stable of customers.
Bharti expects to launch pay-TV services in India soon, and Abe Peled, NDS’s CEO, expects Bharti to be a "very serious player”in the Indian television market. "I believe Bharti is a very professional company and very committed to expanding into the DTH (direct-to-home) space,”he said. "I think India, with 80 million middle class households, has room for more than two or three players, at least in the first two to three years. We are very happy with this partnership. It was a hotly contested bid. I am pleased to say we have won on the strengths of our technology, our roadmap and our combined offering.”
NDS, which reported revenues of $204.9 million and profits of more than $46 million in its most recent quarter, has been successful in gaining business with new satellite pay-TV operators throughout the last year, signing deals with Tata Sky and Bharti in India, VisionTV in the Ukraine, Gateway in Africa and Dogan TV in Turkey, and Peled believes this is only the beginning.
"We are participating in a quite a few new satellite bids. So I don’t think the phase of new start-ups is yet over,”he said. "… We are very optimistic about VisionTV in Ukraine. Also Dogan TV, which has a very innovative strategy in targeting [free-to-air] customers, offering them a la carte services. I think Turkey is a great [free-to-air] market. There are 2 million set-top boxes being sold there every year. Dogan expects a large portion of those to be their D-Smart boxes. I am very impressed with their operation. We see a very strong momentum there.”
Peled believes the economics of delivering a low-cost pay-TV service are now in favor of these new players. "The cost of the technology has fallen to a level that makes even a $5 [average revenue per user] attractive as a digital proposition,”he said. "That is why Eastern Europe and Africa have become viable markets. The cost of technology coming down means DTH operators can offer low-cost solutions. Satellite has a real advantage in terms of rapid deployment, particularly when you are going into diverse geographies.”
Daniel Meron, a media equity analyst at RBC Capital Markets believes the emerging markets offer NDS strong opportunities for growth. "We believe that emerging markets offer the most promising growth prospects for NDS when it comes to subscribers and platforms,”he said in a research notes. "NDS shipped 3 million security cards in China in  and 1 million to Tata Sky in India, and we believe this rate is sustainable and could even grow. Furthermore, we see good service uptake in Germany, Eastern European countries like Romania and in Turkey with recently launched platform of Dogan TV looking to ship hundreds of thousands of cards. NDS won 10 additional service providers in  , and we believe the company sees continued healthy momentum with additional ones.”
As well as working with new start-ups, NDS is also a key technology partner to some of the world’s biggest satellite pay-TV operators such as BSkyB, DirecTV and Sky Italia. NDS hopes to play a key role as these companies look for new multi-faceted approaches to deliver content.
"I think it is a good opportunity for us,”Peled said. "We are pitching the unified headend, which will yield benefits whether you deliver services by broadband or satellite. You can have a Web portal as well. We believe satellite operators should expand their propositions to offer their content on multiple platforms.”
Peled believes hybrid capabilities are “very important” for the satellite operators. “It will play out over the next few years,” he said. “NDS has made investments so that our middleware has hybrid capabilities. We have invested in technology that can take Internet and broadband content and feed it into the hybrid box as MPEG-2 and MPEG-4. NDS can provide a program guide that seamlessly combines offerings from broadband, broadcast etc. All of these things are very important for us. Satellite operators need to adopt this hybrid strategy if they are to effectively compete in the next few years.”
Peled also expects broadband to become key for satellite players. “I think the real quantum step will come when more boxes which are broadband enabled come onto the market,” he said. “It will take a few years for these hybrid boxes to reach the critical mass for service providers to offer a host of new applications like targeted ads and social networks integrated with TV viewing. But it is very important for satellite players to move in that direction and have an offering there.”.
NDS also is working with SES Americom on its IP Prime service, and Peled believes this strategy makes a lot of sense. “IP Prime just got a competitor with Charlie Ergen (EchoStar),” he said. “I think it is a very interesting approach that SES Americom is taking. We are really working with them to reach small and mid-sized telcos. I think the numbers are still subject to the same issues that IPTV has, but the IP Prime approach is more clever because the telcos just manage the last mile, whereas, in conventional IPTV, telcos have to set up an IP backbone infrastructure to deploy IPTV, rather than using a combination of IP and satellite. I think technically it is a very good approach as it overcomes some of the issues of scalability that telcos normally have.”