A hung Parliament now appears the most likely outcome of the UK general election on 6 May, giving the Liberal Democrats influence, in terms of votes and seats, over the next government

Because the Lib Dems are ideologically closer to Labour than to the Conservatives, we anticipate their influence will favour the policy and regulatory status quo in media and telecommunications in relation to the proposals made by the Conservatives

This influence would be strongest in a coalition of Labour and the Liberal Democrats, but also would persist in a Conservative minority government, reducing the likelihood of a new legislative framework for media as proposed by the Conservatives

The outlook for ad-supported UK media businesses is brighter in the short term than in the medium term, irrespective of who wins the election, since fiscal tightening is inevitable early in the next parliamentWe expect the Conservatives, should they win, to favour commercial media (Sky, ITV) over the BBC in general and in particular in the upcoming negotiations on the licence fee settlement post 2013Super-fast broadband networks enjoy cross-party support, but Labour’s 50 pence landline tax was blocked by the Conservatives, who prefer to use a small portion of the BBC licence fee

H3G Group organic service revenue growth was just 0.2% in Europe in 2009, with EBITDA now roughly breakeven and cashflow remaining firmly stuck in negative territory, and lower subscriber net adds driving most of the EBITDA improvement

H3G UK is outperforming the UK market, but only just, and remains loss-making. Its prospects for 2011 are good, with its network share roll-out likely to have been completed and lower termination rates likely to be implemented, and the Orange/T-Mobile merger could provide significant long term benefits, but it will still require significant investment to gain scale

H3G Australia is now a sound business after the merger with Vodafone Australia, but all of the European businesses are sub-scale, with significant further investment and/or M&A activity required to reach sustainable profitability

Hulu’s postponed UK launch, and the inability of SeeSaw and MSN to get carriage deals with the BBC and ITV, underscore the difficulty for internet TV aggregators of acquiring mainstream content

In-stream video advertising is nascent – we estimate it was worth just over 1% of UK TV ad spend last year – giving major channel operators/rights holders little incentive to syndicate their programming to online services

The future for ad-funded internet aggregators continues to look highly challenging, aside from YouTube, due to its audience scale and Google’s deep pockets

Trinity Mirror (TM) has acquired Guardian Media Group’s (GMG) regional media business for £7.4 million cash, also releasing GMG from a £37.4 million liability print contract

The deal is the first significant consolidation play since the cyclical downturn that started in 2008 helped reduce local newspaper advertising by about 35% or £1 billion. TM is understood to have beaten private equity to the deal, signalling that consolidation activity in local media may be starting to warm up

While the price tag appears small for a business that generated £94.5 million in FY 2009, its operating profit had fallen to £0.5 million, and TM should be able to realise measurable local synergies and cost savings