UK mobile market revenue growth improved in Q2, rising to -3.6% from -5.0% in the previous quarter, but we see this as driven entirely by an easing in the regulated MTR impact, with underlying growth actually dropping. O2’s revenue growth has continued to improve, Vodafone and EE’s revenue growth both improved roughly in line with the market, and H3G’s growth declined but remained much above the other three Both Vodafone and O2 announced plans to launch 4G on 29 August but both also have modest roll-out plans, with only 13 cities due to be covered by the end of the year, leaving both with less than half the coverage of EE, and H3G is not planning to launch until Q4. There is some debate over how much consumers are likely to value 4G, with a number of consumer surveys putting interest at a low level. Our own survey is consistent with this, but reveals that interest among high-end smartphone owners – who tend to spend more on handsets and airtime – is very much higher O2 is now selling all its upper end contract plans under the ‘O2 Refresh’ structure, which splits handset and airtime fees but in such a way as to allow it to make good margins on handset sales, a clever way to take advantage of smartphone popularity as opposed to working against it as many operators do. The other operators may well follow suit

UK residential communications revenue growth was again strong in Q2 2013 at 4% supported by strong unit volume growth (despite seasonal factors in the quarter) and firming ARPU, helped by firm pricing and high speed broadband take up

High speed broadband adoption continued apace at BT and Virgin Media, but much more slowly at the other operators. This may start to change in the second half of the year, as Sky and TalkTalk market the product more aggressively, and a wires-only self-install version becomes available

Overall the market outlook remains very healthy, with two potential areas of market disruption – BT Sport and regulated pricing – looking like they will resolve without prompting a damaging price war

Reports of the death of the PC have been greatly exaggerated, but rapid adoption of mobile devices is changing how, when, where and why consumers access the internet.

Over the next few years, we forecast that PC user growth will be limited to population growth, smartphone penetration will rise from two thirds currently to over 80% by 2020, and tablet users will converge to the same level as the PC audience.

In addition, we project that overall internet consumption will nearly double by 2020, with PC-based usage declining before levelling out, and smartphone and tablet use increasing threefold.

Of the traditional media sectors, we expect print media to be the most negatively affected by the rise of the mobile internet, with less impact on radio and TV viewing and advertising likely to be relatively resilient.

Virgin Media’s subscriber figures were slightly soft in Q2, even accounting for seasonality, with transaction distractions and reduced marketing spend likely contributing

RGU ARPU growth however remains strong at well over 2%, and increased marketing activity around high speed broadband by competitors will give the company the ongoing capability to keep pricing firm

The company management has had a number of changes, but Liberty Global’s overall strategy – profitable growth, not subscriber chasing – would indicate that any changes in approach will not be radical

A cheaper iPhone has been discussed almost since the original launch in 2007, but we believe costs have fallen and the market developed to the point that it now makes sense for Apple to offer a $200-$300 (unsubsidised) model.

We see a positive but fairly small financial impact on Apple. The key benefit would be defensive: by extending the ecosystem and preserving iOS as developers’ first choice, Apple would secure the whole portfolio.

We believe a well-executed and distributed $200-$300 iPhone would sell double-digit millions of units – a significant challenge to Android OEMs and Google. However, the US market’s pricing structure might limit the impact there.

TalkTalk’s broadband net adds held up well in the June quarter despite weak seasonality and an aggressive competitive push by BT

ARPU growth was steady, which allowed rising subscriber growth to drive consumer revenue growth up to just over 2%, and growth at the group level rose to just under 2%

With the BT Sport impact appearing slight, and regulatory outcomes looking reasonably benign, the outlook is much less uncertain than before

FY 2013 produced strong growth as revenues increased by 6.5% and costs by only 6.1% as a large £188 million rise in programming spend was more than balanced by the achievement of efficiencies in operating service costs The big surprise was the announcement of a £60-70 million impact on EBIT in 2014 as Sky seeks to accelerate the uptake of connected TV across its base The big threat in 2014 is the possible loss of European Champions League rights to BT Sport from the 2015/16 season, while the main challenge is how to maximise connected TV revenues, where clear communication of the benefits and enhancements will play a vital role

BT’s underlying revenue growth of -1% in the June quarter was a slight dip from the March quarter, but remains very impressive compared to historic trends and international peers

BT Sport gained over 500k sign-ups, a pretty respectable figure in context, but so far it is looking mostly defensive, with any impact on broadband trends in the quarter indiscernible

Regulated cuts to copper pricing look like they will drop out completely from 2014/15, and BT’s DSL competitors are starting to push fibre more aggressively, both of which will give BT a very solid boost from 2014

Vodafone Europe’s reported organic service revenue growth improved in the June quarter for the first time in over a year, albeit to the still-somewhat-unimpressive figure of -7.2%

This was however helped by slightly improving MTR cuts and the previous quarter being hit by the leap year effect; on an underlying basis growth declined again

Contract net adds continue to be weak, ARPU continues to suffer from the dilutive Vodafone Red tariffs, and the company continues to invest heavily in fixed line and lightly in mobile, the wrong way around in our view

Recorded music retail sales in Japan were flat in 2012 at $5.8 billion on the unexpected bounceback of CD sales, amidst the ongoing collapse of mobile music sales

Smartphone adoption is driving up internet track sales, which topped mobile track sales in 2012, but the internet’s price discount to mobile is squeezing track revenues

Japan will be dynamic in 2013 and beyond for ‘access’ subscription services, newly launched by Sony, J-pop label-backed RecoChoku, and carriers