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Gemalto sees profit in TSM services

“Customers will only have one TSM. It’s like a billing system; if you’re in, it’s harder to get you out rather than if you fight to get in,” says Olivier Piou. “I think that we have a very good momentum.”

Gemalto CEO Olivier Piou
PIOU: Gemalto secured a large number of long-term contracts in 2012

Digital security company Gemalto is pinning its strategy for future growth on its platforms and services division, including its trusted service management business, after recording its first significant returns.

Platforms and services activities grew by 26% to account for €392m in revenue last year, generating 40% of total company growth and increasing its share of the company’s overall revenue.

€210m of the revenue generated in the division came from its mobile communications business segment. There, revenue was up 27% “thanks to customer deployments of next generation infrastructures for mobile payment and 4G LTE.”

The division’s secure transactions segment, meanwhile, generated €115m, driven by more demand for personalization services and the first TSM infrastructure deployments by banks.

Almost all of the company’s revenue from its TSM business in 2012 came from fees it charged to telecoms operators and banks to integrate the TSM platforms for them, rather than from usage fees.

One of the company’s strategies is to bring a “compelling” platform to the market in short order, hoping that a quick investment will widen its early lead in the TSM market.

CEO Olivier Piou revealed why in an earnings call: “Customers will only have one TSM. It’s like a billing system; if you’re in, it’s harder to get you out rather than if you fight to get in. I think that we have a very good momentum.”

Gemalto is believed to hold the largest market share for NFC SIMs, but the company is expecting more competition for NFC SIM business. This is expected to be offset by growth in the number of mobile wallets, however.

“For us, the good news is we will deploy multiple wallets. Probably, you will try them by loading your card in them, so we will be paid multiple times even though you only have one physical card,” says Piou.

“It will be like the apps. You know, you load a bunch of apps, take weather, and then load five weather services and after some time you like one better than the others.

“But in terms of security, we will have to do this. All those wallets will need to contain secure data related to your banking card. They will need to have the secure software to protect the payment transaction and this is what we do.”

Commenting on the Visa-Samsung global alliance, which will see Samsung preload Visa’s PayWave application onto its NFC-enabled handsets, Piou sees an opportunity. “We have never been constrained, whether you have a removable secure element or if you have an embedded secure element, and this secure element is provided by OEMs or whether it’s provided by a payment operator or a mobile operator.

“What is important is that there is a secure element, and it provides the opportunity to remote manage those secure objects, because you will need to download into those secure objects credentials and data and manage those data along the lifecycle.”

He added: “Anybody who helps mobile payment is most welcome.”

“The coupling of Gemalto’s secure embedded software and trusted service management platforms and services has become an important part of a rapidly growing ecosystem for trusted mobile transactions.

“We design and champion this trusted digital and wireless TSM approach because it allows all parties to work together while remaining autonomous from one another, and being able to deploy this service at their chosen pace.”

Gemalto recorded total revenue of more than €2.2bn in 2012, up by 9% on 2011, and expects double digit growth this year. The company also announced that it has exceeded its goal of €300m in operating profit a year ahead of plan.

Piou said: “2012 will go down as the year that we secured a large number of long-term contracts in the mobile payments and the government sectors in particular, which will bolster our profitable expansion into the future.”

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