In this note we summarise the available evidence on trends in ARPU among European mobile operators. We demonstrate the increasing trend towards stable or increasing revenue per subscriber in key markets. The end to the long downward trend in voice ARPU is clearly in sight. This new stability is derived from increasingly firm call charges and slow growth in minutes of use. Local competitive conditions may disrupt this pattern in individual countries – and we demonstrate the countervailing trend in Finland – but, overall, the pattern is clear and will probably become more so in the next few months.

More important, perhaps, the current economics look acceptable both for BT's Wholesale and Openworld divisions - this note includes some detailed financial analysis. But even at the lower price levels, we remain unconvinced whether subscriber numbers will grow as rapidly as BT predicts. (BT is now saying that ADSL subscribers will be more numerous in 2005 than unmetered customers are today!)

Nokia's recent guidance suggested a modest recovery in handset sales in 2002, followed by a strong resurgence thereafter. We think the position will be different and look for unit sales of about 450m next year, with only 3-7% growth in the years 2003-2005.

In this short note, we look at trends in mobile design and features. We show that the steady decline in size and weight is now over, and manufacturers are focusing on adding new functions, such as digital cameras, and even, in one case, a thermometer.

In this issue, Toby looks at recent evidence on UK multichannel viewing, particularly in the period immediately prior to the start of the new BARB audience panel.

Mobile operators’ marketing strategies are the primary determinant of the size of the market for handsets. The level of handset subsidy dramatically affects retailer sales. In this brief note, we look at the changes in retail subsidies in the UK during the past 6 months. We show how the emphasis on the acquisition of contract customers has meant higher levels of subsidy for the phones taken by these customers. By contrast, pre-pay subsidies have fallen.

In this short note Chris Goodall looks at consumer payment technologies. He says that the banks and credit card companies are under no immediate threat from new technologies. Do not be confused by the wizard new technologies coming out of Nokia; technical advances are not going to change payment systems much in the next five years. Rather, he suggests, observers should focus on three interesting companies which use low technology solutions to solve particular payments problems. These companies support, rather than undermine, existing players in the consumer payments industry.

In our recent report on the prospects for BT, we looked at the pressures on the company resulting from declining prices, static call volumes and increased competition from mobile.

In France, mass marketing by France Télécom and Wanadoo, lack of availability of unmetered, and ubiquitous self-installation have allowed DSL to increase its market share from circa 40% in mid-2001 to an estimated 70% by end 2001 (300,000 DSL connections plus). We expect cable operators’ market share of the broadband market to continue to decline to circa 15% by 2005. We assume that the current European Commission investigation into Wanadoo’s DSL pricing will lead to maintenance of current prices (circa €45/month) through 2003. In our opinion, lack of sustained price declines to €30/month or less will limit the French broadband market to 2.5 million connections by 2005 (25% penetration of Internet households).

This report looks at how consumers in the UK spend their money on TMT goods and services. It tracks changes in the portion of household expenditure going to TMT. It shows that expenditure patterns are very different in the lowest 40% of all households, with very little expenditure going on newer technologies. The greatest increase in TMT expenditures has been concentrated in the upper middle of the income range. The richest consumers have actually decreased the portion of their expenditure devoted to TMT in the last five years.

On the other hand, the published commentary failed to note that the new BARB panel will allow analysts to get more accurate figures for the actual watching of TV advertisements. This data, to be released in a couple of weeks, will provide important new information. We doubt whether the figures will make pleasant reading.

Since the research for our report on Vodafone was carried out, the UK mobile operators have made a number of changes in tariffs. We think the net impact of these changes has been to increase average call charges. This may be the first time that the UK has seen any upward trend in prices. If these price changes stick, the impact on voice ARPU is clearly positive.

Looking ahead, the costs of buying a PC and funding a connection will act as barriers to Internet expansion. Such expenditures weigh more heavily on households in less prosperous households, where the Internet have-nots are concentrated. Although the Internet-enabled mobile phone and digital TV subscription would eliminate PC ownership as a barrier to Internet access, we do not think these will be (for the foreseeable future) access platforms of more than marginal significance.

Nokia's quarterly results statement included an estimate for worldwide global handset shipments of about 390 million. Global shipments so far this year have been:

This report looks at the prospects for mobile operators. It focuses on the UK, and Vodafone in particular, because of the high quality of data available to analysts. We think the main conclusions apply widely across European operators.

It is well placed to weather any downturn, though its dependence on recruitment advertising continues to concern outside observers.