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.

In this note we look at the recent revenue growth performance of European mobile operators. We show that the current pessimism about future performance looks broadly justified. We comment on the increasing evidence, at least in the UK, that mobile penetration has stalled and that minutes of use are growing only slowly. We admit that our previous view that mobile usage would drift upwards even with stable call charges looks difficult to justify at the moment. Instead, many marginal users, such as older age groups and the less well-off, appear to be reducing their usage of mobile phones, possibly in reaction to perceived high prices.

This note discusses the likely obstacles to a successful launch of H3G UK, the most aggressive 3G new entrant in Europe. Our main points:

What does this mean for the media industry? Does the increasing power of media buyers mean further downward pressure on rate cards? We suspect that many of the effects have already been felt, particularly in the European and US TV businesses. In fact, we see a different issue emerging: the explosion in advertising inventory in the last few years, which has resulted in a worldwide glut. This has coincided with what we think may be a permanent reduction in the absolute number of advertisers. As a result, media buyers will continue to obtain better terms, whether in buying as part of a large group or not, but media price deflation may be a feature of the industry for many years to come.

BT's direct access broadband product attracted a lot of attention last week. This note examines the likely scale of demand for the product over the next four years. We conclude that although the product does have a niche among sophisticated users, the number of prospective customers is very unlikely to exceed 1 million. BT forecasts several times this number.

We use this report to show that, while camera phones have been important in Japan, they have actually added very little to ARPU. Their primary effect has been to attract high spending customers to J-Phone, Japan's innovator in this area. The rate of uptake in Japan has been encouraged by highly subsidised handsets (less than or around €150 or £100), and very low prices for sending and receiving pictures (12 € cents or 8 pence each).

The BT self-install broadband product appears to be working well. Our own trial showed it was easy to install and functioned perfectly.

Despite the cut of approximately 25% in retail pricing of broadband and BT’s major advertising campaign, intentions to adopt broadband have only increased modestly – from 24% to 28% of Internet users in the three-month period to May 2002.

We identify one problem as the absence of concerted industry efforts to shift uneconomic heavy users to broadband by limiting consumption on unmetered products.

Telewest has drawn away from its key competitor in terms of UK performance. However, we still believe Telewest's bonds are worth less than 50% of their face value. This note explains why.

In this note, we provide some evidence for this unpopular view. We look at BSkyB in the UK in the period from prior to the start of its digital service to today. We show four main points: (1) Digital TV has not resulted in digital viewers buying more channels or spending significant sums on pay-per-view. In fact the key 'pay-to-basic' ratio has fallen; (2) Sky's increased TV ARPU has resulted entirely from price increases in the various Sky packages, rather than increased purchasing; (3) The move to digital has caused a significant, and possibly permanent, deterioration in the costs of operating the Sky service. All the main categories of Sky's costs have risen as a percentage of turnover; (4) The ability to run more sophisticated interactive services on a digital platform has had little positive effect on Sky's economics. Though Sky disguises the costs attached to interactive services, it almost certainly loses money on this part of its activities.

The mobile operators in the UK and elsewhere probably make a higher margin on SMS than on any other product. We think that about 30% of a UK operator's gross margin in derived from SMS and the percentage is rising. This report asks the question 'why should mobile operators launch any other mobile data products aimed at consumers?'. SMS now generates about £800 per megabyte of traffic. GPRS prices fall to about £1 per megabyte to heavy users. We conclude that operators may say that they are focusing on new consumer data services, but the reality will be very different as they work to protect their golden goose. In the long run, we think that SMS is vulnerable to Instant Messaging services introduced onto networks by innovative third parties. (In the US, where SMS has not really taken off, and thus the operators have no profits to protect, these applications are already available on some GSM networks).

The survey showed the typical UK consumer expects to keep his or her phone an average of 39 months. The most likely reason for changing would that the owner's existing phone no longer works. Younger consumers will replace their phone much more swiftly than the average.

The painful restructuring process at NTL is probably well underway. Holders of NTL bonds will have to accept a significant reduction in the nominal value of their holdings. To us, the crucial question is how much debt the slimmed-down UK businesses of NTL can afford to have on the balance sheet. If everything goes right, the number is something over £3 billion. But things will not go right, and the underlying debt capacity of NTL is probably considerably less than a billion pounds.

As noted, TV viewing did indeed fall sharply in the first quarter. Viewership of the main analogue channel, ITV, fell faster. And this is not caused by multichannel competition. ITV's share has fallen fastest in analogue terrestrial-only homes. Sky has been a beneficiary, as have ITV2 and E4, the digital offspring of the main commercial channels.