European mobile service revenue growth was down slightly to 0.3% in Q1, with improving trends in all countries other than France, which was down sharply due to the closure of the VAT loophole and intensifying competition

Iliad's launch in Italy was somewhat muted but its focus on straightforward tariffs is likely to hold considerable appeal there, with hidden charges there commonplace and being investigated by the antitrust authority

We expect greater polarisation between the North and South as the year progresses, the key question marks being Vodafone's strategy in Germany, Iliad's traction in Italy, and whether Iliad's revamp in France will lessen or worsen mobile competition there​

The UK continues to lead the EU5 in take-up and consumption of video-on-demand services, with close cultural alignment and a historic williness to pay for TV content making it a receptive home for US SVODs

Netflix dominates in most markets, benefiting from high-profile US imports and big-budget local productions. Local SVODs are struggling, with those operated by FTA broadcasters facing considerable challenges

Collaboration between local broadcasters and pay-TV platforms is essential if they are to hold at bay the threat of Netflix and co., with an increasingly favourable regulatory environment opening the door for unprecedented collaboration

Vodafone’s acquisition of Liberty's assets in Germany and Central Europe is likely to face regulatory scrutiny at the EU – and possibly also German – level. We view Vodafone’s expectation of closure in mid-2019 with no remedies as unlikely

The economics of the deal for Vodafone are slim, highly reliant on extracting sizeable synergies, and vulnerable to operational risk and potential remedies for regulatory approval, particularly in Germany

While we see some synergy benefit from combining two cable assets in Germany, we are unconvinced of meaningful benefits from combined fixed/mobile offerings

We interviewed the biggest hitters in the UK television production sector, asking them about the current issues affecting their industry, such as consolidation, Peak TV, and Nations and Regions quotas

Most pertinent, however, was the production sector’s relationship with the new buyers—Netflix, Amazon, Apple et al.—and how their approach to them differed for each one, as well as traditional broadcasters when pitching, negotiating deals or producing programmes

With views anonymised for candour, this report is an honest representation of an industry where quality and volume are both at an all-time high, despite the challenge of change brought about by these new players

Our latest forecasts predict traditional broadcasters will account for 72% of all video viewing in 2027, down from an estimated 82% in 2017, reflecting the continuing adoption of online video services across all UK age groups.

Additional viewing of online short-form content such as YouTube will keep pushing overall volumes higher, with SVOD services serving more as a substitution for linear TV.

The extent will be greater among younger age groups, for whom the shift has already been significant. We predict that in 10 years just 42% of 16-34s’ total viewing will be to conventional broadcasters versus 91% for the over-55s.

European mobile service revenue growth was unchanged this quarter at 0.3% growth, despite an easing of the European roaming cuts impact. This was due to intensified pricing competition in Italy and Spain, and EE’s unexpected poor performance in the UK. France and Germany were the only countries to improve their growth, but the improvement in France was largely due to a revenue-boosting VAT loophole

More-for-more price increases continued during the quarter, but their implementation is increasingly dependent on market conditions. Zero-rated streaming offers have continued to launch, but remain the exception rather than the rule.  Given the long implementation periods required for innovative new products at most operators, this may be temporary

Looking forward, overall the outlook looks finely balanced with boosts from the reduced MTR impact in Germany in Q1 2018, an easing in Spain’s retail pricing pressure and EU roaming impact annualising out by Q3 2018. This is countered by France closing its VAT loophole, steep MTR impact in Spain in Q1 2018 and continuing intense competition in Italy given Iliad’s impending launch

Linear TV's decline continued into 2018, with an overall drop of 3% across the first 12 weeks YOY. However, overall TV set usage remained flat at 4 hours/day, as time spent on unmatched activities—which includes Netflix, Amazon and YouTube—continues to rise.

Within the ever-shrinking pie of consolidated viewing to the TV set, share of viewing (SOV) to the ten largest channels remains broadly flat. Across the whole of 2017 and the start of 2018 the best performer has been ITV (main channel).

Several big-name digital channels are showing surprising signs of recent decline, including UKTV’s Drama and Viacom’s 5USA. It is too early to tell if these declines are a blip or a trend. However, they reflect stalling growth from the long tail of digital channels in aggregate. 

The Competition and Markets Authority (CMA) has provisionally found that Fox’s acquisition of Sky is against the public interest on media plurality grounds, although it could proceed with an appropriate remedy

The CMA found the merger would give the Murdoch Family Trust (MFT) and family members “too much influence over public opinion and the political agenda”

The CMA now enters the challenging remedies phase. Fox could offer an Editorial Board for Sky News pending finalisation of Disney-Fox (by 2019). Third parties seem likely to continue to seek to prohibit the merger

European mobile service revenue growth declined this quarter to 0.3%, likely due in large part to the increased negative impact from the European roaming surcharge cuts, which we estimate at around 0.5-1.0ppts for Europe as a whole

The continued growth was supported by continued ‘more-for-more’ price increases coupled with strong data volume growth. Partially countering this, there has been a step up in competition at the low end in some markets, often driven by the smaller operators

Looking forward, the negative EU roaming impact is likely to decline from next quarter given the end of the summer holiday season, and on balance we would expect positive price increase trends to overcome negative low end competitive trends, at least in the short term. This might change in 2018, as Iliad launches in Italy, and recently consolidated operators become more of a threat

Vodafone Europe’s revenue growth was very similar to the previous quarter at just under 1%, but this was impressive given the considerable drag of roaming cuts, with ‘more-for-more’ tariffs coupled with data volume growth driving underlying improvement

Flat-ish revenue was enough to send EBITDA surging 13%, or around 9% excluding some one-off distortions, driven by good cost control and falling handset costs, with this trend previously disguised by profitability issues in the UK

Looking forward, the question is whether Vodafone is doing enough to cope with future competitive threats. Competitive indicators (churn, NPS) have not improved; its new initiatives are quite mixed; and competitive intensity is likely to increase across a number of markets