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.

Some of Ofcom’s proposed wholesale charge controls for Openreach fixed access services sound stringent

However, we estimate that the overall financial impact on BT and other players is likely to be very small

We do not expect the proposals to result in changes to many retail prices, but they should tilt the playing field slightly in favour of BT Retail’s competitors, particularly smaller providers of broadband and business services

H3G Europe improved its revenue growth and margins in 2010, albeit not by as much as its headline figures claimed. It is currently growing at 5% with EBIT at around breakeven

Given that its parent company is likely to want to keep EBIT positive, it is likely to be constrained on future investment in subscriber growth, limiting its potential going forward

The UK was particularly strong, with dramatically improved contract subscriber growth, and margins improving despite this, driven by the completion of the T-Mobile network share implementation helping margins and the smartphone revolution playing to the company’s 3G network strengths

Ofcom is proposing to design the 800MHz and 2.6GHz spectrum auctions to ensure that the UK mobile market remains at four players, through a complex set of rules largely designed to help H3G get the spectrum it needs to remain competitive

However, the sting in the tale is that Ofcom expects H3G to pay around £600m for this spectrum, which it may not want to do, and it is not clear what the backup plan would then be

We expect the general theme of regulators seeking to protect a fourth player to repeat across Europe and across regulatory areas, especially as the US market may consolidate towards three with AT&T’s proposed takeover of T-Mobile USA

European mobile revenue growth improved very slightly in Q4 2010, up by 0.1ppt in reported and 0.2ppts in underlying terms, but remained negative

While the improvement is welcome, growth remains very subdued compared to pre-recession levels, especially in Italy and Spain, which continue to lag the growth of the UK, Germany and France

The outlook for mobile revenue growth is bleak, with severe MTR cuts in Germany and the UK likely to drive growth down again over the next six months

Q1 2011 TV NAR (Net Advertising Revenue) has delivered strong year-on-year growth of about 8%, yet the monthly variations are large, with a predictably sharp decrease in March based on past year comparatives countered by a large Christmas-style upswing in the Easter and Royal Wedding month of April

After several years of decoupling total display and TV advertising trends from those in the broader economy due to negative structural causes, the underlying positive correlations are expected to reappear as the structural factors subdue

The general economic outlook suggests stable growth in TV NAR during 2011 of about 5%, remaining flat to marginally positive in real terms beyond 2011 as long as conditions of weak economic growth last, but with significant risks of a sudden sharp downturn in the short to medium term

BBCW is selling its portfolio of magazines. This is the first major disposal of the UK magazine marketplace since Emap sold its consumer magazines division to Bauer in December 2007, valuing the portfolio at 1.8x pro forma revenue, but we expect a lower valuation given the downgrading of the magazine marketplace

Our analysis of the portfolio suggests a mixed bag of relatively resilient adult-focused titles, while Radio Times is a significant cash cow with medium term potential from a more aggressive commercial owner. Our principal concern resides in the viability of the children’s magazine portfolio, where titles are tied to Cbeebies programming, with relatively short life cycles

Bauer is a probable favourite to buy the portfolio, assuming it is picked up by a trade buyer. A post-acquisition process of disposal of non-core assets could provide other trade players with the opportunity to scoop titles that fit well in their portfolios

European mobile revenue growth improved by 0.8ppts in Q3 to reach -0.3%, but all of this improvement and more was due to easing regulatory pressures, with underlying growth actually declining marginally

GDP growth continues to improve year-on-year, but in the current low confidence environment underlying mobile revenue growth is not (yet) responding. Smartphone sales are surging, but their net impact on revenue is hard to discern

Looking forward, the regulatory impact is likely to turn negative again for the next few quarters, so some underlying growth catch-up is required for revenue growth to stay at around zero

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

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