In this short presentation we show our analysis of trends in UK broadband and telephony to December 2010, based on the published results of the major service providers. We include our own estimates where reported data is incomplete. This quarter’s edition includes a look at Ofcom’s recent research into broadband speeds and its response to the Advertising Standards Authority’s review of broadband advertising.
VMed’s Q4 results were strong financially, although this was partly due to an exceptionally sharp drop in capex; cable volume growth continued to weaken in the face of strong competition from BT Retail and BSkyB
VMed’s results for the past seven quarters have benefited heavily from price increases, which are unlikely to have as great an impact in 2011
Management is developing a range of strong initiatives, including TiVo, 30 and 100 Mbit/s broadband, and fixed-mobile service convergence, but the financial benefits are likely to be felt in 2012 and beyond rather than in 2011. A revamped Virgin Media Business should have a more immediate impact, but we expect group performance in 2011 to be more modest
TalkTalk Group (TTG) lost broadband customers for the first time in its history in the quarter to December due to dissatisfaction among former Tiscali customers, and to a lesser extent, at AOL UK
But gross additions appeared to remain healthy and ARPU growth was strong, holding group revenue flat
The group remains on track to make guidance for the financial year to March. Beyond that, we remain optimistic about the prospects for further cost reduction, but reducing churn remains a daunting prospect
BT Global Services is generating cash ahead of schedule and the company’s strategy for defending the core business is gaining traction
Group performance continues to be affected by increased capital expenditure due to investment in next generation access
The company is on track to meet guidance, although prospects for further upside remain limited
The year ended on a strong note, as Sky broke passed its milestone of ten million homes and achieved yet another record breaking quarter for multi-product take-up
Home communications once more achieved exceptional growth, with triple play penetration jumping from 18% to 24%, while HD take-up resumed strong momentum after halving in Q1 2011
Financially, the company has never looked in better shape, with good prospects for continuing strong multi-product growth, leaving the question of where Sky will choose to invest next to drive further revenue growth
Jeremy Hunt announced on 25 January his intention to refer News Corp’s bid for BSkyB to the Competition Commission
However, he is first providing News Corp with the opportunity to address Ofcom’s concerns, and in so doing protecting his department and Ofcom from any legal threats
If Ofcom or the OFT say the News Corp remedies don’t go far enough, Jeremy Hunt will be then almost obliged to refer the transaction to the CC
French ISPs are about to enter a disruptive four month window of penalty-free broadband subscriber churn, triggered by the VAT rise on IPTV
SFR has followed Iliad’s Free by offering unmetered fixed-to-mobile calls at the risk of ARPU decline
We expect Free’s market share to stabilise, whilst those of SFR and Bouygues should rise to the detriment of Orange
France’s Iliad will rekindle broadband subscriber recruitment with its Freebox V6 (router and TV set-top box), and extension of the triple play to include unmetered fixed-to-mobile calls
Freebox V6 is positioned as an innovative premium quasi-PC device including a 250GB PVR, a Blu-ray player, a game console and a web browser, re-establishing Iliad’s technology leadership
Iliad expects that V6 subscribers will be less profitable in the short term than in the medium term, but cumulative free cash flow guidance for the ADSL business remains unchanged for 2010-12
Virgin Media’s recent investor day served to emphasise the potential for further growth in cash flow, with Virgin Mobile, next generation TV and Business taking more prominent roles
The new TiVo service, launched on 1 December, is impressive, but will not be available throughout the cable footprint until Q3 2011 and is more likely to help maintain the company’s differentiated position, keeping churn low and subscriber growth positive, than generate a sudden revenue boost
Management’s residential ‘quad play’ strategy of selling higher end mobile contracts to cable customers looks sound, but handset subsidies mean that the benefits will not feed through until 2012
In this short presentation we show our analysis of trends in UK broadband and telephony to September 2010, based on the published results of the major service providers and Ofcom telephony data. We include our own estimates where reported data is incomplete. This quarter’s edition includes a revision to some historical trends resulting from our own interpretation of BT’s recent adjustment to the volume of unbundled lines.
Highlights in the quarter included exceptionally strong growth in broadband net additions at Sky and the resumption of the long term rate of decline in broadband market growth by volume.