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There are still two and a half weeks of the campaign to go before polling day, but postal votes are already being sent out to voters and many have already made up their minds. We believe there is now a small range of likely seat outcomes, and therefore possible governments.
Our central case sees the two main parties almost level on seats, resulting in a Labour minority government dependent on the support of the SNP and its allies (the Greens and Plaid Cymru). Slightly different outcomes are also possible, depending on the final size of the swing from the Conservatives to Labour in England and Wales, over which there is still considerable uncertainty. If Labour does worse than we expect, it could require the votes of the Lib Dems as well as the SNP; if it does better, it could require only Lib Dem votes.
The upside case for the Conservatives is now that they win enough seats to make a minority government dependent on the support of the Lib Dems, DUP and UKIP possible. We think that scenario is now unlikely, but even if it were to occur, we think it would be very challenging to both knit those parties together and persuade the parliamentary Conservative party that its interests are best served by doing so. For these reasons, we think a government led by the Conservatives can now be all but ruled out.
Prospects for European free-to-air commercial broadcasters are clouded by a weak advertising recovery, decline in TV set viewing by younger age groups and increased competition from pay-TV and international operators
Growth opportunities are nevertheless to be found in fine tuning families of channels to sustain audience shares, increased production of differentiating original content, wider HD and catch-up programmes distribution and smart pay-TV developments – broadcasters must focus on strengthening the quality gap between the TV set experience and online entertainment
ITV has shown the greatest increase in profitability, benefitting from its global production strategy. RTL and ProSiebenSat.1 have a modest upside from carriage fees for HD channels but production and pay-TV initiatives have yet to pay off. TF1 and M6 have withdrawn from pay-TV and face regulatory obstacles to launching channels and production investments. Mediaset in Italy should benefit from the ad market stabilising, but risks large pay-TV losses. In Spain, Mediaset and Atresmedia enjoy an ad boom
Local newspaper circulation continues to decline precipitously, while decline in some categories of print advertising has slowed marginally.
Digital traffic exploded in 2014, however, substantially outperforming the market generally, resulting in signs of stabilisation across print and digital in some marketing categories, notably recruitment and pockets of display.
Industry leaders have moved beyond cost-cutting and are no longer reproducing their print products online: local platform solutions, and strategic technology and business partnerships, mean fundamentally different companies are emerging in local media.
European mobile service revenue growth improved for a fourth consecutive quarter jumping 1.7ppts to -2.7%, the slowest rate of decline in over three years. Easing declines in France, Italy and Spain largely drove the improvement but a full recovery in these markets is still some way away given that all of their growth rates remain below -5%. The UK, and now Germany, are experiencing positive mobile service revenue growth although their improvements in the quarter were more modest
Three announced consolidation transactions have yet to be approved by the regulators although none of these deals are likely to offer much market repair, being either of the wrong kind of deal or being in markets that are growing. Consolidation targets remain in France, Italy and Spain which offer clearer routes to market recovery as seen in Germany where the consolidation of O2/E-Plus has already led to positive rhetoric on medium term market growth prospects
Network investment continues with 4G roll-outs at or over 70% population coverage in all markets and targets being accelerated, supporting long term optimism in the sector. Strong data traffic growth coupled with the growing importance of data to service revenue give a clear focus for operators on value-adding network quality investment, although the impact of pricing competition in some markets could weigh on the ability to capitalise on these trends in the medium term
Radio’s transition from analogue to digital has been slow, with no switchover date yet in sight 16 years after Digital Audio Broadcasting’s (DAB) commercial launch
Recent initiatives intended to boost DAB are welcome, but most will not be transformatory as they offer little new to the consumer
However, the award of the second national commercial multiplex to Sound Digital with the launch of new, compelling content in 2016 could finally give radio listeners the reason to upgrade and make a case for switchover
BT announced this week its fourth launch of consumer mobile, following three failures since it split from O2 in 2001
The product is SIM-only, low-end priced and lacks any ‘convergent’ features as yet, but is well structured to target those likely to take a BT mobile service in our view
While its ambitions may be modest, take-up may well be higher than its over-ambitious over-complicated predecessors, as well as giving BT experience in cross-selling mobile prior to its EE acquisition