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

Vodafone Europe’s revenue growth was again weak, flat on the previous quarter in reported terms at -10%, but underlying revenue growth declined slightly, despite a strong recovery in GDP growth

There are some limited signs of recovery – improved contract net adds, sustained data volume growth, an end in sight to ARPU dilution – but realistically Vodafone’s admirable organic investment push will not reap rewards within the year

More near term interest is on M&A, with Vodafone shopping for fixed line operations, important in-market mobile consolidation regulatory decisions coming up, and interest in Vodafone itself possible after the Verizon deal closes later this month

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 X-Series is not quite as innovative as it was presented to be, given that T-Mobile’s Web ‘n’ Walk is very similar in concept (flat rate data tariffs, 3rd party Internet services) and has been available since June 2005

Vodafone’s revenue growth has improved, with core underlying growth rising both relative to the previous quarter and relative to its competitors

Vodafone UK’s new broadband product is not very competitively priced compared to the offers from Carphone Warehouse and Orange, costing £5-10 a month more than the nearest equivalent packages

In a fit of pique over increasing subsidies, Vodafone UK is dropping Carphone Warehouse (CPW) as a distributor, and moving exclusively to Phones4U with lower subsidy levels and volume guarantees, while Orange is reportedly also considering its position with CPW

Iliad is among the very few European altnets that have made unbundling a profitable business, despite France's highly contested market for broadband. This report examines Iliad's current positioning in this market, and the development of the media side of the triple play to grow ARPU and differentiate the brand

Vodafone is taking the first step in implementing its convergence strategy in the UK by buying broadband from BT Wholesale; while we believe the strategy is misguided, Vodafone’s approach is at least cautious 

The company is at least unlikely to be losing money on the product, and is perhaps just sensibly testing the water for positive consumer interest in a bundled package from Vodafone

We expect the water to be very cold - results from Orange, NTL and BT suggest continued very low consumer interest in fixed-mobile convergence, and we doubt that Vodafone will fare much better

H3G has extended its deadline for hitting EBITDA breakeven, with this now around 12 months later than its previous forecast, we believe due to management failing to understand the extent of its churn problem 

The Zune Marketplace is no match for the iTunes Store, with a smaller repertory of music and no video to supply the Zune, since Microsoft has announced it will soon sell video for the top-end Xbox 360, around which its ‘home-entertainment’ strategy is based

We figure the costs of switching to the Zune are low, but Microsoft will be lucky to sell 1 million Zunes in the Christmas quarter – if it does, revenue will rise by less than 1%, so the Zune is of limited interest, whether successful or not