Publications

Format: Sep 2015
Sector(s) Datesort ascending
Numericable-SFR: Costs down but growth elusive

Ten months after the acquisition of France’s SFR by Numericable, cost cutting targets appear likely to be exceeded, but the promised resumption of revenue growth may still take time to materialise as downward price pressures persist and the subscriber base has yet to stabilise

Profitability has increased faster than expected, while debt ratios look sustainable and set to decline. The challenge is to relaunch marketing while achieving the guided ambitious EBITDA margin growth. Investments, even if lower than planned, may be enough to sustain network competitiveness

The rationale for consolidation between Numericable, Bouygues and/or Iliad remains strong. But Numericable’s model looks sustainable without this. Side investments in media may at best bring political clout. The main risk stands with parent company’s Altice’s debt-finance expansion

  • SFR
Telecoms 2 September 2015
UK internet device and consumption forecasts: Smartphones rule

The UK is now a smartphone society: by the end of this year smartphone users will exceed the PC internet audience and by 2020 we project penetration will reach 83%. The average smartphone user now spends an hour and three quarters a day online, significantly more than the equivalent for PC and tablet, and phones already account for nearly half of all time online

We are positive on tablet user numbers, and think PCs will be resilient, especially for work users. All in all we expect connected time in 2020 to be 21 billion hours higher than in 2015, up over 35%

Commercial revenues via smartphones and tablets still lag their share of internet usage, but the monetisation gap versus the PC is closing fast: the newer devices accounted for 27% of internet search and display advertising last year, up 8ppts versus 2013, and 36% of e-commerce transactions, up from a quarter a year earlier. Consumers are already thinking mobile-first; businesses will have to follow

Internet, Media, Mobile, Technology, Telecoms 27 August 2015
UK mobile market Q2 2015: Modest growth continues

UK mobile service revenue growth dipped a touch in Q2, falling to 0.9% from 1.0% in the previous quarter, although all of the dip and more was due to the reintroduction of mobile termination rate cuts in the quarter, with underlying growth rising to 1.3%

O2 is now the fastest growing operator in both contract net adds and service revenue growth terms, exceeding even the much smaller H3G, and its revenue growth lead over EE and Vodafone expanded during the quarter

BT’s consumer mobile launch was relatively successful from BT’s perspective, with it garnering 100k subscribers in the first three months, but this appeared to have no impact at all on the mobile operators, which had a relatively strong quarter for contract net adds in spite of this. We conclude that much of the fixed line MVNO base growth is coming from impulsively upgrading prepay users, consumers wanting a spare SIM and other MVNO customer bases – sources that do not threaten the MNOs

  • EE
  • Hutchison 3G
  • O2
  • Vodafone
Mobile, Telecoms 26 August 2015
The BBC, the press and online news

Non-subscribers can download this report in full - alongside all our other coverage of the BBC during the Charter Review process - from the 'BBC Charter Review' page of our site.

The Government’s Green Paper on Charter Renewal asks whether BBC News is “crowding out” commercial news suppliers and, if so, whether this is justified

Our research shows that UK newspaper publishers have been damaged by the internet. They face inherent challenges in monetising online audiences, in common with other news publishers. To be blunt, the BBC plays no role in exacerbating these challenges

Scaling back BBC News will damage the UK’s sole source of impartial, quality and trusted news, whose independence is valued by users in the UK and around the world, risking the UK’s global “soft power”

  • BBC
Media, Press, TV 25 August 2015
Music publishing in the UK 2014-17

The UK is the top music publishing market in Europe, at £428 million in 2014, despite being second to France and Germany for collections, because mechanical royalties for the reproduction rights (CDs, vinyl, digital) flow only to music publishers, while performance royalties are shared with writers

Thanks to the recovery of the UK economy that started in 2013, royalties from performance on radio, TV and in public have risen more strongly in recent years than in the difficult period of the recession 2008-10, providing a more promising context for sustained growth of the performance component of music publisher revenues

For online royalties, which accounted for 12% of music publisher revenues in 2014, the withdrawal by major music publishers of their rights to Anglo-American repertoire has shifted licensing to SOLAR, a joint venture of PRS for Music, STIM, and GEMA, also offering an aggregated repertoire and copyright administration services. This makes PRS for Music a leader in the development of multi-territory licensing of digital music services

  • Bertelsmann
  • Spotify
Media, Music and Radio 24 August 2015
UK broadband, telephony and pay TV trends Q2 2015: ARPU dips, but bounce back in sight

While volume growth remained robust in Q2, UK residential communications revenue growth did dip again during the quarter, to 3.6% from 4.5% in the previous quarter and 5%-6% for much of 2014

However, this largely related to the timing of price increases, with there being a host of headline and effective increases due before the end of the year. The combined effect of those announced so far is sufficient to push market growth back up to the 5%-6% range for both of the next two quarters

