KINGSTON REBRANDS AND SEEKS GROWTH

By | September 6, 2000 | Feature

The initiative comes along with a new managing director, Nick Thompson, who recently joined UK-based Kingston from Loral Cyberstar.

This week the company has also signed new uplink contracts. One is with Modern Times Group’s ‘PIN’ shopping channel channel, a second contract with the Digital Broadcasting Company (DBC) to uplink the broadcaster’s new channels to its second transponder on the Astra 2A satellite. Another contract is to provide satellite services to LankaCom, the joint venture between Singapore Telecom International and the Capital Development & Investment Company Ltd of Sri Lanka.

Under the terms of the agreement, Kingston TLI, the international satellite and broadcast arm of the Kingston Communications Group, will supply Internet service provider LankaCom with a circuit between Colombo and London on Intelsat 602 at 62 degrees East.

But this is only the tip of KMS’ iceberg, which sees investment taking place almost all over the outfit’s over 140 acre northwest London site. There is a new virtual studio, another being refurbished and willingness from the company to now invest directly in enterprise start-ups. Thompson said KMS’ broadcast side continues to increase, “and is still the mainstay of the business”.

“We have recently put up a carrier onto Astra 2A. Indeed, we have doubled our business. For example, we have the contract for [PPV specialist film company] DBC’s U Direct service, and working with them to exploit some of their space segment. So we have a strong DTH business as well as a point-to-point business, and we are now looking at an enormous number of satellites from a farm of over 30 dishes. The occasional business sector is also doing well, and I suspect we are benefiting from all the disparate businesses being helped by the coming together of the Kingston brand over the past year.”

Currently, Thompson’s division of Hull-based Kingston Communications is steaming ahead. Last year its turnover was just below GBP9 million (E14.70 million), and this year it more than doubled to GBP19.49m (E31.83m), and Thompson said the company expects that to grow some 50 per cent again next year, and a similar amount in 2002. With this sort of growth in prospect, an IPO floatation cannot be far from Kingston Communication’s mind, although Thompson quite properly declined to comment on any such forward-looking plans.

The growth is coming across the board, noted Thompson, and managed to mention his old Alma Mater in the process: “Cyberstar has led the industry in Internet in Eastern Europe and the near Middle East, and has allowed itself to be driven to a commodity-based business model. What is crucial for us is to add some value and extra service for our clients. ISP’s naturally want everything at the lowest possible price and the way to achieve this is not to simply cut one’s margins to the bone, or else that would lead to trimming the overhead to such a level as you would not be able to properly support the business. Instead we use technology to drive through-put, which delivers more volume at the same fixed cost, same bandwidth, same antenna.

But more importantly, allows us to properly support the business. Some companies, like New Skies Satellite, can only offer part of the service, pure capacity. New Skies’ ground services come through us anyway. But we are able to offer that complete ground service and infrastructure which is crucial. The easy bit is the point-to-point on the satellite circuit. Our solutions have been built to handle the commercial pressures of the Internet, as well as the technical demands.”

A useful resource is Kingston Communication’s brown-fibre backbone is KMS’ relationship with its Torch business telephony sister network. “We have Torch infrastructure connecting our teleports and this continues to grow. But it also allows us to draw on their IP skills in supporting both our and their business growth. This is all a new industry, barely 12 months old, and we are all learning but the Torch and KCL business, including ADSL, is a very useful addition to our service proposition as a group.”

But Thompson’s expects the largest growth will come from what he calls “the enterprise market”. He specifically referred to BSkyB’s plans to launch web-streamed ‘channels’, which “we are mirroring in preparation. The three parts of Media Streaming will be, first, broadcast services, which is our traditional area including occasional use, point-to- point and DTH services. As far as DTH is concerned it is where we provide the connectivity for clients. We do not see ourselves in the retail market.

“The Internet carrier market is second, best described as the backbone high-speed connectivity and typically reaching the sort of regions that terrestrial fibre has not, or may never, reach. We are also looking at Internet applications that cover IP multicast, where you have a broadband service needing to get to the edge of the net.

“Our third area is the enterprise market, the corporate or business-to-business market, and we have created a network services group to handle this business, looking a multi- point applications, business TV, Internet and intranet corporate needs and applications, video point of sale, WAN in the sky. This extends into what we might call narrow casting.

We are looking at new web-hosting contracts, storing and streaming out from here, as well as training and support.”

Thompson said Kingston is winning contracts in the business-to-business sector despite heavyweight competition that includes SES’ AstraNet service. “Astra has struggled to tackle the enterprise market successfully. It is almost their Achilles heel, and I think it is a service issue. We suspect that while they are very comfortable with the retail model, when it comes down to an enterprise market, the business customer finds they are not geared up to handle [it].

