EE reported improved mobile service revenue growth in Q1 but it is still shrinking at -1.7%; a disappointing performance now that all of its competitors have moved back into growth

The main causes of its underperformance appear to be the impact of the gradual retirement of the Orange and T-Mobile brands, and the loss of sales from Phones 4U which closed last year, with differentiation through superior 4G not (yet) able to make up for these factors

EE’s fixed line business was the star of the quarter with 50k customers added and 15% revenue growth. It seems to have cracked the formula of cross-selling broadband into its mobile base, a useful skill in the current market context

European mobile service revenue growth improved for a fourth consecutive quarter jumping 1.7ppts to -2.7%, the slowest rate of decline in over three years. Easing declines in France, Italy and Spain largely drove the improvement but a full recovery in these markets is still some way away given that all of their growth rates remain below -5%. The UK, and now Germany, are experiencing positive mobile service revenue growth although their improvements in the quarter were more modest

Three announced consolidation transactions have yet to be approved by the regulators although none of these deals are likely to offer much market repair, being either of the wrong kind of deal or being in markets that are growing. Consolidation targets remain in France, Italy and Spain which offer clearer routes to market recovery as seen in Germany where the consolidation of O2/E-Plus has already led to positive rhetoric on medium term market growth prospects

Network investment continues with 4G roll-outs at or over 70% population coverage in all markets and targets being accelerated, supporting long term optimism in the sector. Strong data traffic growth coupled with the growing importance of data to service revenue give a clear focus for operators on value-adding network quality investment, although the impact of pricing competition in some markets could weigh on the ability to capitalise on these trends in the medium term

The UK residential communications sector continues to be in rude health, with revenue growth in Q4 accelerating by 1ppt to 5.7%, the strongest it has been for years, with all of the operators enjoying an improvement. Volumes were strong, and ARPU even stronger, with the latter driving most of the revenue growth progress, driven by firm pricing and high speed broadband adoption

Growing revenues and profits in an industry tends to encourage both investment and competition, and this is certainly the case in the fixed telecoms market, as BT announced plans for higher speed services using G.fast and Virgin Media announced a 4 million premises network expansion. The timings suggest that Virgin Media will keep its edge; given historic trends and its network capabilities we expect it to be offering superior speeds to G.fast by the time G.fast hits the mass market

In competitive terms the biggest short term threat is EE, which is growing its broadband base at 15%, and may accelerate further in 2015. Its success appear to stem not so much from the raw appeal of ‘quad play’ bundling as improved performance in the mechanics of cross-selling from physical shops. EE itself may be less of a threat if its planned merger with BT is completed, but Vodafone is launching broadband services in the spring, and H3G/O2 may yet be encouraged into the market

Customer movement between operators shows susceptibility to dynamism in branding; O2 are picking up the majority of EE churners as customers move to the new “cool brand” while EE pull in Vodafone churners tempted by the new “best network”. O2 have the lowest churn though the lion’s share move to Vodafone and H3G churners are more evenly picked up by the other three

Customer perceptions of own operator network quality are high among the big 3 with no less than 75% of customers reporting theirs is the best network. O2 is the best regarded while H3G is the least best regarded highlighting a stark contrast between the (prospective) merging parties

Consumers report little interest in quad play and indeed operators in the both fixed and mobile markets have publicly confirmed the same from other market research. However the arrival of converged players in the form of a merged BT/EE or Vodafone re-entering the fixed space will see operators seeking to change this

For the second year running, 2014 has seen a steep year-on-year decline in total daily average viewing time, which fell by almost 5%, and was again, as in 2013, greatest among younger age demos, especially among children aged 4-15 where the decline reached double figures

Connectivity and the rapidly growing population of smartphones and tablets appear the main, though not the only, causes of a decline that appears general across the main PSB, PSB family and non-PSB channel groups. The decline nevertheless varies by channel genre, with the more youth oriented, such as Children and Music, feeling the connectivity squeeze the most

Whilst the great majority of non-PSB channels are only available on the pay-TV platforms, the DTT platform provides a significant audience and advertising contribution (ballpark estimate of £150-200 million per annum) to the relatively small group of leading free-to-air non-PSB channels, which are also less constrained in developing their online initiatives than the mixed advertising/subscription non-PSB channels on the pay-TV platforms

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)

The international business (CWI) has been hit by a sharp downturn in tourism, but performance at the UK-based business (Worldwide) remains on course, despite declining revenue

The initial announcement of an intention to demerge Worldwide from CWI will be followed by more details by the end of November

With little prospect of growth at International in the second half, and a successful turnaround phase at Worldwide beginning to draw to a natural conclusion, the demerger may not have the impact some had hoped

The UK and international businesses (now ‘Worldwide’ and ‘CWI’) are both continuing to perform well, despite weak revenue growth, thanks to strong cost control. Worldwide is now generating cash organically for the first time in memory

Performance at the newly-acquired Thus has been slightly below expectations, mostly due to increased customer churn. The sale of the ‘mid-market’ part of the business is a possibility

The market was disappointed by guidance for the new financial year. In our view it is both acceptable and achievable

The final Ofcom statement on the future of PSB advocates fixing the commercial PSB crisis by designating Channel 4 as the core alternative provider of public service programming to the BBC, and freeing up ITV and Five commercially by means of considerably lightened PSB obligations

The fundamental issue of the Channel 4 (or any other) solution is funding the new commercial PSB model. Eyes are now being set on a Channel 4 partnership with BBC Worldwide, centred on its UK assets as the marriage made in heaven

Another major recommendation of the Ofcom PSB proposal is the abolition of the national Channel 3 breakfast time licence, currently held by GMTV, which is running a viable business with its own sales force. This recommendation appears at odds with Ofcom’s commitment to plurality in news provision and its statutory duties to encourage competition in the communications industries