Looking ahead, the actual launch of BT Sport Europe in Q3 may have further impact, but a modest pre-launch effect suggests that this will not be dramatic. BT will be hoping that it at least drives an acceleration of growth in its TV base, given that it is still free for these users

  • BT
  • Sky
  • TalkTalk
  • Virgin Media
Telecoms 20 August 2015
UK consumer magazines: Digital future still a long way off

In this extensive report on the UK magazine market we review demand for print magazines, the advertising marketplace and the transition to digital. We detail the major publishers’ print and digital activities and provide advertising forecasts for print and digital spend to 2018

Media, Press 14 August 2015
Print advertising hits structural wall

UK advertising is having a bumper year – some of the strongest growth for two decades – but print is receiving none of this upside. The year started soft then plummeted in the weeks immediately before and since the General Election, with increasingly serious implications for the sector

A reasonably steady UK economy and explosive TV and digital spend evidence a structural decline for print media display, though specific factors also point to some cyclical effects

We forecast a slowing of the rate of decline in H2 2015 and 2016, but we believe sooner or later the industry will have to work closely with agencies and brands to establish new terms of engagement for print media

  • DMGT
  • Gannett/Newsquest
  • Guardian Media Group
  • Johnston Press
  • Local World
  • News UK
  • Telegraph Media Group
  • Trinity Mirror
Media, Press 13 August 2015
Virgin Media Q2 2015 results: Bouncing back

Virgin Media’s subscriber figures bounced back in Q2 after a weak Q1, and consumer revenue growth also improved to a respectable 3% despite continued headwinds from VAT changes

The UK broadband market remains tough, and BT Sport Europe’s launch in Q3 will not make it any easier, but Virgin Media’s access to this and all other sports channels means that it should be able to remain above the fray

The network extension program is likely to give further growth impetus from 2016, and the company is laying the groundwork for network speed upgrades which will maintain its speed advantage for at least the medium term

  • Virgin Media
Telecoms 11 August 2015
ITV H1 2015 results: International Television

The end of ITV’s five year transformation plan leaves it a different company to the one that had only just emerged from the recession and advertising collapse of 2008/9, with total external revenues up 37% on H1 2010 and EBITA more than doubling from £165m to £400m across the same time period

This turnaround comes off the back of a resurgent TV advertising market, with ITV NAR revenues up 15% since H1 2010, but ITV has also expanded its Studios division, investing an initial £760m in international production companies over the last three years

However, there are some areas of concern, particularly ITV’s 7.7% drop in share of viewing since H1 2010, the biggest among the main broadcasters. There are also doubts about the longevity of the Studios acquisitions – what happens when key hits dry up? Or top talent leaves at the end of the buyout period?

  • ITV
Media, TV 10 August 2015
EE Q2 2015 results: Margin boost on lost costs

EE remains the slowest growing of the ‘big 4’ UK MNOs or the only one in decline with service revenue growth at -1.8%, a touch lower in reported terms despite a slight underlying improvement

Adjusted EBITDA margin improved to a record 26.6%, a somewhat fortunate compromise on the loss of gross adds share since the demise of Phones 4U – and associated reduction in (expensive) third-party gross adds

In a seasonally low broadband quarter, EE actually gained net adds share, showing resilience to heightened marketing from Sky and underscoring the merits of EE’s in-store cross-selling strategy 

  • EE
Fixed Line, Mobile, Telecoms 6 August 2015
Sky plc growing synergies - Q4 2015 results

The first set of annual results to include all three Sky pay-TV operations in Europe shows Sky plc to be off to a very good start: subscriber growth up by 5%, churn everywhere below 10%, adjusted group revenues up 5% and operating profit up 18%

Excellent though the start has been, each of the pay-TV operations faces its own specific challenges – be they to do with ARPU growth in Germany & Austria, subscriber growth in Italy, or football in some shape or form across all three markets and nowhere more so than in UK & Ireland

Most importantly for the Sky European merger, the latest results indicate that Sky is well on course with its target annual run-rate of £200 million in synergies by 2017; but with the UK model to act as a template, it is the fast-growing connected space that catches the eye

  • Sky
  • Sky Deutschland
  • Sky Italia
Media, Telecoms, TV, UK Media 6 August 2015
Vodafone Q1 2015/16 results: Steady improvement continues

Vodafone Europe’s slow but steady improvement in service revenue growth continued into the June quarter to reach -1.5% from -2.6% in the previous quarter, and -8.2% just one year ago

This was driven in roughly equal parts by subscriber growth improvements and ARPU, with both likely benefiting from Vodafone’s Project Spring investment, rapidly growing mobile data and an easing of competitive aggression

Mobile service revenue is still declining at 2-3%, making margin stabilisation still challenging for now, but there remains room for further improvement, and revenue stabilisation is at last in sight

