Publications

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Sogecable FY 2005 results

Sogecable FY 2005 results recorded the first net profit (€7.7 million) since 2001, two and a half years after the merger with Vía Digital. With the after effects and restructuring costs of this merger behind it, the question we examine in this note is what growth can Sogecable's pay-TV business look forward to and what extra contribution will be made by the national free-to-air (FTA) analogue channel Cuatro, which launched on 7th November 2005?

Under rules agreed with the EC no one party could win all six packages. The surprise is that BSkyB has only won four, the other two going to Setanta. Although BSkyB has won the four ‘best-looking’ packages, it must pay an extra £97 million per annum for two thirds as many games 

  • Sogecable
Telecoms 27 February 2006
Cable & Wireless UK business update. "My gaff, my rules."

C&W UK’s new Chairman John Pluthero’s turnaround strategy involves shedding 27,000 business customers and focusing on 800 of the largest accounts

Viability is a major concern. Although the Freeview channels and much of the on-demand content will be free, subscriber acquisition costs probably will exceed £200, while per subscriber on-demand revenues are unlikely to amount to much more than £1 or £2 per month 

  • Cable & Wireless
Telecoms 1 March 2006
Mobile TV update: technology and consumer demand still very uncertain

Mobile TV hype remains alive and well, but the DVB-H and DAB-IP standards are not progressing fast given a lack of European-wide spectrum

Telecoms 6 March 2006
Vodafone: all change?

Vodafone’s discussions with Softbank to exit Japan could remove its most troubled and ill-fitting subsidiary, but only if the structure allows for a clean break, which will require tricky financial engineering given Softbank’s limited ability to pay

We estimate that savings for the typical French contract customer would actually be around 5%, and therefore not worth the extra handset cost and inconvenience involved 

  • Vodafone
Telecoms 6 March 2006
EMI-WMG Merger Prospects

Talk of a merger between the recorded music divisions of EMI and Warner Music Group to create the third largest recorded music group has been simmering for at least six months. After two failed attempts in the past six years, the logic of a merger continues to be strong and scale is an even more compelling objective given the continued difficult conditions in the recorded music market, despite rising digital sales in line with our forecasts. The question is when, not if and we believe that the time is fast approaching, judging by investment bank and private equity interest in the music publishing assets of each company.

We continue to expect group revenue growth to remain positive in spite of the impact of local loop unbundling

Media 10 March 2006
Internet and Telephony Market Statistics Q4 2005

Broadband connections continued to increase strongly in the UK in Q4 2005 with 935,000 net additions, taking the UK total to just over 9.8 million connections and household broadband penetration to 35%. For 2005 as a whole, the UK broadband base rose by 60% - one of the fastest paces in Europe. Cable connections account for 27% of the broadband market with more than 99% of other connections provided via DSL.

Sound market fundamentals mean that the growth-based rationale for the bid should prove feasible 

Telecoms 13 March 2006
UK PC Video-on-Demand

This companion report to UK TV VOD [2005-24] concludes that the number of PC-based video-on-demand (VOD) services in the UK is set to explode in the near future. Rising broadband penetration, to 35% of UK homes at the end of 2005, is leading every major content owner, aggregator, broadcaster, service provider, and network operator to develop a PC VOD service. Will this response to the interest in personalised media consumption enable the PC to take over from the TV as the main source of video entertainment? The short answer is no, although we expect the market for PC-delivered VOD to grow dramatically in the next 2-3 years.

Sky Italia subscriptions, now totalling 3.71 million, have increased by almost 0.5 million subscribers in the last year. Low SACs, low churn, and yet high ARPU, show that Sky continues to benefit from strong natural growth in a pay-TV market that is experiencing a new lease of life thanks to the eradication of piracy post merger of Telepiu with Stream 

Media 17 March 2006
Iliad FY 2005 results

Sharp rise in EBITDA margin to 31% in 2005 as Free increases the share of unbundled (on-net) subscribers from 53% to 70% and retains tight control of marketing spend in the 'landgrab' for customers in France

The new management is teeing up the core UK business for a successful turnaround 

  • Iliad
Telecoms 20 March 2006
BT Wholesale Broadband Access Speeds

BT Wholesale will launch IPStream Max, a rate adaptive ADSL product, on 31st March 2006, providing a downstream data rate greater than 6.5Mbit/s – a line speed that should support a wider range of good-quality video applications – to 25% of UK telephone lines

We believe that its focus on 3G is to blame, and the company seems poised to repeat this mistake with a focus on the latest industry fad, convergence 

  • BT
Telecoms 22 March 2006
Spanish Free-to-Air TV

With the launch of two new analogue terrestrial services and a relaunch of digital terrestrial television (DTT), the Spanish government has opened up the country’s free-to-air (FTA) TV market. Although we expect the government to assist the new analogue terrestrial entrants, we anticipate that both will struggle to become profitable. Meanwhile, the DTT space will be more interesting for the takeover opportunities that it presents to the leading terrestrial commercial groups.

Fastweb’s high service model increasingly appeals to the business segment but aggressive competition on the residential segment is eroding ARPU 

Media 24 March 2006
Mobile Video Downloads

Mobile video services (along with music) have been heralded as the ‘killer applications’ set to deliver the revenue and customer satisfaction long promised by 3G. In our report Mobile TV: Trials and Tribulations [2005-20] we addressed live TV services; in this report we now consider non-live video downloading services. We conclude that while this is currently the largest ‘media’ mobile service (excluding ringtones) and it may continue to grow strongly in the short term, the market opportunity is ultimately limited due to the small size of video files downloadable over 3G, and that live TV and PC-based downloads will eventually force the market into decline.

