Kordia reports $18m loss; hurt by early digital TV switchover

State-owned Kordia has reported an $18 million loss for the 12 months to December 31.

As a result of the government accelerating its digital TV switchover timetable, the company recorded an impairment charge of $29 million (before tax), covering “the write-down of assets associated with analogue television transmission, and an increase in the make-good provision relating to sites on which the transmission equipment is located, chief executive Geoff Hunt said.

Without this non-cash adjustment, net profit after tax would have been $1.4 million.

In the year-ago period, Kordia made a $1.1 million profit.

Half-year revenue was up 5.5% to $136 million.

Debt – recently so hairy that Kordia was in breach of its banking covenants – was again chipped down, reducing by $20.5 million over the past 12 months to $80.6 million.

Orcon helped by Sky TV hookup
Fully-owned Kordia subsidiary Orcon was ahead of profit and revenue targets, Mr Hunt said.

Ironically, even though Sky TV undermine Kordia’s core operations, Orcon has profited thought its partnership with the broadcaster over its new content-over-broadband iSky service (Orcon is one of several ISPs that offers unmetered iSky data).

Early digital TV switchover
Late last year, the government announced that analogue TV would be switched off, region-by-region, between November 2012 and the end of 2013 – at which time every New Zealander will have to be on Sky TV or Freeview.

The Crown will auction the freed up spectrum to phone companies and ISPs in a process expected to raise $200 million to $400 million, depending on how many years’ the radio wave are leased.

Although Kordia provides broadcast services for Freeview (broadcasters are charged $1.8 million a year to place a high definition digital channel on Freeview’s terrestrial service and $500,000 for a standard definition digital delivered via satellite), the revenue does not come close to matching the lose analogue TV income.

Additionally, Kordia faces the threat that Freeview could potentially move to cable transmission as the Crown Fibre project ramps up over the next few years (Freeview has told NBR it is actively considering this option - which, of course, could also be used to squeeze down Kordia's fees).

"Broadcast to broadband"
Faced with the loss of its core analogue TV broadcast business, Kordia has been making furious attempts to diversify, from its acquisition of retail ISP Orcon and web host iServe to the launch of its KorKor digital radio network, and a growing telecommunications engineering business whose clients include 2degrees and, across the Tasman, Optus.

Kordia was also part of a consortium (with FX Networks and Woosh) that bid, unsuccessfully, for the government’s $300 million rural broadband tender (leading to some sharp word betwen the state-owned company and Communications Minister Steven Joyce.

Aussie broadband hopes
However, it still has a lot of irons in the fire for the Australian government’s National Broadband Network.

“The Kordia Solutions business in Australia has again delivered a strong result with revenue and profit ahead of budget. Over the last six months, it has delivered a record amount of proposals into the Australian National Broadband Network, the telecommunications sector and the mining sector. Kordia Solutions in Australia is on a very strong growth path," said Mr Hunt.

The company's underlying profit proves that its "broadcast to broadband" diversification strategy of the past five years was paying off, Mr Hunt said.

Transtasman cable
Kordia still as plans to build a fibre optic cable between Auckland and Sydney, likely as a partnership with another company.

Communications Minister Steven Joyce recently told NBR that the “OptiKor” cable was still a live possibility, but that the state-owned Kordia would have to make a commercial case for the project. It would not receive any leg-up from the Crown.

Mr Joyce said Kordia was not included in the Crown’s current plans for partial SOE privatisation.