While Sky’s overall revenues continue to rise, Q3’s growth was hampered by a significant fall in advertising revenue and to a lesser extent a slowdown in content sales

Underlying EBITDA growth was in the mid-teens. Next quarter, Sky will continue to benefit from lower Premier League rights costs versus last season, and profit appears on track to meet full year guidance

Q3 saw a rare decline in Sky’s total number of customers due to the conclusion of Game of Thrones. Sky clearly understands the value of unique content—recently extending its HBO deal. In our view, this was essential, since without a distribution deal for Disney+ (launching in the UK in March) Sky would lose Disney’s alluring content

New SVOD entrants are prioritising reach over revenue in the US with extensive ‘free’ offers, including Apple TV+ (to hardware buyers), Disney+ (to Verizon customers), HBO Max (to HBO subscribers) and Comcast’s Peacock (to basic cable homes)

This is the latest development in an unfolding global story of partnerships, continuing on from multiple Netflix and Amazon distribution deals with platforms, bringing benefits to both parties

In Europe, Sky faces price pressure, but it has secured its HBO partnership and can now talk to Disney from a position of strength

European mobile revenue trends are not yet improving. Italy is still flat-lining at almost -10%, Spain worsened again, and the UK deteriorated sharply. France is the only good news story

5G rollouts seem somewhat tentative. Indications from the UK that it is leading to a more competitive environment may discourage European operators from exacerbating already challenging markets

Prior year comparables for Southern Europe will be more flattering in the second half of this year although a doubling in the drag from intra EU calls will dampen any recovery

Ofcom’s recommendations to Government suggest updating EPG prominence legislation to cover connected TVs, and were warmly welcomed by the PSBs

Balancing various commercial, PSB and consumer interests will be key; determining what content qualifies for prominence will be a particularly thorny issue to resolve

Extending prominence to smart TVs and streaming sticks is critical, but implementation will be challenging

The combination of 5G, AI, IoT and big data were evangelised at MWC as generating massive scope for the transformation of multiple industries. 

That much is probably true, but it is the tech and consultancy companies who will likely receive the benefits, with connectivity revenue likely to be modest.

For the operators, 5G brings more capacity much needed for hungry smartphone users, and perhaps the opportunity to transform themselves into a leaner operating model.
 

European mobile revenue growth improved by 0.8ppts in Q3 to reach -0.3%, but all of this improvement and more was due to easing regulatory pressures, with underlying growth actually declining marginally

GDP growth continues to improve year-on-year, but in the current low confidence environment underlying mobile revenue growth is not (yet) responding. Smartphone sales are surging, but their net impact on revenue is hard to discern

Looking forward, the regulatory impact is likely to turn negative again for the next few quarters, so some underlying growth catch-up is required for revenue growth to stay at around zero

FT has put majority stakes in Orange Sport and Orange Cinéma Séries on the block, and claims to have held discussions with News Corp. We think it unlikely that an investor would be interested in entering the French pay-TV market, dominated by Vivendi’s Canal+

We believe FT could find a buyer for Orange Sport in Disney’s ESPN, which could prove viable if a cross-retailing deal is reached with Canal+. A Eurosport merger is another option. Orange Cinéma Séries could be viable under a new owner, if it widens it distribution to other platforms

Now officially on the way out of the pay-TV production business, a welcome decision in our view, Orange can focus on improving the consumer value of the basic TV offering on the triple play marketplace

FT’s domestic fixed line revenue decline accelerated in Q1 2010 as Orange’s broadband subscriber growth continued to disappoint, despite price cuts

FT’s higher service level has sustained premium pricing to date, but competitor altnets are also improving service – FT must run to stay still in a fast moving competitive marketplace

New promotions and/or price cuts for the triple play are required to stabilise Orange’s broadband market share, at the cost of further fixed line revenue decrease

Despite the recession, in 2009 the French broadband market added 1.8 million connections to reach 19.6 million, but we expect the deceleration in growth to persist in 2010

Orange’s leading position weakened further in Q4 2009, despite retail price cuts, and we expect a further decline in market share in 2010, impacting FT’s top-line

SFR was the star performer of 2009, although its Ebitda margin has improved slightly. Iliad remains the ‘best in class’ in terms of profitability, but must address high churn at Alice. Bouygues’ fixed line début was an impressive splash – at a cost

France Télécom’s forthcoming Chief Executive Officer, Stéphane Richard, is considering a radical shake up and potential U-turn of Orange’s TV ‘content’ strategy, initiated and driven by CEO Didier Lombard

Orange could withdraw entirely from supplying premium pay-TV channels (sports and film) and distribute only third party content, as has been the focus of other broadband suppliers

A retreat of Orange from TV content would enable a more active cooperation with the Canal+ Group, benefiting both partners, who have largely overlapping subscriber bases