Publications

Format: Aug 2015
Sector(s) Datesort ascending
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

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

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
The plight of the BBC post-intervention

Last Monday’s (6 July) announcement by the Secretary of State marks the second major direct intervention by government without recourse to public consultation in the financing of the BBC throughout the corporation’s history. The previous occasion was 2010.

As in 2010, the government has interfered by top-slicing the BBC’s licence fee revenues. We estimate the current annual top-slicing component that will appear in the annual accounts for 2014/15 (BBC year running from April to March) to be in the region of £525 million, including funding the BBC World Service for the first time (est. circa £245 million). By the time the BBC fully absorbs the over-75 subsidy (worth £608 million) in 2020/21, we are looking at a total revenue impact of circa £750 million; that is without taking inflation into account.

  • BBC
Media, TV, UK Media 13 July 2015
Content marketing: publishers' saviour?

Brands are investing more than £5.2 billion a year in content strategies, £1.2 billion of it with consumer media, and investment is growing at 25% per annum, massively outstripping growth in traditional advertising

Content marketing defies the broader direction of travel in the digital era – response-measured programmatic advertising – by expressing value in content and context, much of it at the top of the discovery funnel

In a rapidly converging marketing value chain some consumer publishers are adopting agency values and practices by responding to the changing demands and expectations of their advertisers

Internet, Media, Press, UK Media 6 July 2015
A new Fox bid for Sky: when, not if

News Corp’s original bid for full ownership of BSkyB was withdrawn because of the phone hacking scandal. It was never blocked by regulators. Had it not been for the scandal, the bid would almost certainly have been approved.

With the phone hacking scandal fallout largely over and the election of a friendly government, the climate is now much more favourable to a renewed bid. With undertakings, we believe it would be approved by regulators.

The increasingly global scale of TV and film distribution means the commercial case for the bid is, if anything, stronger now than in 2010. The questions are simply whether the right price can be agreed, and how high up it is on James Murdoch’s list of priorities.

  • 21st Century Fox
  • News Corp
  • Sky
  • Sky Deutschland
  • Sky Italia
Media, Technology, Telecoms, TV, US Financials 1 July 2015
BT Sport - the Champions?

BT will soon for the first time charge the majority of viewers for their own channels with the launch of the BT Sport Pack. The Pack includes BT Sport Europe, home to UEFA’s European football tournaments from this August, the rights to which BT are paying £299 million a year

Viewing figures for the big European tournaments are not as high as one might expect given their prominence. Consumer demand for the new channel will also be highly dependent on the success of British teams, notably lacking in recent seasons

We therefore do not expect a dramatic impact on BT Sport (or BT broadband) subscribers, and the widening losses will put pressure on BT’s margin squeeze test regulation, although they are easily absorbable at BT Group level

  • BT
  • ITV
  • Sky
Media, Telecoms, TV, UK Media 30 June 2015
European mobile in Q1 2015: Another improvement, but not in Spain

European mobile service revenue growth improved once more in Q1, rising 1.1ppts to -1.6%, continuing a trend of underlying growth improvement that started in Q3 2014. The improvement was mainly driven by easing declines in France and Italy but deteriorating performance in Spain meant that Europe-wide growth did not improve by as much as in the last two quarters

Pricing stabilisation appears again to be the main driver of recovery (in those countries that are recovering) with more rational pricing allowing operators to monetise rapid data usage growth. However, more price cut moves have been made in France since the end of the quarter, Italy remains an inherently unstable market and Spain again suffered this quarter from convergence discounts

As data usage continues to grow rapidly, customer concern for high quality data networks increases, which makes investment in superior 4G networks a clearer differentiator for operators to convey to customers. The UK market leads the EU5 in this regard, and has taken advantage through rationally priced tiered data plans, but this effect spreading to the rest of the EU5 is a source of optimism as 4G roll-outs continue across Europe

  • Hutchison 3G
  • Iliad
  • Orange
  • T-Mobile
  • Telefonica
  • Vodafone
Mobile, Telecoms 25 June 2015
UK broadband, telephony and pay TV trends Q1 2015: Weak ARPU, strong volumes, stronger fibre

The UK broadband market remained strong in Q1 2015, backed up by healthy volumes, with a modest weakness in ARPU causing revenue growth to slow to 4.5% from 5.7% in the previous quarter. ARPU growth was particularly weak at BT and Virgin Media, with part of this due to one-off factors, but part due to the dilutive effect of increased promotional activity

Broadband volumes continued to modestly accelerate, pay TV volumes modestly decelerated and line rental growth levelled off. The highlight was high speed broadband, with market net adds continuing to rise, driven by increased marketing and BT’s roll-out reaching more rural areas where the speed improvement is more marked

Since the end of the quarter, Vodafone launched a new consumer dual play product. Launch pricing is at the bottom end of the current price curve, but not well below it, suggesting that it is wisely imitating EE’s approach of cross-selling a profitable product as opposed to deep discounting on broadband to build mobile market share

  • BT
  • EE
  • Sky
  • TalkTalk
  • Virgin Media
  • Vodafone
Fixed Line, Telecoms 24 June 2015
Apple at WWDC: intelligent design

Apple has confirmed the launch of Apple Music, its streaming music service, available on iOS devices by the end of June, and later on Android. Priced at the same level as Spotify’s premium tier and lacking a free ad-supported offer, much hinges on the appeal of its curation tools.

