Publications

Format: Apr 2017
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Everything Everywhere: UK market leader (for a bit)

 

Everything Everywhere’s maiden investor day presentation was soured by the disappointing results it reported for Q2 2010, with service revenue growth underperforming its UK competitors by 7 percentage points. At current relative growth rates, O2 will retake its lead by June 2011

The synergy savings targets have been maintained, but focused more towards back office functions and away from front line assets such as shops and network base station sites, with the brands being kept separate for the time being. This is a sensible enough approach, and the cost savings still look eminently achievable

Going forward, the company will have the advantage of a better network but the disadvantage of disruptive integration for the next few years. Its main challenge will be to reverse the current negative revenue momentum, which puts both its revenue and margin targets at risk

 

  • T-Mobile
  • Orange
  • EE
Telecoms, Mobile 3 October 2010
Media advertising in 2010 and 2011

Total UK media advertising will grow 3.7% to £15 billion in 2010, on a bounce back of TV, internet and national newspapers from the recession

If UK economic growth slows to a crawl, UK media advertising could decline by about 1.1% in 2011

For local and regional newspapers and magazines, ongoing structural pressures are dominating the recovery in 2010, and we expect the headwinds will be even stronger in 2011

Media 3 October 2010
Music market trends in H1 2010

 

US recorded music sales continued to slide in H1 2010 (-9% year-on-year for physical and digital formats (excluding ringtones), on a track equivalent basis). The UK recorded music market has been stronger than the US in recent years, and H1 2010 was no exception (down -1.5%)

Music major revenue declines on recorded music are being partly offset by growing licensing fees paid by music streaming services, as well as artist and merchandising services under 360 degree contracts

High margin music publishing revenues remain the pillar of music major profitability. These declined in H1 2010 due to the delayed impact on current quarterly results of the advertising recession in 2008/09, and we expect the advertising bounceback to be reflected in future results

 

  • Apple
Music and Radio, Media 29 September 2010
UK internet advertising: 5 year forecasts

We forecast UK online advertising to grow by 8% CAGR to £5.1 billion by 2014, representing approx. 33% of total advertising spend, overtaking press

Search is the main growth engine, which we predict will reach £3.1 billion in 2014, due to its appeal and value to advertisers as a sales and lead generation tool

Growth in spend on social media and video networks will push online display to just over £1 billion by 2014; whilst classifieds will grow to £840 million

  • Google
  • Facebook
  • Yell
Media, Internet 29 September 2010
French telecoms retail highlights

Late entrant Bouygues Telecom is gaining broadband market share via the quad play. Orange and SFR have now also launched quad plays, but Iliad’s mobile offers will be ready only in 2012

Iliad hopes to use its new Freebox to energise recruitment around new IPTV services in Q4 2010. SFR will also launch a new box

Led by a likely VAT hike for triple play bundled IPTV services in 2011, triple play pricing is set to rise after many years, from €30 to €35/month. FTTH upgrades in urban areas will be gaining visibility this winter

  • Iliad
  • Orange
  • SFR
Telecoms, Fixed Line, Non-UK Telecoms 13 September 2010
Google has launched Google Instant

Google’s new Google Instant displays and updates results in real time as users type in queries, shaving an estimated 2-5 seconds off the average 9 seconds taken to carry out a search

Available in the US and UK now and key European markets shortly with other territories and mobile to follow in 2011, Instant will help Google to differentiate its search engine in an increasingly competitive market

Google Instant should stabilise, if not boost, the company’s share of queries, which has fallen both in the US and globally since February, and may also enhance the value of ads on Google

  • Google
Media, Internet 9 September 2010
Mobile data economics: the limit of unlimited

The unlimited mobile data plan, rightfully credited with being a key part of the current boom in handset-based mobile internet use, is now being scaled back across the US and UK, with capped data bundles of various sizes now preferred

The economics of data are such that current price plans (including unlimited ones) combined with current average smartphone data usage rates are still respectably profitable for the mobile operators on an incremental basis, provided they do not substitute for the far more profitable voice and text messaging services

However, current average smartphone usage rates are around 1/50th of home broadband usage rates, and smartphones’ improving screens, increased storage capabilities and faster processors are enabling some users to push well beyond profitable usage levels, leading to the danger that average usage may surge in the future (possibly even within current 2 year contract periods), to the point where current plans are not profitable

