Conditional access technology vendor NDS will play a key role in developing the direct-to-home (DTH) market in India, Alex Gersh, the company’s chief financial offer, said.

NDS will be providing smart card technology for the DTH joint venture between the Tata Group and Star, which announced in July a nationwide DTH service dubbed T- Sky. “They want subscriber growth, and we believe India is the type of market where there is a significant opportunity for growth,” Gersh said. T-Sky is targeted for a launch in late 2006.

“We will be looking at more integration and development revenue as we integrate the system and help it get ready for launch,” Gersh said. “We are all working together very closely as our major revenues occur when our customers add subscribers.”

Mehrdad Torbati, a technology equity analyst at Deutsche Bank said, “The prospects in India are there to be materialized over the next three to four years. There is a target of 5 million subscribers over the next four to five years. It is certainly an interesting Asian opportunity that they have there.”

The strong performance of satellite pay-TV operators will continue to underpin the growth prospects of NDS, which announced Aug. 9 that revenue increased by more than 50 percent to $556 million throughout the past 12 months, which ended June 30. In the previous 12-month period, NDS actually saw a 7 percent revenue decline.

NDS also wants to improve its performance in the middleware market, which posted an 11 percent revenue increase in the past year. The company’s Mediahighway solution has now been installed in more than 20 million set-top boxes.

“In terms of revenues, the numbers were above my expectations,” Torbati said. “They were excellent results. The results were a confirmation of the financial health of the company.”

Other Opportunities

NDS, which now is responsible for more than 56 million active digital TV smart cards, hopes to play a key role in the future with satellite pay-TV operators such as DirecTV, BSkyB in the United Kingdom, Sky Italia and Viasat in the Nordics.

In terms of current projects, NDS is helping DirecTV install the infrastructure to improve its interactive offerings. Gersh said, “The first thing we undertook to do was the middleware download, which was our ability to download middleware on to their legacy boxes as well as new boxes. This has been extraordinarily successful, both for us and DirecTV, and was truly a partnership effort. We will continue to work with them on current and next generation of interactive applications.” Among the projects is a new generation of gaming, dubbed Xtreamplay, produced and developed by NDS, Gersh said.

The company will also look to advantage of a number of trends within the satellite industry, particularly as established satellite pay-TV operators look to generate further revenues from existing customers. DTH operators “are continuing to grow their platforms and their subscribers,” Gersh said. “They are also focusing on what we call multi-box penetration in the home. DirecTV has an average of about 2.5 boxes per home, and they are trying to increase this figure. In BSkyB’s case, it is about one box per home but they would like to get to a 40 percent penetration of second boxes in the home. Whilst growing their subscriber base, they are also looking to mine their existing subscriber base to get additional STBs and therefore additional revenues. Obviously, we will benefit from that trend.”

The company also expects to generate healthy revenues as satellite pay-TV operators begin to ramp up their personal video recorder (PVR) strategy. NDS offers the XTV solution, which integrates with a platform’s other services such as conditional access, middleware, electronic program guides and interactive applications. “NDS has eight PVR customers today, which is a very small penetration of our customer base,” Gersh said. “But we have 56.7 million active subscribers, and if you think that equates to anywhere between 35 to 40 million households, the question you need to ask yourself is how quickly will the majority of these households have PVRs? Ultimately, 80 percent will have PVRs and this will be a major growth driver for NDS in the medium term.”

–Mark Holmes

(Margot Field, NDS, mfield@ndsuk.com; Mehrdad Torbati, Deutsche Bank, Mehrdad.torbati@db.com)