Across Europe, markets are becoming more competitive. Incumbent pay-TV paltforms (e.g. Sky or Canal+) face increasing threats from both internet-based services (e.g. Netflix and Amazon), and telecoms operators

Telecoms providers are proving the most potent challengers as they enter the premium football rights market to create attractive triple and quad play bundles – examples include BT, SFR and Telefónica. The latter is now the main pay-TV operator in Spain whereas France’s Canal+ has entered into a strategic alliance with Orange

Across the top five markets (UK, France, Germany, Spain, and Italy), Sky remains the leading operator with an estimated 21.5m video subscribers, twice as many as Netflix

European mobile service revenue growth remained stuck at zero in Q1, with a heightened impact from the mobile termination rate cuts in Germany and price promotional activity in southern Europe mitigating improving markets in the UK and France

‘More-for-more’ price rises continued both during the quarter and after, and appear to be more widespread than the 2016 increases. This should be driving revenue growth at a healthier rate than zero, and may well do as out-of-bundle revenue declines fade away in significance and regulated MTR and roaming cuts annualise out

On the downside, there remain clear disruptive threats from consolidation in Italy, the potential for improved non-incumbent competitor performance in Germany and Spain, and the potential for further consolidation, with its distinctly mixed blessings for competitors, in the UK and France

Domestic championship and Champions League rights for 2018-21 are auctioned almost simultaneously. The main uncertainties are the extent to which Sky will increase its exclusive coverage of Serie A, and whether it will try to win the Champions League auction to take advantage of rival Mediaset Premium’s announced retreat

Mediaset has complained to regulators over the Serie A terms, possibly seeking a repeat of the 2014 scenario when it provoked the termination of the auction and ultimately gained a private deal – an outcome still facing legal challenges. Any possible resolution of Mediaset’s dispute with Vivendi should not impact the auctions

We doubt that telecom or digital operators will be tempted by the €200m minimum price for the two internet-only packages with patchy regional coverage – a bad idea mandated by the regulator. However irrational behaviour at auctions should never be ruled out

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

European mobile service revenue growth recovered to nearly reach positive growth in Q3, improving a whole percentage point over the previous quarter to -0.2%

The main driver of the improvement was continued ‘more for more’ price increases combined with a lack of price wars at the lower end, although the current detente does not feel very stable. Furthermore, the pressure on growth from the general trend towards SIM-only and the consequent lower contract revenue looks unlikely to alter

Revenue growth of around zero as almost achieved this quarter is sufficient for the operators to grow the bottom line, but not to transform their network coverage in the style envisaged by 5G enthusiasts – more substantial growth is needed to cover the costs of such a step-change

This is the second of three reports in our annual review of vertical marketplaces (classifieds), focused on property, and follows Vertical marketplaces overview and recruitment classified outlook [2016-116]

Stamp duty reforms and the impact of the Brexit referendum triggered a -10% fall in UK residential property sales between April and October 2016 and the consensus among estate agents and commentators is that the property slowdown will continue into 2016/17 as buyer confidence recedes. As a result, we expect UK property classified advertising to slip into decline in 2016/17 driven by losses in print, while online advertising growth will slow to low single digits

In the online market, while Rightmove continues to deliver outstanding financial results from its simple listings model, we believe that a new phase of innovation is imminent. Consumers are demanding enhanced services through data and personalisation, and there is clear potential for virtual/augmented reality and artificial intelligence to disrupt the market in the longer term

European mobile service revenue growth worsened slightly in Q2, dropping to -1.2% after three consecutive quarters at -0.8%. Southern Europe significantly outperformed the North, reversing the regional trend of recent years

EU roaming rate cuts and the increase in SIM-only subscriptions were the two main negative, albeit temporary, factors with the former particularly impacting northern European operators with heavy roaming exposure and the latter more varied in its impact across the EU5

Mobile service revenue growth was thus quite robust given these factors, helped by price firming in a number of markets. Looking forward, while the negative factors are likely to continue in the short-term they will drop out in two years in the case of roaming cuts, and SIM-only, whose impact is mostly profit-neutral to operators, will also reach an equilibrium in due course, and the market's overall resilience is encouraging

European service revenue growth improved in aggregate but with traction noticeably gradual and fragile, and growth remains negative. The future of this fragile recovery is highly uncertain in the wake of a vote to take the UK out of the EU. Most economists have budgeted a slowdown in UK GDP growth, revising 2017 expectations from around 2% to near zero or below. The IMF expect 1.3% growth in 2017 (-1ppt revision) based on “limited” Brexit impact with implied potential for further downward revisions, and it has made more modest cuts to forecasts for other European markets

Mobile service revenues are susceptible to the slowdown but we believe there to be sources of resilience in the revenue stream that would temper the impact including much reduced prepay share of the base, heavily eroded ARPU differential of contract users over prepay and contract tariff value for money, bundling trends, high smartphone penetration (>64%) and data attachment rates (>75%), and 4G coverage and penetration

Following a failed acquisition of O2 in the UK, H3G have turned focus to the proposed JV merger with Wind in Italy where offered remedies are rumoured to have been found acceptable although official confirmation (pending) is only due by 8 September. These include furnishing Iliad as a replacement fourth market entrant with uncertain consequences for the Italian market

European mobile service revenue growth was flat at -0.8%, while underlying country movements were somewhat more dramatic. The key highlights were Italy returning to positive growth driven by pricing stability, and France showing worsening growth decline for the first time in over two years impacted by challenger telco pricing cuts

An assessment of these challenger telcos highlights a somewhat precarious position, as continued price aggression yields diminishing incremental gains, and they all remain some way from gaining the scale to achieve profitability

The only incentive for challengers to remain aggressive is as an encouragement for their competitors to buy them; increasing regulatory hurdles to consolidation would remove even this incentive, leaving price increases as their only rational route to profitability

This is the second of our three reports in our annual review of vertical marketplaces (classifieds), focused on property, and follows Vertical marketplaces overview and recruitment outlook [2015-115]. Zoopla Property Group (ZPG) has been hit by new entrant OnTheMarket, and has diversified its publishing and revenue models. But OnTheMarket is a red herring in the marketplace, delivering the same charging model more expensively for estate agents than leading portals Rightmove and ZPG. Property marketing expenditure has been resilient this year, and we expect it to be roughly flat (a little down in real terms) over the next two to three years, largely a result of the print-to-digital transition depressing spend, but also because estate agents are feeling squeezed. Local newspaper print decline will roughly offset increases at the property portals and elsewhere, though print spend at the top of the market – brands such as Country Life, the FT and the Telegraph – remains robust, despite deep declining volumes of £1.5m homes.