In fixed line, net broadband additions for the quarter were strong at TalkTalk given a tough market, but remained firmly negative at AOL UK

We are sceptical of new guidance for fixed line for the year to March 2010, but still expect reasonable performance, given the slowdown in broadband market growth

The distribution business continued to defy the consumer downturn in volume terms, with 12% connections growth and a solid outlook for next year, although the pain is being felt at the margin level

Friday’s Digital Britain summit generated more heat than light but nonetheless provided a useful forum for the articulation of the views of government and some other key players

There appears to remain a significant gap between government aspirations for a high speed broadband Britain and the commercial realities. All eyes are now on Wednesday’s Budget to see the extent to which the government is prepared to put its money where its mouth is

In online content, achieving an outcome that reduces piracy, avoids oligopoly and encourages continued innovation in content creation remains the key challenge for both industry and government

This report concludes our series of country reports (France, Germany, the Netherlands, Spain and Sweden) on next generation access on the Continent

Although Italy boasts the largest FTTH network in Europe, it is the least propitious market for new NGA plans among those we have surveyed. Telecom Italia has no specific plans for NGA, precluded by its level of indebtedness, and neither does any of the altnets

Because Italy does not want to be ‘left behind’ on NGA, a public/private partnership dedicated to building local FTTH networks for wholesaling to service providers is likely to be created in the near future. Its initial focus is likely to be denser city centres, where broadband penetration is high, and pockets of demand for FTTH-based applications can be located

Iliad, now France’s number two broadband provider, will increase total revenues by 10% per year by 2012, mainly by growing its subscriber base (rather than ARPU) in a market however rapidly reaching maturity

Excluding mobile, the EBITDA margin could rise by five percentage points to 40% in 2012, but a mobile launch in 2011 would pare the margin down to 32%

Funding both the fibre-to-the-home and the mobile network capex commitments could compress Iliad’s cumulative cash flow to just €168 million during 2009-2012, thus requiring new financing or a minority partner in the mobile venture

UK broadband subscriber growth continued to decline in Q4 2008 year-on-year. We expect declining growth throughout 2009, with the growth rate remaining positive, but in single figures

H3G group’s H2 2008 results showed a 5% decline in revenue on a constant currency basis and a return to strongly negative underlying EBITDA, with a margin of -17% in H2 2008 and -8% for the year as a whole, versus a margin of -1% in 2007

The UK performed reasonably well, with 11% revenue growth and improving margins, albeit still being cashflow negative, but Italy suffered from an 18% revenue decline and falling margins

The company’s target of positive EBIT in 2009 looks very unlikely without contributions from some major accounting adjustments, and the consolidation move in Australia looks likely to be repeated elsewhere

Overall reported year-on-year growth for the top 5 markets recovered in the quarter to December after a significant fall in the previous quarter, rising from 0.2% to 0.8%

However this movement was entirely due to the improving regulatory landscape which reduced the negative impact on growth by 0.6ppts in the quarter, particularly due to less pressure on growth from last year’s roaming cuts, which we estimate reduced reported growth by 1.3ppts this quarter vs. 1.9ppts last quarter

Stripping out these negative influences, and our estimate of underlying service revenue growth for the quarter is flat at 2.2%

We expect VMed to use the upgrading of its 2 Mbit/s broadband base to 10 Mbit/s as the basis for a de facto price increase

The resulting increase in revenue could be substantial, although growth in subsequent years is likely to be reduced by lower gross additions

We continue to expect cash flow performance in 2009 to be resilient but unspectacular. However, the prospects for double digit growth in subsequent years to 2012 are beginning to look more promising

Ofcom has reallocated its Digital Dividend spectrum, allowing the UK to fit in with plans for harmonised usage of the spectrum across Europe, resulting in most of the spectrum being made ‘mobile friendly’, and a little left for digital TV services

The revised plans provide a much improved platform for mobile services in a very attractive spectrum band, with European harmonisation providing the potential for standardised (i.e. cheap) equipment and handsets

On the downside, there will still be insufficient quantity of spectrum to satisfy demand from the mobile operators, with five operators chasing three decent blocks of spectrum, so the auction is likely to be very competitive

Ofcom’s statement on Next Generation Access (NGA) gives BT the maximum possible incentive to invest by allowing a high degree of pricing freedom and some short cuts to reduce implementation costs

But Ofcom cannot guarantee that BT will make a return from NGA, only the existence of an opportunity to make one

Ofcom’s statement is certainly positive for BT, but we remain sceptical of the business case for BT NGA, particularly given the low price of all-copper based offers and Virgin Media’s roll-out of 50 Mbit/s broadband