Publications

Format: Apr 2016
Sector(s) Datesort ascending
TV NAR gloom lifting a shade

Recent weeks have seen a marked improvement in the short-term outlook for TV NAR (Net Advertising Revenues), with total decline for 2009 reckoned to be in the order of -12.5% after a fourth quarter in which year-on-year decline is now expected to be in the order of -6%

The economic outlook for 2010 remains very uncertain due to the drastic cuts needed in the government’s spending to bring the deficit under control, which could lead to a double dip recession, and the persistence of downward pressures on airtime costs due to structural changes to the TV medium

We have accordingly revised our central case forecast year on year decline in TV NAR from -8% up to -4% in 2010, but it may not be until the London Olympics year of 2012 that we again witness positive growth

Media, TV 11 October 2009
UK Fixed Telephony Market Trends

Over the four years to 2008, fixed telephony market revenue has fallen by about 17% (£1.9 billion). But the picture is complex

The total number of fixed access lines has fallen by only 4% since 2004, but losses have been predominantly of business lines, due to a combination of inter-related factors involving a shift from ISDN2 to broadband, fixed call substitution and increased home working

We estimate that roughly half of the decline in total market revenue since 2004 has been due to substitution of dial-up internet access by broadband, the rest being accounted for by the substitution of regular call minutes by email and other forms of text communication, as well as by mobile, and price cuts

Telecoms, Fixed Line 10 October 2009
Amazon, ebooks and the UK

Amazon has announced that it will launch its ‘Kindle’ ebook reader internationally. It will be sold from the US site and shipped internationally for $270, with a free global wireless service for downloading books. This looks like an interim step with full ‘local’ sales in place next year; nonetheless local media (newspapers, magazines and book publishers) are in place.

All of this, however, was caused by regulatory effects, with underlying growth being stable for the first time since March 2008

We expect both underlying and reported growth to recover in the December quarter, and to progressively improve throughout 2010

Media 8 October 2009
Carphone Warehouse September quarter trading update: continued resilience

At TalkTalk Group (TTG) net broadband additions at TalkTalk/AOL UK were unexpectedly strong, with low cannibalisation of Tiscali subscribers particularly good news

At the newly acquired Tiscali UK, the inevitable skeletons are starting to emerge from their cupboards. Management appears well prepared for the challenges, although it is early days

Carphone Warehouse’s distribution business grew connections at 2.1% during the quarter, another very creditable performance in a declining market, and it remains well positioned for the market recovery

  • TalkTalk
  • Carphone Warehouse
Telecoms, Mobile 7 October 2009
UK internet advertising: spend flat, share up

Recession has hit internet advertising, with spend down 1% YoY in H1 2009, but the collapse in advertising on traditional media helped push online to 23% share, up 4 percentage points versus H1 2008

Based on IABUK/PwC data, we estimate that spending on search rose 2% YoY in H1, whilst display was down 5% and classified fell by 4%, the latter supported by unexpected growth in non-recruitment listings

We have adjusted our forecast for online advertising up slightly to flat for the year, but whilst the internet has now overtaken TV in absolute terms, TV remains very much the king of display

Media, Internet 4 October 2009
On the brink: UK anti-piracy regime

By 29th September, all submissions on the government’s anti-piracy proposals will need to be in to the Department of Business Innovation and Skills (BIS), with furious lobbying taking place in the lead up to the tabling of the draft Digital Economy bill in November

Under the proposals, content owners are to identify IP addresses of file-sharers and communicate them to their ISPs, which would be required to write letters to the account holders, and also release this information to content owners in the event of continued file-sharing activity to allow legal proceedings to be initiated

Opportunities for retreat abound, but if the proposals become law (rather than shelved for the next government), the UK’s new online piracy regime will generate economic benefits for the content owners (and the creative industries), which will share costs with the ISPs under the government’s latest proposal

Music and Radio, Media 23 September 2009
Vodafone 360 - all spin?

Vodafone has launched a suite of internet services, platforms and handsets under the ‘Vodafone 360’ umbrella brand

Our views are mixed: we applaud the contacts back-up service that will be available across a wide range of handsets, provided it proves user friendly, but are puzzled by the point of a Vodafone-designed user interface built onto a fairly obscure smartphone operating system

Overall, if Vodafone 360 can stimulate data usage amongst low- to mid-end handset users, Vodafone would profit in both revenue and loyalty terms, but competing at the high end with the likes of Apple, RIM and Google strikes us as both needless and futile

  • Vodafone
Telecoms, Mobile 23 September 2009
Mobile revenue growth and outlook Q2 2009: the penultimate dip?

