In our view the potential for synergies from an acquisition of Thus by C&W, though more limited than might be supposed, would still have a significant impact on the combined entity at the EBITDA level

A stronger motivation for C&W management could be improved cash flow performance at C&W’s UK business, EAUS

Given the current offer level and the nascent recovery at EAUS, a deal strikes us as a sensible way of expanding the UK business prior to a split with International

We expect the TNS-GfK merger proposal to be examined closely by the European Commission, and anticipate competition concerns to be raised in the market for television audience measurement (TAM)

If unhindered by remedy solutions imposed by the Commission, TNS-GfK will control about 50% of the TAM segment in Europe, the rest being supplied by AGB Nielsen, with above average margins on the segment

Because the Commission is likely to insist on three suppliers remaining in the TAM market, we anticipate that TNS-GfK could offer to divest GfK’s European activity, although this will depress the margin improvements from synergies

Having acquired national broadcast TV rights for premium content, France Télécom’s Orange TV will launch on satellite on 3^rd July and introduce subscription football and film and series services from August, in a first for a major European telecoms incumbent

Orange TV’s offer is a light one and no match for Canal+ on premium content, and represents only a marginal threat to Canal+

France Télécom’s investment in content will improve its TV profile and increase its broadband/telephony market share and also ARPU, but the investment can only be fully recovered if FT can secure a distribution agreement for Orange TV with Canal+, at this point unlikely

Consumer take-up both of DAB receiver hardware and of listening to digital-only radio stations has been slow, in spite of considerable investment in content and in transmission infrastructure for the platform by the BBC and commercial radio since 1995

Despite lack of consumer interest, the Digital Radio Working Group has recommended that ‘DAB’ (Digital Audio Broadcasting) become the primary digital radio platform in the UK, and that an “aspiration” date of 2020 be adopted for digital switchover

Regardless of the potential offered by other digital platforms, including IP-delivered audio, the Government is insisting that DAB remain the preferred platform for broadcast radio in the UK

Digital TV growth has consistently exceeded expectations since the launch of Freeview in October 2002, while 2007 saw a record annual increase in digital TV homes reception from 72.0% to 82.3%. These forecasts update our previous forecasts of DTV platform growth issued in December 2007 (see UK DTV Homes Platform Forecasts: 2003-2017 [2007-116]), taking into account the very strong final quarter of 2007 and recent market developments.

Vodafone’s Q4 revenues were healthy if a little weak, with underlying growth slowing from 2.0% to 1.8%, but the improvement in Germany is very welcome

The company guidance for 2008/09 implies European growth slowing slightly, which is conservative given that the regulatory impacts are likely to ease by 2 full percentage points, giving plenty of buffer against any macroeconomic impact

New CEO Vittorio Colao’s first test will probably be to avoid getting distracted by a fixed line DSL push, particularly with the Tiscali purchase process ongoing

International performance continued to be weak apart from Macau, although well within EBITDA guidance. Turnaround in Jamaica remains a significant challenge

The UK business (EA&US) is continuing to improve ahead of guidance as expected, as costs are reduced. A potential acquisition of Thus does not strike us as a strategic no-brainer

The credit crunch and the need for a pension fund buy-out are now the main obstacles to a break-up of the Cable & Wireless group

Regional publishers are reporting steep downturns in advertising revenues in the early weeks of 2008. If the trend continues throughout 2008, print advertising could drop £250 million (9%) to £2.5 billion

Some publishers claim the decline is due to an economic downturn, which will eventually end, but the drift to online makes it unlikely that much of this spend will ever return to regionals when the market is more buoyant

Regional newspaper sites are attracting advertiser interest and increasing revenues rapidly. However, the share of regionals in online classifieds is much lower than offline due to the presence of specialist websites for property, autos and recruitment that are more effective advertising media – 2008 could be the year of no return for regionals

BT’s Q4 results were a welcome improvement on Q3, with better growth in revenue, consistent growth in EBITDA and strong growth in cash flow

But revenue growth was helped by currency movements and acquisitions at GS, while EBITDA was boosted by non-core business

Although capex now appears to have peaked, we remain concerned about the impact of slow progress on 21CN

Ofcom has linked Sky's plans for a pay service on DTT (Picnic) to its wider investigation into the UK market for pay-TV, announcing on 13^th May that it will issue its next statement on both issues simultaneously by the end of the summer. This is the first time the regulator has indicated that it is merging its consideration of Picnic with that of the wider pay-TV market

When Ofcom next pronounces on Picnic it will take the shape of a further consultation document and it now looks highly unlikely that it will give Sky any kind of  answer this year

The added delay is not such bad news for Sky because Picnic may be viewed as a non-core incremental revenue opportunity. But we believe the 13^th May announcement may signal that Ofcom is now focused on the much more important question of whether Sky should be forced to increase retail margins for third party sellers of its channels. The decisions that the regulator reaches on this issue are of vital importance to Sky's long term profitability