Speculation has arisen about a possible acquisition by Sky of Mediaset Premium, the DTT competitor to Sky Italia. The unprofitable platform faces a 50% cost increase this summer due to the start of new football broadcast contracts

Getting rid of competition would allow Sky to raise prices, but also burden it with the new contracts. At best, if it kept the Premium subscribers on DTT to limit churn, Sky would have a small revenue upside

But the regulatory risk looks substantial, including mandated third-party access to the platform and wholesale of content. On balance, we believe that it would be better for Sky to let the situation play out

Customer movement between operators shows susceptibility to dynamism in branding; O2 are picking up the majority of EE churners as customers move to the new “cool brand” while EE pull in Vodafone churners tempted by the new “best network”. O2 have the lowest churn though the lion’s share move to Vodafone and H3G churners are more evenly picked up by the other three

Customer perceptions of own operator network quality are high among the big 3 with no less than 75% of customers reporting theirs is the best network. O2 is the best regarded while H3G is the least best regarded highlighting a stark contrast between the (prospective) merging parties

Consumers report little interest in quad play and indeed operators in the both fixed and mobile markets have publicly confirmed the same from other market research. However the arrival of converged players in the form of a merged BT/EE or Vodafone re-entering the fixed space will see operators seeking to change this

The posited deal merging H3G and O2 would create a new largest UK mobile operator with 40% market share, with massive synergy benefits available from cutting overlapping network and operations costs

Regulatory hurdles would be very significant, and the remedies required may well counteract the benefits of reduced network operator competition, as they will be designed to do

For Vodafone and EE, the impact will be mixed; a potentially aggressive competitor is removed, but their preferred positioning as being the best mobile networks is under threat

In this presentation we highlight Mediaset's star position among European FTA broadcasters, enjoying the highest share of its national advertising market (and profit margin), stable throughout digitalisation and secure for the future

Mediaset Premium, the pay-as-you-go and subscription DTT service, grew customers rapidly up to 2010, leveraging both DTT expansion and the appetite for low cost football and film programming. This hampered subscriber recruitment at satellite pay-TV operator Sky Italia, which relaunched its sales in 2010 on heavy programming in programming, set-top boxes and marketing

Sky Italia's subscriber base may be just above that of Mediaset Premium, but Sky's ARPU is 8x that of Mediaset premium, underlining the greater efficiency of the monthly subscription bundle in relation to PAYG pay-TV. Sky Italia is profitable while Mediaset Premium might just reach breakeven in 2010

In this short presentation we show our analysis of trends in UK broadband and telephony to September 2010, based on the published results of the major service providers and Ofcom telephony data. We include our own estimates where reported data is incomplete. This quarter’s edition includes a revision to some historical trends resulting from our own interpretation of BT’s recent adjustment to the volume of unbundled lines.

Highlights in the quarter included exceptionally strong growth in broadband net additions at Sky and the resumption of the long term rate of decline in broadband market growth by volume.

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

This report on Sky Italia and Sky Deutschland, News Corporation’s Continental Europe pay-TV assets, complements our coverage of BSkyB in the UK. We look at the market environment, including regulation and competition. The report also provides subscriber, revenue and earnings forecasts and SWOT analysis.