On 28 June, News Corporation split into two companies:
• 21st Century Fox will consist of the TV and entertainment assets: Cable Network Programming, Fox Filmed Entertainment, Television, Sky Italia, its 55% stake in Sky Deutschland and its 39% stake in BSkyB.
• New News Corp will consist of the publishing assets (Dow Jones, The Sun and Times/Sunday Times, the New York Post, News America Marketing Group, the Australian newspapers and Harper Collins), as well as Fox Sports Australia, the digital education business Amplify, a 61.6% stake in digital property business REA Group Limited and a 50% stake in Australian pay-TV operator Foxtel.

The split partly reflects industry trends. Over the last five years, a number of media conglomerates, including McGraw-Hill and Time Warner, have separated low growth, low multiple publishing assets from higher growth parts of the businesses in order to optimise valuations and management focus.

This report provides a breakdown of the divisions within the two new companies and analyses their growth prospects.

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. A copy of the underlying data in spreadsheet format is available to our subscription clients on reques

UK residential communications revenue growth was very strong in Q1 2013, rising to 4.6% from 2.1% in the previous quarter with most of the improvement driven by improved unit ARPU growth, which turned positive for the first time since early 2011

We expect unit volume growth to remain strong for the rest of the year, although ARPU growth is likely to moderate as overlapping price increases drop out, but it is still likely to be firmer than 2012 given the continued growth of high speed broadband (at least at BT and Virgin Media) and firm pricing in general

The outlook for market shares is less certain, with a number of difficult-to-predict factors coming into play, and while we do not expect dramatic changes in market share to result from any of these factors, they do create a risk of pushing operators to adopt more aggressive pricing strategies, which would disrupt an otherwise very healthy outlook

Q3 2013 results show a sound financial performance and strong growth in home communications, offset by low DTH net additions under a testing economic climate With a heavy emphasis on its own product initiatives in the broader connected screen and on demand space, the results release also shows Sky to be preparing for increasing competition from BT Vision and others in the IPTV space Although the rising competition promises extra programme and marketing costs and constraints on future product price increases, we expect limited impact on subscriber numbers, but also significant opportunities for incremental revenues

The completion of digital switchover has left an equilibrium between the digital satellite, cable and terrestrial platforms that is not expected to alter significantly by 2020

The main anticipated change over the forecast period is pay-TV subscription take-up where the 50/50 split between pay and free TV households is expected to rise steadily to 60/40, or even 67/33 if we include more individually-, as opposed to household-, based OTT online services such as Netflix, LoveFilm or Sky’s NOW TV

Most of the pay-TV subscription growth will occur at the lower end of the price range among BT Vision and TalkTalk customers, where the popularity and success of YouView will be critical in driving subscriber growth as TiVo has been and will be to Virgin Media holding its ground

Thanks to bargain prices, France’s Iliad managed to grab 5.2 million mobile subscribers in its first year and to increase its fixed broadband market share, while achieving close to cash flow breakeven at the Group level

In 2013 Free Mobile’s termination charges will fall back to parity with those of its competitors, dramatically shrinking its gross margin, and likely pushing mobile EBITDA firmly negative again

Raising prices would be the surest and quickest way back to breakeven for mobile EBITDA, otherwise the losses could continue for some years as gross margins improve but network costs rise as it builds out its network

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. A copy of the underlying data in spreadsheet format is available to our subscription clients on request

German unbundlers are in decline, unable to match cable for price or bandwidth, or to invest in new fibre networks. Vodafone, the second largest unbundler, must choose between consolidating and divesting Merging with Kabel Deutschland would deliver fixed line synergies – with high execution risks. But, based on the French and Spanish experiences, we doubt that a quad play strategy (synonymous with a price war) would generate value Mobile operators’ fixed line ventures are also in decline elsewhere in Europe, but cable is not always to blame, with pure play fixed line altnets also tending to outperform them, suggesting that genuine cross-selling advantages are marginal at best

Both subscriber and revenue growth in the UK home communications market perked up in Q4, with an easing of weather related supply-side constraints helping the former and firm pricing helping that latter. We expect both trends to continue into 2013

BT’s high speed broadband net adds accelerated in the quarter, as did that of the other DSL operators, albeit from a much lower base. High speed broadband is already a mass market phenomenon within the BT and Virgin Media subscriber bases, with it only a matter of time before this spreads further

Virgin Media had a record quarter, as it continues to benefit from being able to offer high broadband speeds at very competitive prices, with its planned acquisition by Liberty Global unlikely to change its strategy or performance going forward

BT Group’s acquisition of ESPN’s television business in the UK and Ireland marks an important step in cementing BT Sport’s position as the number two premium sports provider from the moment of launch.

The acquisition also raises the stakes, leaving BT with the strategic challenge of what distribution to opt for on the satellite and cable platforms to mitigate the high costs of BT Sport, but without overly sacrificing its USP for strengthening customer retention and building demand for high speed broadband on its own platform.

Crucial to BT’s success with BT Sport, yet obscured by the intense focus on the impending sports contest between BT and Sky, is how BT exploits YouView and multicast, all part of the bigger picture.