Encryption specialist Nagra Kudelski says its 'Aladin' smart card version has been compromised. There have been widespread reports of a hack, especially in Spain where it is the card of choice for Sogecable's DTH service Digital+. CEO Andre Kudeski confirmed two weeks ago that Aladin represents some 70% of its business, as of June 2005. The company's biggest customer is Echostar's DiSH DTH system in the US, while Canada's Bell ExpressVu is another major. Between them they have taken some 11.7m cards.

A report from investment bankers Credit Agricole Cheuvreux talked last week of Kudelski planning electronic counter measures to cure the hack: "It is still very possible that the hack will not stand up to the electronic countermeasures," said the bank's note. However, the bank warns of several negative implications for Kudelski, not least the firm's basic reputation given that much has been staked on this iteration, as well as churn amongst clients with players like NTL and Telewest planning on switching to the system.

"Under Kudelski's new rental model," said the bank report, "the cost of swap-outs, which would be automatically triggered by piracy, is borne by Kudelski. We estimate that around 11-12 million cards are currently on the rental model (including the Premiere and Canal+ platforms)." These direct costs could amount to SFr50m, suggests the bank.

A Nagra source, speaking at IBC, said the original 'Aladin' card was issued in 2000, and was now in its 5th year of use for some clients. "We are already well advanced with swapping out and upgrading that card with only a few hundred thousand cards to go. This was always planned to be completed by about the end of this year." Our source said that 'Aladin' was a suite of products on which there had been a "small" problem. "This is never a small problem for our clients, however. We spoke to our customers in a timely fashion, and initiated our upgrade plan."