In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain)

Overall reported year-on-year growth for the top 5 European markets fell sharply again, with a drop of 1.0ppts following on from the drop of 1.7ppts in the last quarter, with growth now -2.0%. Part of the drop can be accounted for by increasing regulation on termination rates in the UK and Germany –however, underlying growth still fell by 0.5%

Overall reported year-on-year growth for the top 5 European markets fell sharply again, with a drop of 1.0ppts following on from the drop of 1.7ppts in the last quarter, with growth now -2.0%. Part of the drop can be accounted for by increasing regulation on termination rates in the UK and Germany –however, underlying growth still fell by 0.5%

The continued fall in underlying growth is slightly worrying as GDP declines appear to have reached their nadir, with the Q2 average year-on-year decline of 4.9% the same as in Q1, raising the possibility that lagging effects of the downturn (such as rising unemployment) may keep downward pressure on mobile revenues beyond the point of inflection of GDP itself

Telecoms, Mobile, Non-UK Telecoms 9 September 2009
Competition Commission CRR announcement imminent

The impending Competition Commission announcement of its provisional decision concerning the Contract Rights Renewal (CRR) remedy is expected to make little change beyond extending CRR to cover variants of ITV1, such as ITV1 +1 and ITV1 HD

Extending CRR to cover ITV1 variants should benefit ITV NAR (Net Advertising Revenue) by improving ITV1’s overall audience share, but does nothing to ease the deflationary pressures now gripping the TV advertising medium, where CRR works hand in hand with the requirement on the commercial PSB channels to sell 100% of their advertising inventories

The current goings on underline the dichotomy between competition and public broadcasting policy objectives

 

 

  • ITV
Media, TV 9 September 2009
T-Mobile and Orange in the UK: creating a synergy champion

T-Mobile and Orange’s plan to merge their UK businesses into a JV would create the UK’s largest mobile operator by some margin, and the enormous planned synergies of £545m per annum are actually quite unaggressive given the cost overlap

This achievement would be moderated by ‘integration leakage’, i.e. increased churn caused by customers leaving who were initially attracted by an aspect of one of the operators that disappears after integration, but the net result should still be positive for the JV

The remaining UK operators will benefit both from this churn and the reduction in competitive intensity associated with five players dropping to four. While all the operators may win, UK consumers might lose, with regulatory clearance thus still far from certain

  • T-Mobile
  • Orange
Telecoms, Mobile 7 September 2009
UK broadband and telephony markets Q2 2009

This report looks at the UK broadband and telephony market up to Q2 2009. The key trend is that the steep reduction in UK broadband net additions continued in Q2 2009, to 176,100

  • Orange
  • Virgin Media
  • TalkTalk
  • Sky
  • BT
Fixed Line, Telecoms 6 September 2009
ESPN and Sky - The new complementary premium sports duo

According to recent speculation, Sky stands to benefit materially in the short-term from the replacement of Setanta by ESPN, but could suffer from rights inflation and worse in the longer term should ESPN become really successful

ESPN’s commitment to a pure wholesale channel distribution model across all platforms and lower outlay on rights gives a real chance of building a viable business where Setanta failed

But, profits will take time to build and there is little to suggest that Sky will either materially benefit from having ESPN rather than Setanta as a customer, or that ESPN will emerge as a serious threat to Sky’s own core premium sports business in the next three to four years

  • Sky
Media, TV 18 August 2009
H3G H1 2009 results: falling short

H3G’s H1 2009 results showed some improvement on revenue growth and profitability on a very weak H2 2008, but it is still growing very slowly while barely EBITDA positive

The company has at last admitted that it will not be EBIT positive in 2009, and without some major changes we doubt it ever will be

For the UK business, there are a number of factors which may turn in its favour over the coming two years, allowing a more concerted marketing push to scale; for Italy and the smaller European operation, consolidation appears the only answer

  • Hutchison 3G
Telecoms, Mobile, Non-UK Telecoms 17 August 2009
UK consumer magazines: threat of downward spiral

