CPW saw growing revenue but falling volume in its core European handset retail business, as contract handset growth outperformed prepay

We believe that this is in line with a slightly subdued market, with consumer confidence quite weak across a number of European countries

CPW’s US business did much better, growing at 30%, and it is this strength that leaves us confident in the group’s ability to have a strong full year

UK consumer magazines continue to be squeezed by every consumption, technology and market trend, yet we believe the sector, while rebasing in scale, continues to offer unique attributes as a media experience for consumers and marketers

Circulations are falling, and in the context of digital media usage leading titles in each magazine genre are not just typically gaining market share, but emerging as the only ‘must have’ brand for consumers and advertisers

Publishers with multiple titles in mid-table positions may be able to draw short-term margin from some of them, but long-term investment plays increasingly need to be at the top of the pile

FT has put majority stakes in Orange Sport and Orange Cinéma Séries on the block, and claims to have held discussions with News Corp. We think it unlikely that an investor would be interested in entering the French pay-TV market, dominated by Vivendi’s Canal+

We believe FT could find a buyer for Orange Sport in Disney’s ESPN, which could prove viable if a cross-retailing deal is reached with Canal+. A Eurosport merger is another option. Orange Cinéma Séries could be viable under a new owner, if it widens it distribution to other platforms

Now officially on the way out of the pay-TV production business, a welcome decision in our view, Orange can focus on improving the consumer value of the basic TV offering on the triple play marketplace

There were approximately 18.7 million fixed broadband lines in the UK at the end of March 2010 including those used by small and medium enterprises (SMEs)

Year-on-year subscriber growth in Q1 increased for the first time since the early years of the industry, although the increase, from 5.7% to 5.9% was very slight. In our view it should be interpreted as a stabilisation

Looking at net additions in the quarter, Q1 saw the sequential growth drop back to a more normal level of 9% after the 54% spike in the previous quarter, but year-on-year growth, at 21%, was the first really substantial increase since Q3 2005, when market growth was coming to the end of its exponential phase

Subject to BBC Trust approval, Canvas looks almost certain to launch in spring 2011 after the OFT decided that it did not have the jurisdiction to review Canvas under the merger provisions of the Enterprise Act 2002. The OFT decision does not rule out complaints on other grounds, but the chances of persuading the regulators look very small

The launch of Canvas promises to strengthen significantly the free-to-air digital terrestrial platform, otherwise very limited compared with satellite and cable platforms in terms of bandwidth, but mass adoption poses numerous challenges and it is open to question whether Canvas will ever extend to more than half the DTT base

In the long term, it is hard not to see Canvas as an interim step in the growing convergence between the TV screen and the internet, raising the question of how successfully its PSB TV-centric approach can adapt to the coming challenges of the full blown digital age

This report updates our coverage of the commercial radio sector. In Q1 2010, RAJAR data showed that the average number of hours listened per listener and the total number of hours listened, across both the commercial sector and the BBC, fell by 2.7% and 1.2% respectively compared to Q1 2009. This continues the long term trend of gradual consumption decline we have highlighted in the past. Another consistent trend is the relative robustness of listening to BBC radio, whilst the brunt of the decline is borne by the commercial sector

Whilst BBC radio is funded by the licence fee, the commercial sector relies on advertising, which was severely impacted by the recession in 2008-09, on top of the structural shift of advertising to the internet. Oversupply of radio inventory continues to cause downward pressure on ad rates. As the UK economy exited recession in Q4 2009, commercial revenues rose 6.3% over Q4 2008, after six consecutive quarters of revenue decline. Q1 2010 is expected to come in at approximately 7-8%, with more modest positive growth in Q2

Public sector advertising, which includes procurement by the Central Office of Information (COI), has proved to be a significant source of income for radio (18.9% of revenues in 2009, COI itself accounting for 11.5%). On 24 May George Osborne announced that, with the exception of previously committed and “essential” campaigns, further COI advertising will be put on hold until March 2011. Based on this understanding about COI spend, which will translate to a small negative impact in H2 2010, we expect H2 2010 to be flat. Overall, we forecast small, positive annual growth of commercial segment revenues of 2.5% for 2010

Whilst income is being compressed, the cost of serving dual analogue and digital transmission remains a strain. Ofcom’s ongoing deregulation will have a small positive impact on costs. However, further station closures are entirely possible, especially if COI spend continues to be squeezed

TTG’s indicative full year financial results were solid, but were flattered by the acquisition of Tiscali UK in July 2009

Subscriber growth at TalkTalk is exceptionally strong thanks to effective marketing and a strong proposition, if somewhat at the expense of the acquired businesses

Guidance for the new financial year looks undemanding given additional uplift from Tiscali UK; further underlying progress will depend crucially on continuing strong growth at TalkTalk and old fashioned operating leverage based on a single set of platforms, rather than new developments such as high speed broadband or TV

CPW grew its core European mobile handset distribution business in underlying like-for-like revenue terms by 3% in the March quarter, and its profits grew by 18% in the 2009/10 year, although connection volumes and actual revenue fell during the quarter

Growth is improving with the recovery, but not dramatically, as its strong competitive performance during the recession is unwinding to some extent. Nonetheless, 2010/11 should see continued improvement, with handset trends still generally going in CPW’s direction

The company is currently more than covering the start-up losses at its ‘big box’ consumer electronics business in the UK through steady growth at CPW Europe and dramatic growth in the US, and should continue to do so in 2010/11. However, thereafter there is far more uncertainty, as the big box business will have to start trading well to prevent accelerating losses, and we have no visibility over its prospects as yet

A hung Parliament now appears the most likely outcome of the UK general election on 6 May, giving the Liberal Democrats influence, in terms of votes and seats, over the next government

Because the Lib Dems are ideologically closer to Labour than to the Conservatives, we anticipate their influence will favour the policy and regulatory status quo in media and telecommunications in relation to the proposals made by the Conservatives

This influence would be strongest in a coalition of Labour and the Liberal Democrats, but also would persist in a Conservative minority government, reducing the likelihood of a new legislative framework for media as proposed by the Conservatives

The outlook for ad-supported UK media businesses is brighter in the short term than in the medium term, irrespective of who wins the election, since fiscal tightening is inevitable early in the next parliamentWe expect the Conservatives, should they win, to favour commercial media (Sky, ITV) over the BBC in general and in particular in the upcoming negotiations on the licence fee settlement post 2013Super-fast broadband networks enjoy cross-party support, but Labour’s 50 pence landline tax was blocked by the Conservatives, who prefer to use a small portion of the BBC licence fee