Fixed line revenue growth continued to decline excluding the impact of Tiscali UK, but at a manageable rate, and profitability continued to improve strongly. TalkTalk Group is performing well in the run-up to demerger, and management is sounding very confident. But there are some clouds on the horizon, not least the relaunch of Tesco Telecom

Sky+ HD is now manifestly the centre point of a three-pronged operational strategy that focuses on driving customer growth, selling more products into the customer base and seeking efficiencies in fixed costs

Sky 3D, due for residential launch in H2 2010, fits in well with the core Sky+ HD proposition and the satellite operator looks well placed to combat growing retail competition from other platforms, assuming Ofcom implements its wholesale pay-TV proposals for Sky premium subscription films and sports some time in spring 2010

Annual market growth is dropping in line with our predictions over the past two years, despite some significant quarterly blips.We continue to project growth in 2009 to be significant, but much lower than in the past, with net additions of 1 million

We expect annual net additions in 2010 to drop by another 20% to 800,000 as the market becomes ever more saturated

We project 19.8 million broadband households by 2014 and have slightly increased our projections from 2010 to take into account the likely impact of higher growth in the number of households as recently predicted by the Office for National Statistics (ONS)

BT’s Q2 results, and improved guidance for the year to March 2010 provided further encouraging evidence of the new management team’s ability to take cost out of the business

However, the group is in a phase of revenue decline, primarily due to recession, but also strong competition

We continue to view limited deployment of next generation access as a worthwhile defensive move, but remain sceptical regarding the potential for uplift to shareholder value

Three years into its pay-TV investigation, we expect Ofcom to impose a wholesale must-offer obligation with regulated prices on the Sky premium films and sports channels in its final statement scheduled for Q1 2010

The WMO could take effect by the middle of 2010. It appears unlikely that Sky will be granted a stay of implementation whilst its appeals against the lawfulness and substance of the WMO remedy are being heard

Assuming the WMO proceeds, its impact on the pay-TV market is likely to be small in the first three to five years, but could become significant in the long-term; the core issue throughout being the rate-card prices set by the regulator, Ofcom

This report on the French broadband market examines growth trends in 2009 and forecasts to 2012, updates our previous assessments of the commercial significance of IPTV in the triple play (a bundle of broadband, telephony and TV), and details the state of fibre-to-the-home (FTTH) deployment

Shrugging off the recession (milder and shorter than in the UK), the French broadband market is set to reach 19.6 million connections by the end of 2009, up 1.9 million on 2008 – only 12% less than the level of net adds of 2008. With 2009 better than we expected, we now anticipate a sharper slowdown in net adds in 2010, with 1.4 million net adds projected. We still expect the total to reach 22.8 million connections by 2012 (70% household penetration)

Vodafone Europe’s service revenue growth declined again in the September quarter to -4.6%, but on an underlying basis it improved, and volume growth also improved, suggesting that improving economic fundamentals are starting to feed through

Margins again fell, with the net benefit of the cost reduction program a long way from compensating for revenue declines, but overhead costs are at least dropping in absolute terms

We are optimistic that revenue growth can continue recovering in Europe, implying a still-depressed 2009/10 but a much better 2010/11, with positive revenue growth in 2010/11 a real possibility, and that the company could stabilise margins if it sticks to cost reduction plans, and resists the temptation to ‘reinvest’ in ‘strategic’ initiatives

The international business (CWI) has been hit by a sharp downturn in tourism, but performance at the UK-based business (Worldwide) remains on course, despite declining revenue

The initial announcement of an intention to demerge Worldwide from CWI will be followed by more details by the end of November

With little prospect of growth at International in the second half, and a successful turnaround phase at Worldwide beginning to draw to a natural conclusion, the demerger may not have the impact some had hoped

Iliad is the only candidate in the rerun of the French 4th 3G Licence tender and we believe its bid will be successful

Free Mobile could launch by the autumn of 2011 under a ‘low cost’ model

We remain doubtful on the venture’s economic prospects – Iliad appears to underestimate the network and subscriber acquisition costs required to build a mobile operator of profitable scale

VMed’s Q3 results were strong, with the impact of the May price increases feeding through almost directly into growth in revenue and cash flow. Cable volume performance was solid, given difficult market conditions and the focus on higher value customers

VMed’s plans for HD are becoming increasingly important. In this regard, the outcome of Ofcom’s pay-TV investigation could prove crucial

The cost reduction programme is delivering ahead of expectations, and we remain optimistic that revenue growth will continue, in combination with reductions in operating costs, to generate further significant growth in cash flow

Latest fiscal Q1 2010 results show continuation of the strong subscriber and revenue growth trends, but as Sky forges ahead of its rival pay-TV operators so attention is turning to competition issues

It is still unclear whether Ofcom will succeed in introducing a wholesale ‘must offer’ remedy with regulated pricing for Sky’s premium subscription films and sports channels; a proposal that Sky vehemently contests but, if put into place during 2010, this could have a significant influence over the longer term structure of the UK pay-TV market

Results for the telecoms business continued to improve, albeit on a more modest scale than in Q4 2009, with the cost base beginning to show signs of greater stability