“We give that focus on the after sales side. For many of our competitors, they have little or no experience of having to deal with clients and it is frequently the problem at the likes of British Telecom and Globecast – which have had limited success in penetrating the enterprise market over satellite – that they have lost focus and not applied the right amount of customer service [and we know of clients] going away less than happy that they’re not going to be treated as a valued customer. Over the past ten years we have seen the BTs and Globecasts not win enough and lose much of their enterprise business.”

KMS’ strategy has been to grow enterprise customers out of its on-site facilities business, according to deputy managing director Chris Russell. “For us we have attacked this growth sector from our TV facilities and satellite services side and our broadcast systems business. The re-structuring that is just being announced sees us re-focusing on each of these sectors under the overall platform of Media Stream, building on each of the existing client bases that we have, including some very attractive long-term contracts. Coping and catering and specialising in many small but important clients, as well as the obvious larger clients.”

In Hull, there is the Kingston Interactive Television (KIT) division and its operation backbone Kingston Vision. KIT has struck ADSL content deals with most of the major players, not least BSkyB. While not part of Thompson’s brief, KIT nevertheless represents further impressive growth potential for KMS.

Thompson added, “Kingston Vision can be replicated now elsewhere, and we see Kingston as being at the forefront of deploying ADSL technologies. How successful it will be is as much a regulatory issue as a technology issue. But we at KMS can take an antenna and put it on the roof of an ADSL point-of-presence [POP] and distribute the ‘last mile’ via the ADSL network. Satellite then becomes a highly attractive deliverer of content, primarily video, which is very bandwidth-hungry. But dropping it down on the POP and pushing it out over the ‘last mile’ is a perfect marriage. KIT is a consumer-based business, looking for high consumer numbers. We at TLI/Media Stream are looking for the SME-sized and larger businesses. So between KIT and ourselves, we are wholly complementary.”

KMS has already invested in digitised storage and play-out facilities. It is playing out three channels already and expect to see significant increases in that number. As a group Kingston invested heavily last year at the Gerrards Cross and Bedford sites, and currently has a virtual studio about to be completed; adding to the existing studios on site. It has two large studios plus edit suites, with Studio 2 having been upgraded to cope with 16:9 output. Studio 3 will be the virtual studio and is due online by the end of September. The company is about to start building its co-location facility for completion in early 2001.

“We see this as being our electronic warehouse, giving us extended play-out capacity, adding Internet hosting applications as well as conventional TV facilities,” said Thompson. “We expect the co-location unit to be somewhat satellite-centric again, with some people being interested in physically being present at our site and also using some of the other facilities we can offer, not least the teleport.

“We like to think of ourselves as an international media gateway. We are spending money on this sort of expansion as well as continuing to invest in new antennas. We have signed off new 7.6m and 9m diameter dishes and last year commissioned a 16m dish for Intelsat at 62 degrees East. We see even more business going that way once Intelsat updates that slot with a 9 series craft.”

Frequency clearance in a site so close to central London has not so far been a problem for KMS, said Thompson. “Thanks to our twin sites, both with good C-band clearances, we are well-placed, without the sort of issues that some of our colleagues are having to face by digging deep holes in the ground for screening. We are also very close to central London, and that also helps hugely, meaning that the cost of getting to either site has virtually disappeared. One of the first things we did years ago was to invest in some dark fibre and got ourselves very competitive very early. It makes us a London-based C-band operation. We can manage that terrestrial link so well that it means we are London-based, both technically and commercially.”

As for East-West visibility, Thompson said Gerrards Cross, the company’s main centre, is excellent. “From here we are seeing from the west coast of the United States across to the west coast of Australia, including South America where we have services, as well as the Gulf and the Far East.”

He added, “The bulk of our business today still sits in broadcast, but our expectations are still high. I expect our relationship with Astra will continue to strengthen, and I think we have certain technical advantages for some of the new birds coming on stream, and [while] some of Astra’s uplink frequencies present difficulties for some of our competitors, we think we have abilities in this area. EuropeStar is coming and we see opportunities there with us providing a UK gateway to those birds. Broadcast in the traditional sense will continue to grow.”

As to the future, Kingston is fully prepared to continue investing in facilities where it makes economic sense, but Thompson wants to see some asset building a little closer to the value chain. “We are looking at investing directly in owning more of the intellectual property rights, especially in the Internet and enterprise market, but not in the broadcast market. This will give us a longer term return. Logically, our investment in a company will be in the form of our facilities, and gives us a foot on the value chain ladder. It is a risk, but get the risk right and the returns can be meaningful and we’re excited by the prospect.”

Kingston TLI Financial Report ( GBP)
1999
2000
Revenue
8.8m
19.49m
Operating Profit
0.2m
1.59m
Capital Expenditure
2.1m
4.15m
Assets
15.4m
18.67m
(Source: Kingston company report)

KMS’ major contracts

ATC
BBC
DBC (the U Direct film channels)
Fox News
Global Crossing
GulfSat
GWR
ITN
New Skies
Railtrack
Reuters
SSVC
Teleglobe
Xerox


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