In January the UK Competition Commission (CC) is expected to issue its report on the pricing of mobile termination rates, an issue that was referred to it by Oftel after the UK operators rejected Oftel's initial decision. In this note we speculate on the likely contents of the report, and the impact on the UK mobile industry.

This report provides our forecasts for the growth rate of digital television homes in Europe over the next three years. We split countries into four groups and predict how the numbers of households with access to digital delivery of television will change in each group. The growth in satellite delivery has slowed considerably during late 2001 and 2002. The digitalisation of cable has stalled almost everywhere. So the only major uncertainty lies in the growth of digital terrestrial homes. This year has seen the failure of two of the four existing services, but the rebirth of the UK operator, in the form of the BBC's Freeview, may herald a more successful era. First indications are that Freeview is doing well. In other countries, however, the obstacles to the growth of a free-to-air service are more significant than in the UK and we do not believe that DTT will experience rapid growth in many other countries, despite the plethora of launches planned in the next few years.

This note looks at the position of TPS, the satellite pay-TV venture largely owned by TF1 in France. We particularly focus on the issue of payments for football rights because sports rights have become the crucial ingredient in pay-TV success, in France and elsewhere.

Universal Music is an important component of Vivendi’s business. As M. Fourtou shuffles his cards, the disposal or flotation of Universal becomes more likely by the day and this report values this market-leading record company.

One response to the growth of the satellite and cable households has been for terrestrial broadcasters to launch their own digital channels. These channels are beginning to absorb significant fractions of the total programming budget and in this report we look at the implications for the parent broadcasters. We examine E4, Channel 4’s main satellite entertainment channel, showing that it is likely to remain a drain on the parent for many years to come. Rather than ‘strengthening the brand’ of terrestrial broadcasters, which is the reason normally given for diversification into satellite channels, our research shows that E4 and other services do nothing for the parent company and divert programming expenditure that would otherwise be usefully spent on the terrestrial service.

Based on the recent announcement by the French Professional Football League, we now expect Canal+ to be awarded the exclusive rights to broadcast Premier League events for the three seasons starting in 2004, for which it offered €480 million. (Rival TPS is challenging the League's approach to the Competition Commission, so the story may yet have an unexpected ending.) These payments will add to an already hefty calendar of payments for Canal+ under the 1999 contract, as a result of which Canal+ is likely to report no or low profits in FY 2002. This note details the aggressive cost cutting and revenue-raising measures that will be needed to achieve a modest level of profitability going forward. By FY 2005, when Canal+ becomes the sole purveyor of Premier League events and payments rise by 60%, the subscriber base will have to be 180,000 higher just to maintain profits at 2004 levels. This seems a challenging target given that Canal+ lost 70,000 subscribers this year. In short, we think that Canal+ may have won the battle for Premier League rights at the price of its profitability in the medium-term.

In spite of the widely publicised decline in sales of recorded music, the 'music publishing' business grew at an average annual rate of over 4% between 1995 and 2000. This report assesses the prospects for this important segment of the music industry.

The November 12th bids for football rights are a nightmare for Canal+. Its operating margins and cash flow are under pressure, but failure to outbid TPS would mean a probable loss of perhaps 25% of its subscribers. This makes it likely, we think, that TPS will end up buying Canal+ from Vivendi, whoever wins the football rights, at a much lower price than the valuation of €3.5bn suggested recently by Morgan Stanley. Similarly, Vivendi may realise that it will be forced to sell the studio and the record business to Bronfman/Diller for less than current valuations. This potential devastating scenario perhaps explains why M. Fourtou is so keen to buy the rest of Cegetel, rather than selling out to Vodafone. Otherwise he would have little else left to manage. Or perhaps he is simply playing poker with Chris Gent, but running the risk that he ends up over paying. Vodafone cannot lose. It will either buy Cegetel now, or wait for it to fall into its hands when the bankers withdraw support for Vivendi.

This note provides our forecast for the number of UK households able to receive extra television through satellite, cable and terrestrial multi-channel platforms. Though Sky’s performance has been strong this year, subscriber growth has been largely at the expense of cable and digital terrestrial. We expect this pattern – Sky outperformance within a slowly growing multi-channel universe – to continue. We are pessimistic about the prospects for Freeview, the BBC’s new digital terrestrial platform. The programme offering is weak and too directed towards the under 35s, who now largely already have digital television. The technical problems of obtaining better coverage for the service remain severe.

This note shows the mixed evidence on household penetration. Most surveys report a distinct plateau in subscribing household numbers in the UK, particularly compared to France and Germany, where numbers are still growing. Other surveys show a continuing rise in individual users. On balance, we think the data does point to a clear deceleration in the growth in subscribing households. Current penetration is just over 10m homes, or 40% of the UK total.