C&W Worldwide’s performance over the six months to September was strong in terms of cash flow growth, although this was partly due to lower bad debt cost

Revenue decline is easing, but weakness in the mid-market business and reduced public sector spending are weighing on EBITDA

Looking ahead, this should improve somewhat, as the retail mid-market business recovers, but we expect growth in the core business to remain unexciting

The transaction size means that the OFT was obliged to examine BSkyB’s purchase of the VMtv channels. The transaction will probably be approved because of the small impact on Sky’s share of NAR (Net Advertising Revenue), which will rise from around 14% to 16%

The more pressing competition concern, which has attracted little attention, is Sky’s growing market power in the determination of carriage fee payments. Nevertheless the lack of companies actively prepared to complain to the OFT probably means that the transaction will go through without a murmur

Separately, the likely purchase of Five by Richard Desmond raises regulatory issues to do with the possible reduction of media ‘plurality’. The Sky/VMtv transaction and Channel 4’s taking over UKTV advertising sales also places Five Sales in a significantly weaker position, but any attempts to join with one of the big three sales groups (ITV, Channel 4 or Sky) may well be rejected by the competition regulators

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

C&W Worldwide’s first set of annual results since demerger were flattered by the inclusion of a full year of Thus

Nonetheless, management has continued to execute well despite difficult market conditions. Excellent cost control generated another year of strong underlying cash flow growth, albeit from a low base

Looking ahead there are grounds for continuing optimism, despite minimal guidance, although the rate of cash flow growth is set to drop, as cost reduction becomes progressively more challenging

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