Pace pulls plug on Freeview boxes

SET-TOP box maker Pace Micro Technology is to stop making Freeview boxes after concluding that the margins do not justify continuing with the business.

Pace said that there are more than 18 suppliers producing the kit, which is used to access digital television services. Freeview boxes originally cost around £100 but can now be bought for less than half that.

The BT Shop is advertising Freeview boxes for just £49.99 and other retailers have also cut prices. The reductions mean the business is almost unprofitable for manufacturers.

The decision to stop producing Freeview boxes forms part of a cost-cutting strategy at Pace. The company warned in December that full-year profits would be lower than expected and sales would be some £25m lower than expectations.

Half year results from Pace yesterday showed gross profit margins down from 19.1% a year ago to 16.8% in the six months to 4 December.

Although Freeview provided Pace with a sales boom, shipments of its other set-top boxes continued strongly. Pace said that sales in the 27 weeks to 4 December had seen volume shipments rise to a record 2.1m boxes, against 1m in the same period in the year before.

Despite the downturn in profit margins, pre-tax profits came in at £3.1m, compared with £800,000 a year ago.

Pace's problems with Freeview profits came as Teletext struck a 10-year deal with ITV to supply viewers in Freeview and Sky homes. It will launch an editorial and classified service this summer for digital channels, including ITV2 and ITV3. Teletext, 90%-owned by Daily Mail and General Trust, the parent company of the Daily Mail, the Mail on Sunday, the Evening Standard and This is Money, is available digitally only through Channel 4 at present.

Teletext is paying ITV an undisclosed sum to be accessed through viewers' remote controls. It attracts 14m viewers every week in analogue homes and that service will continue. 'We know viewers in multi-channel homes expect to access our services,' Teletext managing director Mike Stewart said.