  • Vodafone
Fixed Line, Telecoms 5 August 2015
BT Q1 2015/16 results: Solid all round

BT had a solid all round Q1, with broadband share robust, fibre growth still strong, revenue growth bouncing up a little on the business side and cost control robust

BT Sport Europe launches this quarter, and will boost revenues but raise costs by more; we continue to believe that the extra net costs can easily be covered by group-wide costs savings to allow group EBITDA to continue growing over the full financial year

The broadband market is increasingly characterised by high headline pricing coupled with heavy promotional discounting, and BT’s early headline price rise scheduled for September continues this trend

  • BT
Telecoms 3 August 2015
BBC Green Paper: red alert on funding

Non-subscribers can download this report in full - alongside all our other coverage of the BBC during the Charter Review process - from the 'BBC Charter Review' page of our site.

The DCMS Green Paper on BBC Charter Review promises a nit-picking examination of all the BBC does, where the focus will be on how to redefine its mission as well as reform and/or improve BBC services in the internet age

A central theme is the scale of the BBC. The Green Paper underlines the “dramatic” expansion of BBC services in the last 20 years, and questions whether there is still a need for the current breadth and universality of the BBC’s offering in the online world of greatly expanded choice

Among the future BBC funding options laid out in the Green Paper, the suggestion of a mixed public funding and subscription model raises serious concerns with regard to its potential negative impact on the commercial television sector

  • BBC
Media, TV, UK Media 30 July 2015
UK consumer books: a tale of two markets

Consumer ebook sales exploded after Amazon launched its Kindle in the UK in 2010, but growth rapidly slowed, and disruption was limited by genre, creating parallel ebook and physical book markets

Compared to the relentless downward spiral of music purchasing, these trends have been heartening for publishers and booksellers, but there are signs that slower, more complicated and insidious disruption is emerging

Decades of steady, albeit slow, growth in total book sales have been reversed, as consumers spend more time on a variety of mobile-delivered services, including some in classic content categories for books

  • Amazon
Media, Mobile, UK Media 28 July 2015
TalkTalk Group Q1 2015/16 results: Work in progress

TalkTalk’s June quarter delivered Group revenue growth of 3.5% with a modest slowdown in consumer, impacted by acquisitions and disposals, and a sharper drop in business

In a competitive trading environment, organic growth was likely suppressed, with the company’s focus being more on integrating the acquired bases of Virgin Media and Tesco

Guidance was reiterated with clear routes towards revenue growth targets of 5% in FY16 and confidence in the (challenging) medium term goal of 25% EBITDA margin in FY17

  • TalkTalk
Fixed Line, Telecoms 27 July 2015
East meets West: Nikkei picks up the FT

A cash offer of £844m from the giant Japanese financial information business Nikkei, a sometime partner of the FT, was too attractive to pass up for Pearson, whatever strategic reservations it felt about offloading the title or doing so now

The deal does not include Pearson’s coveted 50% stake in the Economist (or the FT’s London headquarters), so represents a considerable premium, of 35x earnings and 3x revenues by our estimates

Increased competition in the premium financial information market suggests the FT was a good consolidation opportunity. For Nikkei the move develops its opportunities in Europe and the US

Internet, Media, Press 24 July 2015
Apple Q3 2015: Watch this space

Apple delivered strong results in Q3 2015, selling a record number of iPhones for the June quarter, though iPad sales slid dramatically as consumers switch to ‘phablets’ and the company did not provide any detail on early sales of Watch, its biggest product launch since 2010

We remain bullish both on the iPhone and the Watch’s long term potential, though the latter remains a work in progress and, like many of Apple’s existing customers, we await the next iteration with interest; by contrast the iPad may have peaked already

Rising revenue from App Store, up 24% year-on-year, as well as new products like Apple Music and Apple Pay, should continue to boost the contribution from Services, and we expect this to evolve into a more material part of the business, but ultimately it’s still all about the iPhone

  • Apple
Internet, Media, Mobile, Technology, Telecoms 24 July 2015
BBC to pay for the over-75s

Non-subscribers can download this report in full - alongside all our other coverage of the BBC during the Charter Review process - from the 'BBC Charter Review' page of our site.

The recently elected Conservative government took less than a week to negotiate a licence fee settlement with the BBC immediately prior to Charter Renewal in which it will offload the government’s over-75s licence fee subsidy on to the BBC in return for various financial benefits

But, there are strings attached to a financially poor settlement, making it very difficult for the BBC to protest in the run-up to a charter that promises a major diminution in its ability to contribute to the UK creative economy

The only possible gainers are the commercial media, though the benefits may prove much less than some anticipate, however pleased the newspaper publishers may be by the Chancellor’s criticism of the BBC’s “imperial ambitions” in online news. Much more to be feared is the likely negative impact on the UK TV production sector

  • BBC
Media, TV, UK Media 15 July 2015

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