Kingston Inmedia Ready To Exploit International Opportunities

Kingston Inmedia believes having The Carlyle Group as its owners will lead to the company being able to derive greater revenues from international opportunities. The Carlyle Group acquired Kingston Inmedia from Kingston Communications for GBP34 million ($61 million) in cash. Kingston Inmedia delivers enterprise, broadcast and Internet solutions to business customers using satellite technologies.

According to Kingston Inmedia’s CEO, Nick Thompson the deal is great news for the company. Thompson told Satellite News that the deal should allow the company a great deal more flexibility in its operations going forward. “There is a lot of opportunity for expansion through acquisition and potential international growth and so on. Under Kingston’s ownership it was very difficult for us to spread our wings,” he said. “Their focus is the UK, and although we have got a very UK bias, particularly on the broadcast space, it is a difficult message to spin to the city, investors and KCH that we want to use the money to grow the business elsewhere. We are free of that, and this allows us to look at those opportunities appropriately.”

Thompson believes there are unlikely to be wholesale changes to the company’s business model. He added: “I think the base business model is absolutely right. If you look at the underlying growth in all of the areas of the business, it has been very positive over the last two to three years and there is no reason to change a strategy that is working. We can look further a field, either through international growth organic or otherwise and perhaps in some areas that are complementary to some of the ones we are in.”

Capital Expenditure Plans

The move by the Carlyle Group also indicates a growing willingness from private equity firms to get involved in the satellite sector. In terms of how the ownership change will affect the company’s capital expenditure plans, Thompson said, “Everyone gets concerned about capital expenditure and private equity firms. We have a three-year plan which was part of what Carlyle bought into. It is good business practice that if we are doing well, we will continue to invest.”

David FitzGerald, managing director, Carlyle Europe Venture Partners told Satellite News, “There has clearly been a lot of activity in the satellite space recently. Inmarsat and PanAmSat [SPOT] are two good examples. Interestingly, we have seen large telcos exit their investments in companies such as this. I expect to see this trend continue.”

It is shaping to be a significant year for Kingston Inmedia. It expects to reach profitability, and combined with the ownership changes, the company is looking well positioned. In its financial year results (April 1, 2003-March 31, 2004), revenues are likely to be slightly down. Thompson says: “Last year, April 2003 to March 2004, two of our long-term legacy contracts, one for SSVC and National Lottery both came to a natural end. If you strip them out of previous years, we have actually had year-on-year growth right through the period. That will continue. We see the UK DTH slot continuing to be a significant growth driver for us.”

The company has invested heavily in its satellite and terrestrial infrastructure. It includes key national and international fibre routes, and two UK teleports with over 40 earth stations providing the ability to reach over 90 percent of the world’s population. The company has a number of international carrier, broadcast and enterprise clients in the area contest storage, management and delivery.

In terms of growth in the UK market, Thompson says: “We took on our third transponder at the 28 degrees slot at the end of 2003. It is well on the way to being full and we are already looking at the next transponder. That growth will continue. Sky’s predictions on audience numbers will sustain and support 50 to 60 new channels a year and we are very well placed to win a large percentage of that business.”

FitzGerald also believes the company will eventually be able to target the U.S. market a lot more. He said: “We need to build on those end-to-end capabilities and we will do so by assessing what the acquisition opportunities are in the UK. We will also assess opportunities across Europe and at some point, we will assess the opportunity in the US. In the background, we will assess strategic opportunities for the company, but I would say you would be talking about 2005 and 2006 before you see any additional activity.”

As well as its natural core market, the company will also look to attach other markets. “There are also some interesting developments in the corporate space using satellite as an IP multicast platform for the delivery of a number of applications, particularly in the retail areas,” notes Thompson.

HD Opportunity

One area where the company could look at for potential growth is High-Definition TV (HDTV). The company recently teamed up with Tandberg Television for trials to demonstrate how US and Asian broadcasters can benefit from mobile and fixed HD contribution of live events in Europe. The trials combined Kingston’s knowhow in satellite and fibre delivery and occasional video facilities with Tandberg’s HD encoding and professional receiver solutions.

On the HD opportunity, Thompson said: “We are still in the ‘lets look and see’ where those opportunities are going to be. There is a lot of talk and hype. We are well placed to serve the market if it should appear. We are not going to forge ahead and invest a lot of speculative dollars in that area and until there is a proven case. I think north America and Japan are the obvious places where there is some real interest and lets see what happens in the UK and Europe, but right now I am not holding my breath.”

— Mark Holmes

Contact: Katherine Elmore-Jones, The Carlyle Group, e-mail: [email protected]