Core female readers appear to be leaving the consumer magazine market, or at least not purchasing multiple titles to the degree they have done in the past, raising concerns that the scale of the industry is starting to spiral downwards

Men’s titles continue to fall and titles targeted at young readers are in freefall as these demos drift online for content and social network services, or in some cases adopt more adult titles from a younger age

If circulation decline continues at the 2008/09 rate, the sector risks losing the confidence of the supermarket giants that generate more than 50% of magazine sales, an outcome with unthinkable consequences for many large and medium sized publishers

Media, Press 17 August 2009
UK Classified Advertising

UK classified advertising, which covers categories such as recruitment, property, used car sales as well as directory services including Yellow Pages, has been hit severely in the recession

Last year, we estimate there was a 10.4% decline to £4.1 billion of total classified expenditure across all media including newspapers, magazines and online

However, trends have since accelerated, and we project total classifieds will generate about £3.2 billion this year, a decline of 27% on 2008

Media, Press, Internet 15 August 2009
Virgin Media Q2 2009 results: positive impact from price increases

VMed’s Q2 results were again mixed but, on balance, encouraging, with the impact of the May price increases feeding through into revenue growth

Cable volume performance was poor but, with the exception of broadband, no worse than expected, and is not expected to deteriorate further relative to the market

We remain optimistic that management will succeed in combining revenue growth with reductions in operating costs to generate sustained growth in cash flow from autumn 2009

  • Virgin Media
TV, Media, Telecoms, Fixed Line 5 August 2009
ITV interim results 2009: every little helps

ITV reported a pre-tax loss of £14 million in H1 2009 as the advertising recession took a grip, with total TV NAR down an estimated 17% against H1 2008, while ITV family NAR fell year on year by 15%

Although visibility over future advertising spend is restricted to a couple of months, we expect significant further decline in total TV NAR over the remainder of 2009 and 2010, before recovery starts in 2011/12

Cost savings, debt-restructuring and disposal of non-core assets, including Friends Reunited and SDN, should see ITV through the worst and we expect it to benefit later on from regulatory changes to its core advertising business

  • ITV
Media, TV 5 August 2009
Sky fiscal FY2009 closes on the best quarter ever?

Fiscal FY 2009 closed on a very strong note, with record Sky+ HD additions contributing to Q4 net growth of 124,000, the highest Q4 increase since 2003, and opening up the opportunity for a large increase in TV operating margins after absorption of the initial subscriber acquisition costs

In assessing the medium-term outlook, the Ofcom pay-TV investigation appears unlikely to have a material impact on Sky earnings, even if Ofcom pushes through its premium wholesale proposals, while the advertising downturn may work to Sky’s benefit in developing its competitive strengths in programme origination outside sports

Results for the telecoms business again displayed strong volume growth in a difficult market. The business has now turned EBITDA-positive and is expected to generate a quarterly operating profit during FY 2011. However, original guidance for IRR remains challenging

  • Sky
TV, Media, Telecoms, Fixed Line 2 August 2009
BT FY 2009-10 Q1 results: what goes down

BT’s Q1 results provided welcome respite from a string of bad news, and some evidence of management’s ability to cut costs, but were helped by a temporary sharp reduction in capex and a VAT repayment. It remains early days

The ‘21st century’ upgrade to the core network now appears to be largely complete and delivering cost savings, but a separate voice network will continue to run over the access infrastructure

The company’s project to deploy more fibre beyond the local exchange, whilst a useful defensive move, looks unlikely to have a major impact on shareholder value

  • BT
Telecoms, Fixed Line 1 August 2009
Canvas “drive digital Britain”

The BBC Executive has fleshed out many details of Project Canvas in response to questions raised by the BBC Trust: Canvas being the proposed joint venture between the BBC, BT, ITV and Five that aims to solve the challenge of realising the seamless convergence of linear broadcast TV and internet video to the TV screen in the living room

For Project Canvas to succeed, it is likely, in spite of its merits, to have to address competition concerns in the areas of company structure, stifling innovation and editorial controls over who gets to participate

Stifling innovation – whether to do with creative restrictions, marginalisation of competing players or undue prominence given to the traditional public service broadcasting (PSB) model – appears the most problematic issue facing Project Canvas, whose success will depend on its ability to convince the rest of the industry that it is stimulating, not stifling innovation

  • BBC
Media, TV, Internet 29 July 2009

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