National newspaper advertising revenues should be up 6-8% year-on-year in 2010, with ‘popular’ titles in particular attracting display ads from national retailer brands

Local and regional press advertising revenues will fall by about 6% year-on-year, mainly on the continued decline of recruitment classifieds

Publishers are exploring more efficient printing, new digital models, and staking a claim on e-commerce

The digital transition is almost complete in France, five years after the launch of DTT. After undergoing an audience share decline, TF1's share is stabilising. In contrast, M6 improved its audience share during the transition. Both groups are likely to remain dominant in the FTA TV market, thanks to the partial withdrawal of public TV from advertising sales

The advertising recovery in 2010 was strong. Thanks to its diversification, M6 is less exposed to the cycle than TF1, which is rebounding more strongly. M6 is also structurally more profitable

Pay-TV platform growth has stalled, with subscription decline at Canal+ somewhat balanced by growth of low cost packages of IPTV providers. Canal+ will benefit from the withdrawal of Orange from premium TV and a new distribution deal with Orange. Combined with the roll out of new set-tops with PVRs, we are moderately optimistic on Canal+ prospects

CPW’s European handset business had a steady quarter, with growth dipping slightly on the previous quarter but still in line with full year guidance. Smartphone sales are surging, and CPW is orientating its business towards them, but their impact is not unambiguously positive in Europe

The US handset business continued to enjoy strong growth, with this side of their business benefitting strongly from smartphone growth, and this outperformance led the company to increase its full year EBIT guidance

The UK ‘big box’ roll-out is continuing, but no sales figures or indications have been given, and the full year operating loss guidance has been increased, eating up some (but not all) of the outperformance from the US. There appears to still be much experimentation involved at this stage, and even more uncertainty about the eventual success or failure of this new business

Vivendi is close to being in a cash position to buy out minority shareholdings in SFR and Canal+, shedding the image of a ‘conglomerate’ of partly owned and diverse assets, which has weighed on valuation Acquiring Vodafone’s 44% stake in SFR (now only a question of price) would allow Vivendi to rebrand itself as a telecoms story, serving France, with Maroc Télécom and mainly Brazil’s GVT supplying the upside To fully acquire Canal+, Vivendi’s offer will need to consider Lagardère’s option of floating its 20% stake. Owning 100% of Canal+ and SFR opens the narrative of a ‘French media/telecoms champion’ – which we find less credible

This report on Sky Italia and Sky Deutschland, News Corporation’s Continental Europe pay-TV assets, complements our coverage of BSkyB in the UK. We look at the market environment, including regulation and competition. The report also provides subscriber, revenue and earnings forecasts and SWOT analysis.

Ofcom’s decision not to investigate Project Canvas under the Competition Act removes one more regulatory obstacle to the launch of the broadband connected TV service with the brand name YouView

It looks increasingly as if the YouView launch will experience further delay, with autumn 2011 looking steadily more likely as disputes continue over the satisfactoriness of the technical specifications released by YouView for meeting manufacturer needs

Although backed by powerful broadcast and ISP interests, YouView faces stiff challenges to achieving widespread adoption among ‘Freeverse’ homes, with much depending on YouView’s ability both to deliver consistent product quality and to get its message across

The bounce back in H1 2010 advertising revenues (18% up over H1 2009), combined with extra cost savings, turned last year’s £72 million loss into this year’s £71 million profit; but could not disguise the need for transformation of a business overly dependent on an advertising model in long-term structural decline

The management’s five year goal of reducing the advertising revenue share (now 74%) to 50% echoes previous targets and the ability of the new team to deliver the goal will depend first and foremost on a revitalised ITV content production business

The agreement with Sky to launch HD versions of ITV2, ITV3 and ITV4 to Sky+ HD subscribers marks ITV’s first return to pay-TV since the collapse of the ITV Digital venture in 2002. This should not be seen as an about turn in ITV’s commitment to free-to-air broadcasting, but rather as a one off win-win opportunity for ITV and Sky

Strong FY 2010 adjusted revenue growth of 11% was powered by a 15% rise in subscription revenues, reflecting a mixture of solid subscriber growth in spite of the recession and burgeoning multi-product sales, with HD subscriptions registering a net increase of 1.63 million to end the year at 2.94 million and the telecoms sector breaking into operating profit in Q4

Firm cost control and streamlining of manufacturing and subscriber management expenses now make Sky’s 25% TV operating margin target look very achievable, but also leave it room to increase spend on programming substantially within the guidance limits of pegging increases to the rate of revenue growth

Overshadowing the results is News Corp’s proposal to purchase the 60.9% of BSkyB shares that it does not already own, subject to regulatory review. Assuming it goes ahead, News Corp will have a larger market share in the UK across media (TV, newspapers and books) than any other company in a major market

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

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