Info NDS’ Peled: 'World now very uncertain' -
NDS’ Peled: 'World now very uncertain'
Dr Abe Peled, president & CEO at NDS, and a News Corp main board director, says the economic downturn is placing considerable pressure on the TV industry, and pay-TV broadcasters are not immune from financial challenges.
“People are saying that the pay-TV industry is more or less immunised from the collapse, but in my view nothing is immunised. People involved in well-established pay-TV businesses will tell you they are having to work much harder for their subscription income and to get the same results. The Sky or DirecTV results are stellar compared with the general picture, but they say they’re having to work harder to hold onto those revenues. It means more marketing, and more concessions to customers.”
Peled spent the past year supervising the sale of NDS, valued at some $3.2bn, to a consortium led by Permira Advisors LLP, which sees NDS converted into a privately-held business, with Permira holding 51% of the company and News Corp the balance. The deal wrapped on Feb 5.
Dr Peled explained his anxieties. “The problem for us comes with less-developed countries, where we might be sitting on a nice contract but if they decide to alter their plans what do we then do with our contract? It means a further round of discussions and possibly downward pressures. This is the situation with some marginal operators where the business plan was always going to be difficult. Look at Russia or places like Romania today, badly affected by local devaluations which affects operators who are having to pay for everything in dollars. They are charging their subs in local currencies, and this is difficult for them. It is much the same as happened in Latin America in the late 1990’s when again currencies fell through the floor. But the fundamentals, even in places like Russia, still show good local demand but the projects need funding. Most of these businesses are in their early start-up stages when they are on the way to break-even, but they still need cash. What do you do when credit and funding dries up?”
Nevertheless, Peled says market pressure might mean bargains are in place for merger & acquisition opportunities. But he stressed that NDS has always been a cautious acquirer. “The next year might well present opportunities. Our major reserves have gone as you know as part of the deal, but we are still sitting on about $100m so purchases are quite possible. We have always been careful buyers. MediaHighway cost us €60m, and has been a fantastic acquisition and much cheaper than Mr Kudelski’s acquisition of 30% of Open TV which cost him $200m!”