In this presentation we show our analysis of trends in UK broadband and telephony to March 2011, based on the published results of the major service providers. This quarter’s edition includes an updated outlook for broadband market subscribers and market shares to 2015.

Highlights in the quarter included broadband market growth moving back into line with consumer confidence, continuing strong broadband subscriber growth at both BT Retail and Sky, greater stability in the proportion of the market served by BT Wholesale and a significant price increase at O2. We project that, by the end of 2015, about 21 million households will subscribe to fixed broadband, and that Sky’s market share will exceed that of TalkTalk Group to rival that of Virgin Media.

The most dramatic observation from our survey is the surge in mobile data service usage: 48% of UK mobile users now use a data service at least once a month, up from just 30% last year. This increase is substantially all from the increased number of internet-centric smartphones (i.e. iPhone, BlackBerry and Android handsets) in the base

The internet-centric smartphones themselves had substantially no reduction in data usage penetration rates (all at 90%+) despite their volumes surging, with users from all age and socio-economic groups using them for data services. Data service usage penetration on a daily basis actually increased for Android and BlackBerry handsets

This supports our view that it is the nature of these handsets in terms of their ease-of-use for data services that is driving overall usage, and that overall data usage will continue to surge as they continue to diffuse through the subscriber base

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). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete.

VMed’s Q1 results were respectable, helped by strong revenue growth at Virgin Media Business

However, growth in volume, ARPU and OCF, while still positive, is trending downwards, and we retain our expectation of more limited progress in 2011 compared to 2010

VMed’s strategy is coherent; the issue is the pace at which initiatives such as high speed broadband, service convergence and footprint expansion can be converted into cash flow growth

Fujitsu UK’s announcement of plans to provide wholesale fibre-to-the-premise (FTTP) to five million premises potentially poses a significant threat to BT

However, deployment is contingent on the project attracting at least 60% of the available state funding and significant improvement by Openreach of its terms for Physical Infrastructure Access (PIA)

In addition, ISPs using Fujitsu’s network may find it difficult to attract retail market share from BT based on a high speed broadband proposition. However, should Fujitsu deploy at scale, the project could prove positive for Virgin Media

Some of Ofcom’s proposed wholesale charge controls for Openreach fixed access services sound stringent

However, we estimate that the overall financial impact on BT and other players is likely to be very small

We do not expect the proposals to result in changes to many retail prices, but they should tilt the playing field slightly in favour of BT Retail’s competitors, particularly smaller providers of broadband and business services

European mobile revenue growth improved very slightly in Q4 2010, up by 0.1ppt in reported and 0.2ppts in underlying terms, but remained negative

While the improvement is welcome, growth remains very subdued compared to pre-recession levels, especially in Italy and Spain, which continue to lag the growth of the UK, Germany and France

The outlook for mobile revenue growth is bleak, with severe MTR cuts in Germany and the UK likely to drive growth down again over the next six months

In this short presentation we show our analysis of trends in UK broadband and telephony to December 2010, based on the published results of the major service providers. We include our own estimates where reported data is incomplete. This quarter’s edition includes a look at Ofcom’s recent research into broadband speeds and its response to the Advertising Standards Authority’s review of broadband advertising.

VMed’s Q4 results were strong financially, although this was partly due to an exceptionally sharp drop in capex; cable volume growth continued to weaken in the face of strong competition from BT Retail and BSkyB

VMed’s results for the past seven quarters have benefited heavily from price increases, which are unlikely to have as great an impact in 2011

Management is developing a range of strong initiatives, including TiVo, 30 and 100 Mbit/s broadband, and fixed-mobile service convergence, but the financial benefits are likely to be felt in 2012 and beyond rather than in 2011. A revamped Virgin Media Business should have a more immediate impact, but we expect group performance in 2011 to be more modest