January 9, 2014
Pace, a British set-top box maker, is speeding up its profit performance thanks to North America. Yorkshire, England-based Pace makes more than $2 billion in annual sales by supplying products and services for media and broadband providers. Over half of its revenue comes from North America where it supplies digital set-top boxes to major cable, satellite and telecom groups such as Comcast, the biggest cable operator in the U.S., AT&T and DirecTV.
Three-quarters of its revenue comes from satellite and cable set-top boxes and media servers, with the remainder largely sourced from "residential gateways," or routers used in home and small networks. One of the world's largest set-top box manufacturers, Pace Thursday said it expects its annual adjusted operating earnings to jump at least 20%, to $190 million. It also upped its full-year margin guidance. "Demand from our customers has remained strong, and we continue to win new business," said Chief Executive Mike Pulli. And its business in North America is growing. In 2012, North America revenue jumped 24% to $1.32 billion. Conversely, in Europe-where it supplies hardware to Liberty Global and Canal Plus-revenue fell 12%. In Latin America, revenue declined 20%.
Pace is outpricing traditional suppliers in the U.S. such as Motorola Solutions and Cisco Systems, analysts say, which is driving its numbers. In addition, as pay-TV and Internet content converges, major broadcasters are spending heavily to retain and win viewers. With broadcasters requiring ever-more-advanced gear to deliver content, Pace is also building up its software business. In 2012, sales for the unit rose 7.6%, a growth rate more than double that of the core set-top box business. "Global demand for set-top boxes has been resilient through recent difficult economic conditions. The evolution of technology towards hybrid devices and media servers is a development of which Pace is at the forefront," said J.P. Morgan analyst Alexander Mees. Regular acquisitions have also reflected Pace's ambitions, analysts say. Last month, Pace completed its acquisition of cable network group Aurora Networks Inc. for more than $300 million. Jefferies analyst Lee Simpson said that was a "sensible strategic move." "Acquisitions won't stop there-we expect them to do more of the same on a near-annual basis," said Mr. Simpson. Wall Street Journal
AT&T Inc. 's plan to let content companies subsidize the cost of using their services on mobile devices has attracted the interest of the nation's top telecommunications regulator, who expressed willingness Wednesday to intervene if necessary. But Federal Communications Commission Chairman Tom Wheeler and other regulators said they were taking a wait-and-see approach before acting.
On Monday, AT&T unveiled its "sponsored-data" service, which allows companies like Google Inc. and Netflix Inc. to pay the data charges on their services, similar to a 1-800 number for data. The announcement drew immediate rebuke from Rep. Anna Eshoo (D., Calif.) and other supporters of net neutrality. "The announcement of a sponsored data program by AT&T puts it in the business of picking winners and losers on the Internet, threatening the open Internet, competition and consumer choice," Ms. Eshoo said. On Wednesday at the International CES conference in Las Vegas, FCC commissioners said they were unwilling to pass judgment on the program before seeing how it will operate. But Mr. Wheeler said the commission had the ability to step in if the program became anticompetitive or interfered with consumers' abilities to access the Internet. "Make no mistake, we're ready to intervene," Mr. Wheeler said. "We want to encourage innovation, with the full capability and legal authority to intervene in those circumstances where there are untoward impacts on competition and consumers," he said.
Other members of the commission, including Democrat Mignon Clyburn and Republicans Ajit Pai and Michael O'Rielly declined to weigh in on AT&T's proposal, echoing the need to see how the program would work. "The FCC should not be in the business of a priori declaring business models like this out of bounds," Mr. Pai said. The commission's open Internet rules, which require equal treatment for all traffic on the Internet, are facing a legal challenge in a federal appeals court from Verizon Communications Inc., with a decision expected soon. Democratic Commissioner Jessica Rosenworcel said the commission should wait for that decision and then examine AT&T's plan in light of the court's ruling. There has been widespread speculation that the U.S. Court of Appeals for the District of Columbia Circuit could strike down part or all of the open Internet rules. The same court struck down the FCC's last attempt at enforcing net neutrality in 2010. Ms. Eshoo, the California congresswoman, said AT&T's move demonstrated why the FCC's rules, which prevent broadband providers from discriminating between different content providers, should have been extended to cover wireless broadband. The commission chose to exempt wireless services from the rules in 2010. Wall Street Journal
Dish Network Corp. is officially pulling its bid for LightSquared Inc., the telecommunications firm in bankruptcy that has wireless spectrum Dish has been coveting, according to people familiar with the matter. The reversal, after Dish last year put in a bid for $2.2 billion, marks the latest twist in the high-profile case, in which LightSquared has hit a number of speed bumps in its effort to emerge from bankruptcy.
Dish is expected to disclose its letter of termination of the bid as soon as Thursday morning, one of the people said. Dish's plans have already met resistance from LightSquared lenders, who want to go forward with the Dish deal. On Tuesday, a lawyer for the lenders said in court he believes Dish has breached a contract by refusing to go through with the purchase of LightSquared's wireless spectrum. The lenders, who own nearly $2 billion in LightSquared bank debt, have proposed a restructuring plan based on Dish's bid.
Rachel Strickland, a lawyer for Dish and its chairman, Charlie Ergen, said in court Tuesday she doesn't think Dish breached the contract. On Tuesday, the parties said in court Dish hadn't formally terminated the agreement to buy LightSquared's assets. Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan was to consider approving a reorganization plan for LightSquared based on the Dish bid later this week, as well as a plan to sell a smaller part of the spectrum to LightSquared creditors Mast Capital Management and U.S. Bancorp. Those proposals are competing with a separate one from LightSquared, which Judge Chapman is set to consider later this month.
LightSquared has opposed the Dish bid and said that its $4 billion restructuring proposal-led by Fortress Investment Group LLC-is actually better than the Dish sale and smaller sale. Harbinger Capital Partners, started by financier Philip Falcone, is LightSquared's original backer. Spectrum refers to the limited pockets of airwaves that mobile phone and Internet companies use. Both the Dish and LightSquared plans would pay off the holders of more than $1.8 billion in LightSquared bank debt, a group that includes hedge funds and an investment entity wholly owned by Mr. Ergen.
Meanwhile, as of Wednesday evening, one of the people familiar with the matter said, related litigation was expected to move ahead in court on Thursday though the situation remained fluid. That matter concerns accusations by LightSquared that the investment entity controlled by Dish's Mr. Ergen fraudulently purchased more than $1 billion in LightSquared debt. LightSquared has said the purchases violate a provision of its credit agreement prohibiting competitors from buying its debt. Mr. Ergen has said he bought the debt as an individual, and the investment vehicle isn't affiliated with Dish. A representative for Dish has called LightSquared's complaint "a desperate measure." Wall Street Journal
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