Usage caps are therefore probably a long term necessary evil to guard against this risk, but mobile operators need to be sympathetic to most consumers having no idea how much data various activities might use, and protect them against the bill shock that might result from out-of-bundle charges

Telecoms, Mobile 6 September 2010
Apple: ecosystem upgrade

Apple has upgraded its iPod family and also iTunes, which now includes new social networking features, and revamped Apple TV, now reinvented as a streaming-only device at a fraction of its former price

We expect iPod sales volumes to continue to slide despite the update, but estimate that improved ARPU will add $600 million to Apple’s topline in FY2011. However, iPhones and Macs are the company’s key revenue drivers

The revisions to Apple TV should drive up sales, but the content offering remains weak (especially outside the US) and it is joining an already crowded playing field – its main benefit is likely to be supporting the Apple ecosystem

 

  • Apple
Media 5 September 2010
Pay walls and the size of newspapers

A newspaper pay wall subscriber is worth only a quarter to a third of a print buyer: even if every single print buyer is successfully converted to the pay wall, newspapers will still face a basic problem of scale

Pay walls will not be able to compensate for lower revenue per reader by expanding the audience for paid news, due to the long term decline of circulation, free online news, 24-hour broadcast news and free-sheets

Future change will be radical: publishers may need to consider producing a newspaper its loyal readers recognise and value with just 200 rather than 500 journalists

Media, Press, Internet 31 August 2010
2010 TV NAR bounce back to continue into Q4

The bounce back in TV NAR (Net Advertising Revenue) now looks set to continue into Q4, resulting in full year- on-year growth of about 12.5%

The bounce back has more than reversed the -11% fall in 2009, although it still leaves TV NAR in 2010 about -5% below pre-recessionary levels in 2007 (nominal prices). Meanwhile, persistent worries about the economy and the impact of government debt reduction measures suggest flat growth in 2011

Much depends in 2012 on the outcome of Ofcom’s review of the airtime minutage quota and distribution rules, where its own commissioned econometric analysis suggests that harmonisation efforts leading to increases in airtime supply could cause large reductions in TV NAR

Media, TV 26 August 2010
UK Classified Advertising Annual Report: Part Two- Property, Auto, Directories

Part Two of our annual report on classifieds covers property, auto (used) and directories

As with recruitment, covered in Part One, a step change downwards has occurred in the underlying volumes of transactions driving classifieds in property, autos and directories

Publishers of commercially-run classified sites must contend to different degrees with the presence of Google

Advertiser interest in print editions of directories will remain as these continue to attract mainly older consumers and households outside urban areas

Advertisers face a fragmented marketplace online for directory services, as desktops are used for in-home services, while smartphone apps supply the destination services prized by the affluent, young urban dweller

  • Google
Media, Press, Internet 25 August 2010
UK Classified Advertising Annual Report: Part One- Overview and Recruitment

Classifieds generated £5 billion in 2009, down 13.3% on 2008, accounting for one-third of UK advertising spend

The migration of classifieds from print media to online media accelerated during the recession, with no prospect of a ‘bounce back’ -recruitment has fallen 65% from its peak of £1.5 billion in 2004 to (our estimates) about £649 million in 2009 and down to £538 million in 2010

Key players do not charge on a performance basis, so online and print media retain similar charging models

Digital revenues on a like-for-like basis are discounted by 60-70% of print, with online players offering services, such as display for branding purposes or web marketing to SMEs, to add to core advertising income

Media, Press, Internet 24 August 2010
Internet advertising & e-commerce: UK, Germany, France

Germany, the UK and France are the three largest advertising markets in Europe, worth €40.3 billion in 2009, of which €8.9 billion was spent on internet ads, 65% of the total across the continent (based on IAB Europe survey of 19 countries)

In per capita terms, the UK and Germany spend the most on advertising: in 2009, roughly €200 per head was spent in the UK and Germany, 40% more than in France

  • Google
Media, Internet, Non-UK Media 22 August 2010
Internet advertising and Google in UK: modest slowing of growth in H2 2010

Google’s UK results and other key indicators for the first half of the year confirm that online advertising increased in line with our overall forecast for 2010

We anticipate that deteriorating consumer confidence in H2 2010 will lead to deceleration of advertising growth, including the internet – confirmed by early anecdotal feedback from agencies and ad networks

Our revised forecast for Google’s UK ad revenue is 15% YoY growth in 2010 and 11% YoY growth for UK internet ad spend to £3,800 million

