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

Under regulatory pressure, France Télécom introduced in July 2006 a wholesale ‘naked’ DSL offer, under which broadband alone is supplied to the customer, as the lower frequency portion of the line used for PSTN telephony is deactivated

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

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

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

Orange’s new ‘free broadband’ offer brings savings of up to 60% for Orange UK customers who pay for broadband, and may appeal to a great many of them 

H3G’s 2005 results underperformed in 3 key areas: net subscriber additions were lower than promised, unit SACs were higher than promised and the group failed to reach EBITDA breakeven as promised 

2006 promises to be much worse due to a markedly bigger drop of about 11.5% in weighted share of commercial impacts in 2005, due to a number of factors (not just multichannel platform growth), and an anticipated decline of between 2% and 5% in total TV NAR in 2006. Taking a mid-value of -3.5% yields a drop in ITV plc NAR of around £180 million in 2006 

Sharp rise in EBITDA margin to 31% in 2005 as Free increases the share of unbundled (on-net) subscribers from 53% to 70% and retains tight control of marketing spend in the 'landgrab' for customers in France

The new management is teeing up the core UK business for a successful turnaround 

H3G’s new UK prepay tariff ‘WePay’, launched this week, offers the appealing gimmick of paying customers to receive phone calls. Less appealing is the 32% outbound calling price rise accompanying this change, and the estimated net impact of a 10-20% price rise.

However, we do not share NTL management’s optimism concerning the power of the ‘quadruple play’ – to date triple play has proved attractive to less than one third of cable households

Wanadoo's results for the first half of 2002, detailed in the attached note, show that the company is well on track to make its target of positive EBITDA as the loss margin has been cut by half on the Internet side of the business. The targeted revenue increase of 30% also looks plausible as Internet access revenues have done well in France due to migration of the subscriber base to higher priced broadband packages. Wanadoo hopes to have 1 million broadband subscribers by the end of the year, and is counting on the rollout of a new lower speed (128k) and lower-priced broadband package in mid-October. The French Competition Commission has also permitted the company to again market its broadband packs in FT's network of shops, cutting customer acquisition costs. Margins will improve in mid-October due to wholesale broadband price declines mandated by the regulator ART.

We think that the business is worth about €6bn, rather less than the €7-9bn that the investment banks are projecting. The difference arises because we think that they over-estimate the value of Universal’s music publishing business and expect a faster upturn in recorded music sales. But Universal is clearly strongest of the major music companies and we do expect the company’s margins to recover from the low levels seen this year.