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

Overall UK mobile revenue growth slipped slightly in Q1, dropping 0.4ppts to -4.3%, although, taking into account the leap year effect, underlying growth likely improved a touch, marking the second quarter of growth being at least stable

EE announced 4G subscriber figures for the first time, reporting 318k subscribers at the end of the quarter, a very respectable figure given coverage, handset and price tier limitations. We expect this figure to grow strongly as coverage rolls out and 4G handset availability spreads, but the 4G revenue premium is still unlikely to be significant in 2013

The outlook for revenue growth in the rest of 2013 is fairly positive – the MTR impact will partly drop out from Q2 onwards, boosting reported revenue by over 2ppts, some mid-contract price increases will take effect, and pricing (so far) has remained reasonably stable

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

EE reported 4G subscriber numbers for the first time at the end of March; we estimate the 318k implies that over half of addressable joiners/upgraders are choosing to pay extra for 4G

The rest of EE’s results were more prosaic, with steady net adds and mobile service revenue growth declining slightly due to leap year and price increase timing effects

Vodafone and O2 are planning to launch 4G services in the summer, which may boost the market for all

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

UK mobile revenue growth was steady in Q4 at -3.9%, only a fractional drop from -3.8% in the previous quarter, with underlying growth unchanged, and contract subscriber growth and ARPU trends also unwavering, though the market solidity masked more dramatic developments in service offerings with the launch of the new EE umbrella brand and its 4G service

With the 4G spectrum auction now concluded, we can expect Vodafone and O2 to launch 4G services in the summer and H3G in the autumn; EE is looking to stay one step ahead with its recently announced speed doubling, and the intensity of marketing around 4G may even help its own service

While 4G will provide the talking points, actual financial results in 2013 will depend more on 3G base level pricing remaining firm; the signs so far are positive, with O2 having nudged up its core pricing, and mid-contract price increases scheduled by O2 and EE

In 2003, the Competition Commission imposed the CRR remedy as a condition of the proposed merger of Carlton and Granada to allay advertiser fears that the new ITV plc would use its market power to leverage higher airtime prices on ITV1 CRR made it possible to stop the ITV1 premium from rising and yet the ITV1 premium has risen almost without a blip since 2003. This note asks why The answer it seems has less to do with the negotiating muscle of ITV Sales than with the enduring USP and relative inelasticity of demand for ITV1 airtime and demand elasticity for the rest, while CRR has become increasingly irrelevant

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

Highlights of 2012, which saw double digit EBITA growth for the third year running, included ITV outperformance of the advertising market, strong organic growth in ITV Studios and a large increase in Online, Pay & Interactive revenues The outlook for 2013 suggests that EBITA could see double digit growth for the fourth year running. This is due to a number of factors that may include the bonus of extra NAR as BT launches BT Sport in the summer, arguably the biggest TV media event in recent years For the longer term, two key challenges in the Broadcast & Online sector are the retention of the ITV main channel audience share in an increasingly converged digital landscape and ITV’s ability to grow its online presence and drive new revenue streams

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