The Hong Kong-based provider of broadband networks, digital
video and mobile solutions has been actively marketing its digital services to cable
operators as the country makes the switch to digital broadcasting.
“The digital-media division is growing very rapidly in China, especially with the cable operators migrating from analogue to digital systems.
We expect digital media to grow to 50% in revenue contribution within two years, from
40% currently,” CEO Jismyl Teo told The Edge Singapore when she was in town recently.
On Aug 11, DMX announced a record revenue of US$58.6 million ($79.5 million) for
2Q2010 ended June 30, with over 70% of sales coming from China.
DMX’s digital-media division, which helps telcos and cable operators deliver their digital video and interactive multimedia value-added services to subscribers, saw revenue rise 24% y-o-y in 2Q2010, compared with an 11.8% growth in the infrastructure-enabling segment for enterprises. “Cable TV is the last market to go digital and the change is implemented countrywide simultaneously,” explains Teo, who hopes the adoption would be as quick as that for digital cellphone technology.
According to Teo, the Chinese government had earlier mandated all cable operators to switch from analogue to digital content delivery by 2015. Based on DMX’s estimates, the cable operators would spend about US$10 billion from FY2010
to FY2015 to migrate the content, and its share of the market is about US$2.5 billion. Like digital cellular networks, which enables multiple digital calls to be made in the space of a single analogue call, digital media allows cable-TV operators to push more channels to subscribers using the same bandwidth
and offer services like video-on-demand and interactive TV guides, which is where DMX’s expertise lies. Much of the credit must go to KDDI Corp — Japan’s second-largest telco by subscriber size — which became DMX’s controlling shareholder after it acquired a 50.1% stake in the company for $183.1 million last December. Subsequently, KDDI increased its stake in DMX to 51.36%
as at Aug 26, according to Bloomberg. Teo says KDDI has referred at least 10 new
customers to DMX, including a “very significant” Chinese company. The parent company
also referred customers in Japan, China, Indonesia and Malaysia to DMX for system integration services.
New business of convergence For the past few months, DMX has been working
closely with KDDI to launch a fixed, mobile and broadcasting convergence (FMBC) platform for cable operators. Through this platform,
cable-TV viewers, for instance, could connect to the Internet via their TV sets if they want to know more about the cast or director of the movie they’re watching.
“We just started showcasing this technology last month. It has been quite well received, but we need to localise the whole solution into Chinese
Chinese, because right now, everything is in Japanese,” says Teo, adding that the company hopes to complete the localisation process this year.
According to Teo, the idea of introducing FMBC technology to China came up after Premier Wen Jiabao, early this year, said the convergence of telecom, broadcasting
and Internet networks should be stepped up. Convergence enables telcos
and cable-TV operators to become quad- or tripleplays,
offering broadcasting, Internet, mobile as well as fixed-line services.
Teo expects FMBC technology to create a lot of business opportunities for DMX as telcos and TV operators raise capital expenditureto develop a converged network from
now till 2015. “In fact, we are fortunate KDDI has already
developed an FMBC platform in Japan, although it has not launched the product yet. This means we don’t have to start a new platform from
scratch by ourselves. We just have to adapt it to the Chinese market,” says Teo.
With KDDI’s FMBC platform, DMX hopes to get back into the Internet protocol television network, where China’s largest telco equipment supplier Huawei Technologies Co, Shenzhen-listed ZTE Corp and Alcatel-Lucent have always
been the biggest players. Recurring income While new revenue streams are explored, managed services, which is one part of DMX’s infrastructure-
enabling segment, continues to make a contribution — albeit a small one —
to revenue. In 2Q2010, revenue from the segment jumped 46% to US$3.9 million.
“Although managed-services solutions contributes only about 6% to our group revenue,
this relatively new sub-division under our infrastructure-enabling segment has higher profit margins, of about 40%, compared with only 10% to 15% in the infrastructure-solutions subdivision,” says Teo. In May, DMX said it had won a one-year
contract to provide managed-security services, including vulnerability assessment, security monitoring, code audit, system hardening and network protection, to mobile carrier China Mobile in Inner Mongolia. Currently, most of DMX’s managed services solutions contracts come from enterprises in China and Hong Kong with contract periods of one to three years.
Although DMX has no immediate plans to expand into new markets, Teo says DMX is not
ruling out the possibility of working with KDDI to offer its managed-services solutions to new markets like India, Thailand and Vietnam.
-The Edge
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