France Télécom’s Orange TV premium strategy presents an interesting example of diversification into low cost ‘light’ pay-TV offers by an incumbent telecoms operator. Orange Sport and Orange Cinéma Séries are offered exclusively to Orange's 2.55 million TV subscribers, and five quarters after launch, adoption is 20%. This report draws several lessons on this type of venture for other incumbent operators

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)

At TalkTalk Group (TTG) net broadband additions at TalkTalk/AOL UK were unexpectedly strong, with low cannibalisation of Tiscali subscribers particularly good news

At the newly acquired Tiscali UK, the inevitable skeletons are starting to emerge from their cupboards. Management appears well prepared for the challenges, although it is early days

Carphone Warehouse’s distribution business grew connections at 2.1% during the quarter, another very creditable performance in a declining market, and it remains well positioned for the market recovery

T-Mobile and Orange’s plan to merge their UK businesses into a JV would create the UK’s largest mobile operator by some margin, and the enormous planned synergies of £545m per annum are actually quite unaggressive given the cost overlap

This achievement would be moderated by ‘integration leakage’, i.e. increased churn caused by customers leaving who were initially attracted by an aspect of one of the operators that disappears after integration, but the net result should still be positive for the JV

The remaining UK operators will benefit both from this churn and the reduction in competitive intensity associated with five players dropping to four. While all the operators may win, UK consumers might lose, with regulatory clearance thus still far from certain

This report looks at the UK broadband and telephony market up to Q2 2009. The key trend is that the steep reduction in UK broadband net additions continued in Q2 2009, to 176,100

The distribution business experienced modest growth in connections and revenue, easily outpacing European market handset growth of -15%, as the company continues to build market share

At TalkTalk Group (TTG) net broadband additions for the quarter were relatively strong, given likely market growth, probably due at least in part to reduced subscriber loss at AOL UK

In our view cut-price business broadband, rather than IPTV, offers the best prospect of profitable revenue growth in fixed line

The Digital Britain report’s proposed fixed line levy to fund rural NGA may well never become law, but if implemented, could end up being absorbed by the service providers, with a disproportionately negative impact on TalkTalk Group

The proposed Universal Service Commitment for broadband at 2 Mbit/s looks of limited attraction to potential bidders, but could increase the addressable market for retail broadband by about one million households

The proposed spectrum solution is a sensible compromise which ensures a roughly even playing field between mobile operators over the longer term. There is however still some way to go to implement it, with mid-2010 the best case timetable for the main auction of new spectrum, with this continued delay benefitting the incumbent mobile operators

Ofcom’s recent statement on LLU pricing has increased the amount which BT Openreach can charge unbundlers for full LLU over the next two years by about 8% overall

We estimate the changes will raise BT group EBITDA by less than 1% over the two years to March 2011

TalkTalk Group’s recent retail price increase is more than enough to offset the impact of Ofcom’s ruling on its annual EBITDA to March 2010, but the ruling could still take 5% off annual EBITDA to March 2011

Sky has yet to start mass migration to MPF and is more exposed to increases in the price of ancillary services, but less exposed to those for MPF rental. Sky’s annual residential telecoms EBITDA to March 2011 could be 10% lower, but this could be reduced if management takes the opportunity to increase the price of retail line rental

Carphone Warehouse’s distribution business had a slightly mixed year, with strong volumes and revenue mitigated by a sharp drop in margins and profit, with margin being sacrificed for market share

Given the very poor recession-hit market for handsets, Carphone Warehouse’s market share gains have been dramatic, so the sacrifice was at least not in vain

Although TalkTalk Group missed much of its guidance to March 2009, we now view new guidance as achievable, with the main risks related to the integration of Tiscali UK

Carphone Warehouse’s acquisition of Tiscali UK makes TalkTalk Group the second largest UK ISP and the largest in terms of residential broadband subscribers, just as market growth begins to stall

The company’s synergy target looks readily achievable, although integration challenges are significant and could make the acquired customer base difficult to stabilise

Nonetheless, TalkTalk Group now seems set to dominate the ‘value’ end of the UK residential telecoms market