This report looks at whether the extraordinary investment in Korean digital infrastructure has changed consumer behaviour. A combination of the Korean government and the large conglomerates have provided almost universal broadband access, the world’s most advanced 2.5G networks and are just beginning the process of providing ubiquitous digital TV. Alongside the growth in infrastructure, a small number of businesses have begun to develop substantial revenue streams from content. Of particular interest is the growth of multiplayer online games, in which Korea has a world lead.

Music publishing revenues are composed of multiple streams arising from almost all uses of music – radio, TV, live performance, sale of physical formats, use in film/TV soundtracks, sale of printed music etc. Of these, only the publishing revenues derived from the sale of physical formats are in decline. Otherwise, the industry is buoyant as music becomes yet more ubiquitous in everyday life. The latest version of Grand Auto Theft has 80 music tracks on it from major stars, an example of the spread of music into every corner of life.

In this report, we look at the components of a theoretical DCF valuation of European mobile operators, focusing on Vodafone as the most salient example, and compare our views with those of the ‘analyst consensus’. Perhaps unsurprisingly, we are more conservative on revenue and margin forecasts than most forecasters, but an area in which we are uncharacteristically optimistic is cost of capital; the one benefit of the mobile industry’s transformation to low but stable growth is that WACCs should fall through both reduced betas and the ability to take on more debt. Our resulting value per share for Vodafone is lower than the analyst consensus forecasts would give, but is still a healthy 115p. We should stress that this is not a price target or a recommendation, as many other factors affect stock prices apart from theoretical projections. The Vodafone share price is currently trading below the valuation implicit in our low growth assumptions, perhaps because of cynicism about the company's excessive past promises, the possibility of further expensive acquisitions or many other potential concerns.

The last few weeks have seen several enthusiastic announcements from telecom operators eager to start public Wi-Fi services. In this note we look at the prospects for public Wi-Fi. Our analysis suggests that Wi-Fi is likely to suffer from three major problems

Our central projection – that about 50% of households will have access to multi-channel TV in 2006 – is far lower than other forecasters. Indeed, if we are wrong, it will probably be because we are too pessimistic. However, more sanguine observers should note that Zenith, probably the most quoted industry analyst, has quietly reduced its digital TV penetration forecasts by 5 million homes (over 20% of UK households) in the past year.

Camera phones represent the best hope of the mobile operators. Proven demand in Japan gives European operators reason for optimism that cameras will increase ARPU. Handset manufacturers believe it will ignite replacement demand.

This report provides an insight into the effect on consumers of the significant changes in retail pricing and promotion of broadband, as well as an update on the size and dynamics of the UK Internet population. The main points:

Analysts are predicting substantial declines in mobile industry capital expenditure when expressed as a percentage of turnover. These improvements are supposed to be driven by (a) declining growth in call minutes; (b) decreasing prices of capital equipment; and (c) better 'capital efficiency' in the 3G era.

The continuing success of the industry has derived partly from its position at the meeting point of several important social trends – the decline in the reading of books, the gradual fall in the total circulation of newspapers, increased attention paid to celebrities and fashion and, most important, the increasing amount of disposable income available to the people under 35. Improvements in printing costs and distribution have allowed publishers to make money, even though the average sales per magazine have fallen substantially.

In The Digital Bomb II (2002-21), we asserted that the worldwide switch to digital TV would take place more slowly than most commentators expect. We base this view on our assessment that there is no financial incentive for the operator to make the switch from analogue to digital TV.

1. The evidence of a rapid slowing of the growth in multichannel homes is increasingly clear. We predict that Sky will miss its target of 7 million subscribers by the end of 2003 by 300,000 homes, if current trends continue.

2. TV viewing levels appear to have returned to 2001 levels, after a fall in the first months of this year. The evidence for a secular decline in overall viewing is weak. But ITV1 continues to plummet.

Are resellers with ‘stretchy brands’ going to succeed where others have failed in dislodging BT from a dominant position in the fixed residential market for calls? Stretchy brands are widely touted as the next challengers because they have large and easily marketed customer bases, and their brand can be used to wean the fearful telecoms customer from BT.

This note looks at the likely extent of regulatory pressures on reducing termination charges for off-net calls to the 2G networks of mobile network operators (MNOs) in the UK, Italy and Germany. These charges are well above cost – mainly because each MNO acts as a monopolist for termination of calls on its network - and are therefore important contributors to revenues as well as profits of MNOs. In the UK, off-net interconnection charges contribute one-quarter of revenues of the four MNOs.

In developed markets, the crucial determinant of the level of mobile handset sales is the speed of replacement, not the volume of new subscribers. But data on when customers expect to replace their existing phone, and what will prompt them to make the change, is extremely hard to find. In order to rectify this deficiency, we commissioned a telephone survey of customers in the UK.

Wanadoo also looks set to achieve its target of 2 million new subscribers in 2002 once the acquisition of the Spanish ISP eresMas is finalised in October. Organic growth of the Internet subscriber base has been poor in France and at a virtual standstill at Freeserve in the UK in the context of slow-growing Internet markets.