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

The stress on 21st Century Fox’s Italian pay-TV platform is easing as the worst recession of any G8 country is expected to end in 2014, and competitive pressure from Mediaset is weakening

Sky is sticking to a long term strategy, investing in the (unrivalled) quality of its offering and sustaining high recruitment costs. The subscriber base seems to have levelled off, revenues are stable, but profits have collapsed. Management plans cost cuts to raise profitability by 2016

The upcoming auction for the 2015-18 football rights could see Sky gaining more exclusivity at a higher cost, which it would have to recoup mostly by rising prices. The key potential upside resides in an Italian economic upturn – which is only conceivable in a few years