UK broadband subscriber growth continued to decline in Q4 2008 year-on-year. We expect declining growth throughout 2009, with the growth rate remaining positive, but in single figures
We expect VMed to use the upgrading of its 2 Mbit/s broadband base to 10 Mbit/s as the basis for a de facto price increase
The resulting increase in revenue could be substantial, although growth in subsequent years is likely to be reduced by lower gross additions
We continue to expect cash flow performance in 2009 to be resilient but unspectacular. However, the prospects for double digit growth in subsequent years to 2012 are beginning to look more promising
VMed’s Q4 results were mixed, with consumer cable revenue remaining stable but cable net adds dropping significantly and opex performance hit by rising energy costs
Group OCF was stable thanks to improvements at Virgin Mobile and Content
We expect performance to prove relatively resilient in 2009, though not to the extent of generating significant growth in underlying annual cash flow
The iPhone has inspired all the major Smartphone makers to launch touchscreen models, and dramatically improve the usability of their interfaces. The iPhone itself remains the most easily usable touchscreen handset in our view, although at the cost of speed of use and adaptability
Unfortunately, the characteristics that make these handsets easier to surf the internet with – large screens and/or QWERTY keyboards – are just the characteristics that are unlikely to trickle down into mass market handset models, meaning that the impact on mobile data usage is limited
We continue to believe that web browsing is unlikely to be popular on mass market handsets for the foreseeable future, but usage of web services can be popularised by more of a widget approach, which the cheap but smart INQ1 handset demonstrates well
Major record labels will allow iTunes to sell all its music stripped of digital rights management (DRM), removing a barrier to digital music buying, while iTunes will introduce in April the tiered pricing the industry wants
We expect no real bounce in demand, however, as Apple’s DRM was not a restriction for iTunes customers as most owned iPods, the dominant music player in a market which is almost fully matured – we expect few iPod customers to pay to upgrade their libraries to DRM-free
News of peace breaking out between iTunes and the recorded music industry was overshadowed by reports of the continued steep decline in CD volumes sold in the US market, down almost by one fifth in 2008 from 2007, with digital increases again failing to offset the decline
ITV has agreed to provide 7 day catch-up and archive content to Virgin Media’s TV customers. By closing the last major gap in its VOD offering, Virgin Media can better exploit VOD as a differentiator with Sky, thereby assisting customer retention
ITV also stands to gain from the circa £5-10 million per annum that it could receive for distribution of its catch-up content and the addition of 500 hours of top archive content to TV Choice, Virgin Media’s subscription VOD service. There appears no corresponding downside risk to ITV advertising revenues
The announcement highlights the future role of Kangaroo, the proposed BBC/ITV/Channel 4 joint venture, in supplying archive material to complete Virgin Media’s VOD line up, and the remedies the Competition Commission is considering to protect wholesale VOD customers