The cause of subscription take-up already falling behind management targets set in mid 2005 is the CanalSat DTH basic rather than the Canal+ premium service, now under pressure from rival DSL and DTT services 

Telecoms 28 March 2006
The PVR and Adding Value

The Personal Video Recorder (PVR) will play a central role in contesting the digital TV landscape in the UK over the course of digital switchover and broadband expansion. BSkyB’s market leader Sky+ will be present in over 60% of its Sky Digital homes as the central media storage unit and intelligence hub.

The product, however, has a massive cost to Orange’s economics, and we cannot see how lowering churn or offering extra services can possibly compensate for this – the strategy appears to be driven by French rather than English economics 

Media 30 March 2006
NTL/Virgin Mobile

NTL’s acquisition of Virgin Mobile will improve NTL’s prospects for revenue growth and enable it to exploit the Virgin brand and marketing expertise 

  • Virgin Media
Telecoms 4 April 2006
H3G results: 3 broken promises

H3G’s 2005 results underperformed in 3 key areas: net subscriber additions were lower than promised, unit SACs were higher than promised and the group failed to reach EBITDA breakeven as promised 

2006 promises to be much worse due to a markedly bigger drop of about 11.5% in weighted share of commercial impacts in 2005, due to a number of factors (not just multichannel platform growth), and an anticipated decline of between 2% and 5% in total TV NAR in 2006. Taking a mid-value of -3.5% yields a drop in ITV plc NAR of around £180 million in 2006 

  • Hutchison 3G
Telecoms 9 April 2006
Valuing Premier League Football Rights

The FA Premier League Limited has set a deadline of 14:00 on Thursday 27th April 2006 for receiving bids for live televised Premier League (PL) rights under the new three-year contract due to start with the 2007/08 football season. BSkyB is everyone's favourite to win at least four out of the six packages of 23 games up for auction, but probably the maximum best-looking five under the new rules that will not allow total exclusivity. Valuing Premier League Football Rights [2006-11] addresses the question of how much BSkyB may have to bid in order to win.

The combined NTL/Telewest occupies the centre ground of the triple play space in the UK. It has long provided the triple play of TV, telephony and broadband and is now the largest ISP in the UK. However, it has historically been constrained by high prices and poor customer service.

Media 10 April 2006
Carphone Warehouse

Carphone Warehouse (CPW) has launched a broadband/telephony bundle which effectively offers free broadband to non-cable customers in urban areas 

O2’s purchase of Be may only have cost £50 million but its entry into UK broadband may ultimately prove an expensive distraction 

  • Carphone Warehouse
Telecoms 11 April 2006
Sky and football: more to pay, less to show and reduced margin

The FAPL has just auctioned six packages of televised live Premier League (PL) rights, each comprising 23 games, for the three years commencing autumn 2008. The total consideration of £1,714 million is 67% up on the £1,024 million BSkyB is now paying over three years for the same number of live PL games 

Barça cannot afford to dispense with Sogecable’s support as a pay-TV partner and possessor of contracts with the other leading clubs. A deal has to be struck 

  • Sky
Media 7 May 2006
BT Vision

BT plans to launch BT Vision – its hybrid Freeview-IPTV service – in Q4 2006. The aim is to broaden the appeal of its broadband offerings and help it to withstand aggressive competition from local-loop unbundlers such as Carphone Warehouse, Wanadoo/Orange and, soon, BSkyB 

Of the three known candidates, BSkyB stands to gain the most from acquiring AOL UK’s customer base, except that it would deepen an already challenging LLU cash flow profile. Orange’s market position would also be significantly strengthened by acquiring AOL UK’s customer base, with the added benefit of displacing a potentially harmful rival in BSkyB 

  • BT
Media, Telecoms 8 May 2006
Freebox to hit mobile?

Illiad’s new Freebox in France promises savings of ‘up to’ 40% for mobile users by using Wi-Fi to make mobile calls at home, creating fears that it will harm the French mobile industry 

BSkyB plans to unbundle 1,200 exchanges by the end of 2007, enabling it to offer shared or full LLU to 70% of UK homes. It will offer ‘free’ broadband up to 2Mb to all and only Sky DTH customers served by its unbundled exchanges. Or they can pay a little more, £5 and £10 a month respectively, for broadband up to 8 Mb or 16 Mb. In addition, all Sky Broadband customers will be able to take BSkyB’s telephony offer, Sky Talk for an additional £14 a month, which includes line rental and unlimited calls in the UK.

Telecoms 15 May 2006
Versatel - Football-driven LLU?

The experience of Versatel (now owned by Tele2) in The Netherlands provides a cautionary tale for new entrant altnets hoping to use premium content to gain broadband market share in a well-contested and maturing broadband market (58% household penetration). In late 2004,Versatel was the surprise winner of the 2000-2008 broadcast licence for the domestic football league Eredivisie (carried only by Versatel and licensed to satellite TV), but Versatel's broadband market share and that of other unbundlers fell in 2005 while those of incumbent KPN (operating under three brands) and cable rose.

We welcome that the company appears to be de-emphasising 3G, with SACs reduced and 3G as a percentage of handset sales dropping from 20% to 12%. Unfortunately, just as Vodafone is recovering from the 3G industry fad, it seems keen to get distracted by another – convergence 

Telecoms 16 May 2006

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