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 planned merger of Vodafone and H3G in Australia has raised the question of what consolidation could occur in Europe, although a direct analogy is not appropriate because Vodafone is much weaker in Australia (#3 operator) than it is in the larger European countries, and so would face much more regulatory scrutiny in Europe

The only merger opportunities in the top five markets which would have a similar or lower theoretical impact on competition (and hence would theoretically be as easily approved) in the top five European countries would be T-Mobile and H3G in the UK, Wind and H3G in Italy, and any operator with Yoigo in Spain

There are massive cost savings to be had from in-market consolidation, with network, marketing and general administration costs all fully overlapping between operators. The non-merging players would also enjoy a period of less competitive intensity, which may last indefinitely

DMGT has sold a 75% stake in its London title, the Evening Standard, to Russian investor Alexander Lebedev for £15 million

The deal helps DMGT reduce its losses at the title, thought to be up to £20 million a year

While the sale also underlines the publisher’s commitment to reducing its reliance on volatile newspaper assets, we think it highly unlikely that the crown jewels – the Daily Mail and the Mail on Sunday – will come to market, although the story could be different for regional division Northcliffe

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

This note discusses the likely obstacles to a successful launch of H3G UK, the most aggressive 3G new entrant in Europe. Our main points:

What does this mean for the media industry? Does the increasing power of media buyers mean further downward pressure on rate cards? We suspect that many of the effects have already been felt, particularly in the European and US TV businesses. In fact, we see a different issue emerging: the explosion in advertising inventory in the last few years, which has resulted in a worldwide glut. This has coincided with what we think may be a permanent reduction in the absolute number of advertisers. As a result, media buyers will continue to obtain better terms, whether in buying as part of a large group or not, but media price deflation may be a feature of the industry for many years to come.