Pace slips with sales drop in set-top boxes

Pace slips with sales drop in set-top boxes

Pace: announced shortfall in sales and no longer sole provider to NTL

If Pace is the rock on which the future of digital television is to be built then recent weeks have seen digital evangelists going back to the drawing board.

The set-top box manufacturer posted a trading statement announcing a shortfall in sales during the first few months of this year and this week was ousted from its position as sole provider of boxes for the UK's biggest cable group NTL.

Samsung will join Pace in providing set-top boxes to cable group NTL in an initial contract worth more than £30m. The deal provides considerable cost savings for NTL, according to a spokesperson for the group, which is struggling under a £12bn debt burden.

Last week, Pace sought to assure the market that it was not on the verge of collapse, despite announcing sales in the region of £350m for the year ending May 2002, a "significant shortfall" on expectations. In its third trading statement of the year, it blamed the difficulties in the cable market for many of its woes.

A Pace spokesperson said the company has made a prudent assessment of the UK cable companies. "Trade creditors are no longer prepared to underwrite NTL's business and Pace is not prepared to take the risk with them," she said.

Pace, which will continue to supply NTL until Samsung takes over in mid-2003, remains a contracted supplier for Telewest and said it was still growing.

"In the next financial year, turnover is expected to grow
significantly from a mixture of deployment to existing overseas customers and new contract wins. Pace remains confident that it is well-placed within its markets and the longer-term outlook for the industry remains positive," the trading statement said.

But the markets didn't agree and this week, more than two-thirds of the value of the company was wiped off share prices.

The news does not bode well for the so-called digital coalition, the group set up by the BBC, ITV Digital, Carlton, Granada, C4 and C5 and backed by the Government to drive digital uptake at the bottom end of the market.

Pace has developed a set-top box retailing at £99.99 which goes on sale on March 30. It is hoped the product will add impetus to digital uptake with access to more than 20 free-to-air channels provided by the broadcasters involved. Pace has set itself a sales target of 100,000 boxes by May 2002 and a further 300,000 over the following year, and its ability to deliver on this target will be watched closely following its recent problems.

Pace head of corporate communications Helen Kettleborough said that launch plans are still on track and the Pace model is the preferred product in the free-to-air market. Irish company NovaPal is set to launch a rival later this year called SetPal, but its technology does not have a smartcard slot which would allow upgrade to pay-DTTV. It does, however, claim superior signal reception. Nokia is also expected to enter the market.

trade and industry secretary Patricia Hewitt this week said that the Government was considering forcing TV manufacturers to build digital receivers into sets, and the X-Box consoles, which hit the UK this week, are being manufactured with built-in set-top box capabilities.

See Dawn Hayes Opinion

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