European mobile service revenue growth improved to -7.6% in Q1 2014 from -9.0% in the previous quarter, but most of the improvement came from a drop in the regulated MTR cut impact, with underlying growth only improving 0.2ppts

This is in spite of continued improvements in GDP growth and the highest level of consumer confidence in six years, confirming that the often-blamed economic conditions actually have been having little impact on the market, with competitive intensity the real cause

For this very reason, the approval by the EC of in-market mergers in Germany and Ireland has been warmly welcomed by the industry and investors. Our view is that market repair is dependent on a change of attitude of the incumbents towards long term investment and away from chasing short term subscriber share via price discounting; consolidation may well help with this, but it is neither necessary nor sufficient

UK mobile service revenue growth remained relatively healthy at -1.6% in Q1 2014, despite the absence of some favourable one-off factors in the previous quarter, consolidating the improvements seen in 2013. Underlying growth improved a touch to 0.3%, and given that the regulatory impact will drop out next quarter, reported revenue growth may well turn positive in Q2

Service revenue growth among the ‘big three’ has re-converged to around -3% to -4%, with Vodafone improving due to strong recent subscriber gains, and EE worsening slightly after a strong previous quarter. H3G’s growth worsened due to the previous quarter including some one-off benefits, but it remains very strong at 10%, with contract ARPU having stabilised

We expect the market environment to continue to be relatively benign, with the biggest disruptive threats Vodafone, which is currently competing on quality but may become more aggressive on price if it loses patience, and the fixed line operator MVNOs, who have significant distribution disadvantages but nonetheless can harm the market with discounted pricing

Amazon has entered the increasingly crowded digital entertainment TV device marketplace, one which could be strategically more important for the ecommerce giant than tech rivals Apple and Google

The frictionless integration of entertainment and ecommerce on TV represents a bigger consumer milestone than competitor services are offering, and Amazon’s brand has huge appeal, though at present it has less market traction for streaming than it does for other products

Content owners and broadcasters remain the real TV gatekeepers, with integration of TV and digital a service-level pipe dream for now, and so Amazon will likely have to accept being one of many, rather than the runaway winner as it is in books

European mobile service revenue growth again disappointed in Q4, dropping slightly from -8.9% to -9.1%, with underlying revenue growth dropping a little further from -6.0% to -6.3%, again reaching a record low

There had been hopes that improved GDP growth would drive a volume rebound, that price declines would start to annualise out, and that declining out-of-bundle usage would wane in its impact as this usage declined. In the event, ongoing price competition from smaller operators, MVNOs and quad play offerings, combined with surging use of OTT communications platforms, have dominated trends

In the medium term, the development of 4G and Vodafone’s Project Spring may bring some much needed network differentiation back to the market, allowing pricing power to return to the larger operators. However, it will be 2015-2016 before these factors come into play: in the short term, the main source of optimism is consolidation

UK mobile market service revenue growth improved on both a reported and underlying basis by 1.2ppts in Q4, a very welcome result after six consecutive quarters of declining underlying growth. Reported revenue is still in decline, at -1.6%, but it is the most modest decline among larger European countries, and compares to -5.0% in early 2013 EE is still leading in 4G coverage and performance, with around twice the coverage of its nearest rivals of basic 4G, double speed 4G now covering around 30% of the population, and plans for quadruple speed 4G to launch in 2014. Vodafone may prove the biggest network challenger going forward, with plans to increase capex as part of its Project Spring initiative Maintaining (or increasing) the current level of pricing is key to the industry returning to revenue growth in 2014. We would note that the smallest operator, H3G, is fairly unlikely to return to being a price discounter and put pressure on market prices, leaving the onus on the ‘big 3’ to stay disciplined, with a small but significant risk from SIM-only MVNO offers gaining more traction

Explosive growth in take-up of smartphones and tablets means that the effective size of the internet will increase by several multiples within the next few years. This transformation in scale comes with a major change in character and operating dynamics, creating new opportunities and revenue streams.

Twitter is unique amongst social apps: it gives new users a blank canvas in which they can (and must) create their own social network reflecting their own interests, hence building an ‘Interest Graph’, but onboarding new users remains a challenge.

Revenue at Twitter is now on a $600 million annual run-rate, scaling rapidly since the introduction of ‘native ads’, and seems set for further growth: the key question is whether it can achieve breakout user growth and mass market scale.

Ofcom has been instructed by the UK government to charge the mobile operators ‘full market value’ for the 2G spectrum they have been using for many years, despite there being no liquid market for the spectrum

Ofcom’s general approach to such an imponderable question is eminently sensible, but we disagree with the detail of their methodology on three key aspects, which makes the current proposed charges over three times too high in our view, effectively charging the industry a one-off tax of £4.5bn

The elevated fee levels are (perhaps) still affordable on their own, but coupled with other recent regulatory decisions the UK is in danger of being seen as a hostile regulatory environment, with negative consequences for future investment levels

H3G’s H1 2009 results showed some improvement on revenue growth and profitability on a very weak H2 2008, but it is still growing very slowly while barely EBITDA positive

The company has at last admitted that it will not be EBIT positive in 2009, and without some major changes we doubt it ever will be

For the UK business, there are a number of factors which may turn in its favour over the coming two years, allowing a more concerted marketing push to scale; for Italy and the smaller European operation, consolidation appears the only answer

Steep declines in CD sales in major recorded music markets continued in 2009 as we had forecast last year (Recorded Music and Music Publishing [2008-39])

Sales of recorded music continue to be decimated by physical and online piracy, plus the disintermediation of the album purchase by the digital purchase of ‘cherry-picked’ tracks

A further knock-on effect on CD sales is the reduction in retailers’ shelf space devoted to music, including as a result of the bankruptcies of major chains (Circuit City, Woolworths and Zavvi) – what we have called the ‘perfect storm’ for the CD

H3G group’s H2 2008 results showed a 5% decline in revenue on a constant currency basis and a return to strongly negative underlying EBITDA, with a margin of -17% in H2 2008 and -8% for the year as a whole, versus a margin of -1% in 2007

The UK performed reasonably well, with 11% revenue growth and improving margins, albeit still being cashflow negative, but Italy suffered from an 18% revenue decline and falling margins

The company’s target of positive EBIT in 2009 looks very unlikely without contributions from some major accounting adjustments, and the consolidation move in Australia looks likely to be repeated elsewhere