  • Google
Media, Internet 9 August 2010
No quick fixes... fundamental change required: ITV interim 2010 results

The bounce back in H1 2010 advertising revenues (18% up over H1 2009), combined with extra cost savings, turned last year’s £72 million loss into this year’s £71 million profit; but could not disguise the need for transformation of a business overly dependent on an advertising model in long-term structural decline

The management’s five year goal of reducing the advertising revenue share (now 74%) to 50% echoes previous targets and the ability of the new team to deliver the goal will depend first and foremost on a revitalised ITV content production business

The agreement with Sky to launch HD versions of ITV2, ITV3 and ITV4 to Sky+ HD subscribers marks ITV’s first return to pay-TV since the collapse of the ITV Digital venture in 2002. This should not be seen as an about turn in ITV’s commitment to free-to-air broadcasting, but rather as a one off win-win opportunity for ITV and Sky

  • ITV
  • Sky
Media, TV 8 August 2010
UK broadband and telephony trends to June 2010

There were approximately 19 million fixed broadband lines in the UK at the end of June 2010 including those used by small and medium enterprises (SMEs)

Year-on-year subscriber growth in Q2 increased by half a percentage point, following stabilisation in Q1, the first material since the early years of UK broadband

Looking at net additions in the quarter, Q2 saw a sequential drop of 23%, the lowest Q1 to Q2 sequential decline since 2005 . Year-on-year growth in net adds, at 51%, continued to accelerate rapidly

  • O2
  • BT
  • Orange
  • Sky
  • TalkTalk
  • Virgin Media
Telecoms, Fixed Line 5 August 2010
H3G H1 2010 results: underlying stagnation

H3G Group’s reported results claimed strong growth and rapidly improving profitability, but, taking out the effect of an accounting change, an acquisition and some one off income, underlying revenue was flat and profitability improved only marginally
The parent company is still guiding to positive EBIT from the H3G group for the full 2010 year, but this will require either further creative accounting or very strictly controlled spending on subscriber acquisition, at the expense of future revenue growth
H3G UK’s revenue fell 9% in the half, although profitability improved with very weak contract net adds probably caused by a restricted SAC budget. With demand for smartphones surging H3G UK is in a potentially strong position, but without a substantial marketing and SAC budget it cannot take advantage

  • Hutchison 3G
Telecoms, Mobile 5 August 2010
The bigger picture: Sky fiscal Q4 2010 results

Strong FY 2010 adjusted revenue growth of 11% was powered by a 15% rise in subscription revenues, reflecting a mixture of solid subscriber growth in spite of the recession and burgeoning multi-product sales, with HD subscriptions registering a net increase of 1.63 million to end the year at 2.94 million and the telecoms sector breaking into operating profit in Q4

Firm cost control and streamlining of manufacturing and subscriber management expenses now make Sky’s 25% TV operating margin target look very achievable, but also leave it room to increase spend on programming substantially within the guidance limits of pegging increases to the rate of revenue growth

Overshadowing the results is News Corp’s proposal to purchase the 60.9% of BSkyB shares that it does not already own, subject to regulatory review. Assuming it goes ahead, News Corp will have a larger market share in the UK across media (TV, newspapers and books) than any other company in a major market

  • News Corp
  • Sky
Media, TV 3 August 2010
BT Q1 2010/11 results: strong cost control, but impact of government spending review remains uncertain

BT continues to improve its performance through cost reduction, with Global Services continuing to lead the way

Although a strike appears to have been averted, the next few quarters will be tougher due to increased EBITDA ‘re-investment’

Management is sticking to guidance which is, like the government, conservative in nature. Nonetheless, in our view, the forthcoming government spending review could still prove challenging

  • BT
Telecoms, Fixed Line 2 August 2010
TTG Q1 2010/11 trading update: holding firm

TalkTalk Group (TTG) reported revenue growth for the quarter to June was flattered by the Tiscali acquisition, but broadband net additions were reasonable given the protracted integration process and temporary absence from TV schedules of the X-Factor

An MVNO could prove challenging in terms of generating a significant direct impact on financial performance, but might help defend against other low price players, notably O2 and Tesco

Increasing demand for pay-TV, stimulated by Sky, VMed and now BT Retail, could potentially leave TTG exposed. Our current view is that there remains sufficient demand for ‘extended’ free-to-air TV for this not to be a major issue

  • TalkTalk
Telecoms, Fixed Line 1 August 2010

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