European mobile service revenue growth was unchanged in Q4 on the previous quarter at -0.1%, tantalisingly close to growth but just held back by renewed mobile termination rate cuts in Germany

‘More-for-more’ tariff changes are becoming increasingly commonplace, as operators increase data bundle sizes to allow for volume demand growth, but nudge up pricing as partial compensation.  This has not yet translated into positive revenue growth across Europe as a whole, but increasingly looks like it will do, with a number of moves made in early 2017

The quarter saw completion of two M&A deals in Spain and Italy with MasMovil completing its acquisition of Yoigo, and H3G Wind completing their joint venture to form Wind Tre. While the former is unlikely to alter the market dynamics much, the latter, resulting in the entry of Iliad in Italy, has the potential to disrupt the pricing dynamic in that market, although ultimately it will be limited by Iliad’s initial MVNO economics and dearth of spectrum

UK mobile service revenue growth was -0.1% in Q4, a 0.6ppt improvement from the previous quarter. This was helped by some modest price firming, continued strong data growth, and some inflation in handset prices

EE was the strongest growing operator after being the weakest just 12 months ago, with its efforts to improve customer service, network performance and perceptions of network performance starting to pay off. H3G had a strong H2, with strong customer additions while not sacrificing ARPU, although it is still clearly taking steps to manage capacity demand. O2 had another solid performance with a modest improvement in service revenue growth, and Vodafone suffered from weak ARPU primarily due to pricing pressure in the business market

The outlook for market service revenue growth is fairly positive, with ARPU-enhancing pricing moves in evidence, supported by continuing strong data volume growth, and existing customer price increases due to take effect from Q2 2017

The temporary cool-off in hype around VR following a very buzzy 2016 is not reducing the flow of investment and talent into the industry, notably in video production utilising 360Video technology; setting the stage for the development of a truly new entertainment medium

Fully immersive interactive worlds will continue to be the mainstay of the video games industry, while video entertainment will exist in a multi-track environment, with some genres (news, documentaries , natural history) making 360Video mainstream well before long-form narrative-driven entertainment

2017 will still be a challenging year for consumer device VR roll-out and mass market adoption; Oculus, Google, and Sony continue to seed the market, providing large scale funding and equipment directly to developers and content producers

The past 14 months have seen a flurry of activity from the major UK television platforms, with all but one releasing a revamped version of their television offering; a neccessary reaction to the rise of VOD consumption and the threat this poses to traditional models

The result is 'connected' offerings, with the major players aiming to exploit the impact of this technology by seamlessly integrating on-demand capabilities, and in doing so mitigate the further shockwaves resulting from its emergence

No offering is likely to single-handedly alter the current subscriber landscape radically; with the pay platforms' each taking a unique—and to a degree—entrenched path that affirms its core consumer base, the greatest shifting of sands will likely come from changes in consumer trends or content quality

In the UK, traditional broadcast television's future appears threatened, as technological developments increasingly allow people to access video content on demand, whether on TV sets or other screens, or from traditional broadcasters or online services.

This report examines the extent to which timeshift viewing, by which we mean personal video recorder (PVR) playback and viewing to catch-up services, has bolstered linear TV.

The linear schedule is still very relevant for both consumers and advertisers, maintaining television’s status as an effective mass medium for building brands.

Based on the recent announcement by the French Professional Football League, we now expect Canal+ to be awarded the exclusive rights to broadcast Premier League events for the three seasons starting in 2004, for which it offered €480 million. (Rival TPS is challenging the League's approach to the Competition Commission, so the story may yet have an unexpected ending.) These payments will add to an already hefty calendar of payments for Canal+ under the 1999 contract, as a result of which Canal+ is likely to report no or low profits in FY 2002. This note details the aggressive cost cutting and revenue-raising measures that will be needed to achieve a modest level of profitability going forward. By FY 2005, when Canal+ becomes the sole purveyor of Premier League events and payments rise by 60%, the subscriber base will have to be 180,000 higher just to maintain profits at 2004 levels. This seems a challenging target given that Canal+ lost 70,000 subscribers this year. In short, we think that Canal+ may have won the battle for Premier League rights at the price of its profitability in the medium-term.

The November 12th bids for football rights are a nightmare for Canal+. Its operating margins and cash flow are under pressure, but failure to outbid TPS would mean a probable loss of perhaps 25% of its subscribers. This makes it likely, we think, that TPS will end up buying Canal+ from Vivendi, whoever wins the football rights, at a much lower price than the valuation of €3.5bn suggested recently by Morgan Stanley. Similarly, Vivendi may realise that it will be forced to sell the studio and the record business to Bronfman/Diller for less than current valuations. This potential devastating scenario perhaps explains why M. Fourtou is so keen to buy the rest of Cegetel, rather than selling out to Vodafone. Otherwise he would have little else left to manage. Or perhaps he is simply playing poker with Chris Gent, but running the risk that he ends up over paying. Vodafone cannot lose. It will either buy Cegetel now, or wait for it to fall into its hands when the bankers withdraw support for Vivendi.

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.

This note contains our latest update on Wanadoo, France's leading ISP and broadband service provider, following on from the report we issued in April. Wanadoo's Q1 2002 results are on target with the company's objectives for the year, despite sharp declines in portal and e-commerce revenues. The reason is Freeserve: a better deal from its network provider has raised ARPU to €5.7/month from €3.7/month in Q4 2001, and its PAYG customer base has expanded under continued marketing efforts.

This note discusses the likely obstacles to a successful launch of H3G UK, the most aggressive 3G new entrant in Europe. Our main points:

What does this mean for the media industry? Does the increasing power of media buyers mean further downward pressure on rate cards? We suspect that many of the effects have already been felt, particularly in the European and US TV businesses. In fact, we see a different issue emerging: the explosion in advertising inventory in the last few years, which has resulted in a worldwide glut. This has coincided with what we think may be a permanent reduction in the absolute number of advertisers. As a result, media buyers will continue to obtain better terms, whether in buying as part of a large group or not, but media price deflation may be a feature of the industry for many years to come.