Other key announcements included a news app, the roll-out of Apple Pay to the UK, improvements to maps, and new operating systems for Mac, iPhone/iPad and Watch.

The main theme was one of increasing intelligence in services, with Music and News both being curated and the software getting better at understanding and predicting user needs. This is a necessary step to prepare for the next wave of consumer technology: wearables and connected devices.

  • Apple
  • Google
  • Spotify
Media, Music and Radio, Technology, Telecoms 18 June 2015
UK mobile market Q1 2015: A little growth, less convergence

UK mobile service revenue growth continued to improve, rising to 1.2% in Q1, a modest figure but still the best of the five largest European mobile markets, albeit weaker than the UK consumer fixed line market (4%-5%)

O2 continued to be the strongest grower of the ‘big 3’, and maintained over 40% share of contract net adds. Both Vodafone and EE appear to have suffered from the demise of Phones 4U, having been its biggest (and latterly its only) network operator suppliers. EE is also suffering from the gradual withdrawal of its Orange and T-Mobile brands, which is forcing it to work harder to both attract and retain customers

Vodafone launched a competitively priced consumer fixed broadband offer on 10 June. EE has shown that there is an opportunity for Vodafone to have some limited success cross-selling broadband through its shops, but O2's mobile-only success and EE's struggles in its mobile business suggest that this will not drive improved mobile performance

  • EE
  • Hutchison 3G
  • O2
  • Vodafone
Mobile, Telecoms 17 June 2015
Channel 4 adapting to change: 2014 annual report

After a testing 2013, which saw an 11% fall in audience share of main Channel 4, 2014 has seen a £30 million increase in total revenues to £938 million and return to financial surplus for the first time since 2011

Channel 4 is much more challenged than any other PSB group as well as much of the non-PSB sector by the steep recent decline in viewing among younger age-groups, yet has stuck close to its public service remit of reaching out to the 16-34s and a wide selection of minorities while maintaining its investments in programme origination

A buoyant TV advertising climate, innovative approach to content investment and focus within the digital space on getting to grips with the changing viewing behaviours of the 16-34s point to strong revenue growth in 2015

  • Channel 4
Media, TV, UK Media 16 June 2015
Amazon Prime and the video market

DVDs are a core Amazon product, of which it is one of the largest retailers – the challenge is to sustain this position throughout the on-going transition to digital formats

Amazon Prime Instant Video’s first purpose is to help the transition by building Amazon’s digital video retail ecosystem. As part of the loss leader Prime bundle it also supports increased customer retail expenditure and stickiness

Despite strong headline growth in Prime membership and some high profile content, the streaming service has yet to generate significant consumer interest. Prime’s net cost is likely to rise as Amazon must finance content to meet rising consumer expectation while suffering competitive price pressures on the bundle

  • Amazon
  • Netflix
Internet, Media, TV 11 June 2015
UK quarterly internet trends Q1 2015

The latest numbers for Q1 2015 show strong device and internet user growth, with more of the population online than ever before, including more than 90% of under-55s. Growth amongst older groups, however, has slowed to a crawl

Participation in online activities is up across the board, but digital media data shows spend on ebooks and digital music struggling, with the latter being heavily impacted by the rise of unlimited streaming models such as Spotify

The story of mobile's surge continues, with almost a half of e-commerce transactions and a third of search and display ad spend now going to mobile. Most of these mobile devices are Android, but iPhone seems to have gained long term share with its larger phones. Google services, however, have cross-platform reach

  • Amazon
  • Apple
  • Facebook
  • Google
Internet, Media, Mobile, Music and Radio, Technology, Telecoms, UK Media 5 June 2015
Vodafone Q4 2014/15 results: Modest improvement, but not in Germany

Vodafone Europe’s revenue growth improved again in the March quarter, but not by as much as the previous trend, or by as much as the mobile market in general

Operational trends look more solid, with data growth continuing to accelerate and Project Spring delivering improvements in some markets

The biggest blip was in Germany, a quad play market for Vodafone, and we remain sceptical of the operational benefits of convergence as Liberty Global merger speculation re-surfaces

  • Vodafone
Mobile, Telecoms 4 June 2015

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