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November 2, 2001ITV Digital – The Shareholders’ Logic
ReportsThe issues surrounding ITV Digital are complex and unclear. This report tries to unpick the tangled threads. It looks at the main financial issues and the manoeuvres with the BBC, the Office of Fair Trading and the set-top box manufacturers.
Sector FTA TV. -
October 25, 2001Consumer Payment Companies
ReportsIn this short note Chris Goodall looks at consumer payment technologies. He says that the banks and credit card companies are under no immediate threat from new technologies. Do not be confused by the wizard new technologies coming out of Nokia; technical advances are not going to change payment systems much in the next five years. Rather, he suggests, observers should focus on three interesting companies which use low technology solutions to solve particular payments problems. These companies support, rather than undermine, existing players in the consumer payments industry.
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October 23, 2001UK Internet Trends
ReportsThis note provides an update on UK Internet trends covering the post-Christmas period. It covers usage, shopping and other online activities of the 17.7 million connected adults. The note highlights the feminisation of the UK online population and its impact on shopping behaviour. Broadband cable suffers from several technical performance problems, including installation, actual performance and the costs of providing content, in particular to gamers. In Germany, less than 5% of cable homes have been upgraded to digital, suggesting that Deutsche Telekom's DSL push has irresistible momentum.
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October 19, 2001
European Telecoms Incumbents
ReportsIn our recent report on the prospects for BT, we looked at the pressures on the company resulting from declining prices, static call volumes and increased competition from mobile. In France, mass marketing by France Télécom and Wanadoo, lack of availability of unmetered, and ubiquitous self-installation have allowed DSL to increase its market share from circa 40% in mid-2001 to an estimated 70% by end 2001 (300,000 DSL connections plus). We expect cable operators' market share of the broadband market to continue to decline to circa 15% by 2005. We assume that the current European Commission investigation into Wanadoo's DSL pricing will lead to maintenance of current prices (circa 45/month) through 2003. In our opinion, lack of sustained price declines to 30/month or less will limit the French broadband market to 2.5 million connections by 2005 (25% penetration of Internet households).
Sector Fixed Line (Internet and Voice). -
October 17, 2001
Time and Money
ReportsThis report looks at how consumers in the UK spend their money on TMT goods and services. It tracks changes in the portion of household expenditure going to TMT. It shows that expenditure patterns are very different in the lowest 40% of all households, with very little expenditure going on newer technologies. The greatest increase in TMT expenditures has been concentrated in the upper middle of the income range. The richest consumers have actually decreased the portion of their expenditure devoted to TMT in the last five years. On the other hand, the published commentary failed to note that the new BARB panel will allow analysts to get more accurate figures for the actual watching of TV advertisements. This data, to be released in a couple of weeks, will provide important new information. We doubt whether the figures will make pleasant reading.
Sector Fixed Line (Internet and Voice). -
October 10, 2001Signs of Price Inflation in Mobile Call Charges
ReportsSince the research for our report on Vodafone was carried out, the UK mobile operators have made a number of changes in tariffs. We think the net impact of these changes has been to increase average call charges. This may be the first time that the UK has seen any upward trend in prices. If these price changes stick, the impact on voice ARPU is clearly positive. Looking ahead, the costs of buying a PC and funding a connection will act as barriers to Internet expansion. Such expenditures weigh more heavily on households in less prosperous households, where the Internet have-nots are concentrated. Although the Internet-enabled mobile phone and digital TV subscription would eliminate PC ownership as a barrier to Internet access, we do not think these will be (for the foreseeable future) access platforms of more than marginal significance.
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October 7, 2001Global Handset Shipments
ReportsNokia's quarterly results statement included an estimate for worldwide global handset shipments of about 390 million. Global shipments so far this year have been:
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October 1, 2001European Online Advertising
ReportsThis report provides our forecasts for online advertising revenues in 2001 and 2002 in the UK, Germany and France. Our central forecasts are for a decline of 3% in online advertising in 2001 over 2000 (610 million versus 615 million), and for a maximum increase of 8% in calendar year 2002 (660 million). For Europe as a whole, online advertising will be flat: increases in Italy and Spain are offset by decline in more mature markets.
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September 27, 2001Vodafone – The Transition to Being a ‘Value” St [...]
ReportsThis report looks at the prospects for mobile operators. It focuses on the UK, and Vodafone in particular, because of the high quality of data available to analysts. We think the main conclusions apply widely across European operators. It is well placed to weather any downturn, though its dependence on recruitment advertising continues to concern outside observers.
Sector Fixed Line (Internet and Voice). -
September 13, 2001
UK Regional Newspapers
ReportsIn this report we look at one of the subsectors of UK media - regional newspapers - to see whether these companies would be relatively resilient in a downturn - this is the product of our review. The main points are as follows: Our rationale is simple. This year has been profoundly affected by the impact of high levels of inventory in the early months of the year. This stock has now been disposed of, and handset shipments from manufacturers will revert to a level more aligned with retail demand. This will push up shipments next year from this year's artificially depressed level.
Sector Print Media. -
August 30, 2001BT and Earthlease
ReportsWe note with interest the reported bids by various consortia for part or all of BT's fixed-line network. According to press reports, the Earthlease consortium has offered £8bn for BT's local loop (i.e. the copper wire connecting individual telephones to the local exchange), while a WestLB led consortium is reported to be ready to offer £18bn for the entire network. Note that each of these bids will be structured as asset purchases financed largely by debt. The plans are to provide wholesale access to the network to BT Retail and other telcos. We try to assess the impact on the replacement cycle and network use, and hypothesise that these development are not likely, by themselves, to increase the current levels of replacement. Cameras and Multimedia Messaging Services look as though they may be an attractive combination, but we question whether the industry has yet managed to create true interoperability between phones for this type of function.
Sector Fixed Line (Internet and Voice). -
August 17, 2001
BT – The Pressure Will Continue
ReportsAs the various separations in the BT family draw closer, we use this report to assess the likely prospects of the core UK fixed line division, Wholesale and Retail.
The key points are:
Sector Fixed Line (Internet and Voice). -
August 16, 2001UK Mobile Operators – ‘Active’ Customers
ReportsThe UK mobile operators have made much of their honesty in ceasing to record subscribers that have not made calls within six months. This will help analysts make a clearer judgment of how many people actually use mobiles, and what the correct figure is for ARPU. But pleasure at the apparent increase in openness should be tempered somewhat. Operators are starting to make active efforts to stop subscribers becoming 'inactive'. In the last few weeks all the UK operators appear to have adopted similar policies. These policies state that the operator will take back a subscriber's telephone number unless one call is made or one SMS is sent from the phone during each six-month period. As important, the mobile operators are keeping a much tighter rein on inventories, effectively shifting stock risk to retailers such as Carphone Warehouse. Inventory levels throughout the supply chain will be lower. Retail price levels will be more robust improving operator margins. But we expect total sales over the Christmas period to be lower than expected because of the higher prices in the retail chain.
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August 11, 2001
Mobile Handset Market Global Trends and Forecast
ReportsThis report provides our model for global handset sales in 2001 to 2005. We continue to forecast 375 million units shipped in 2001. The forecast for 2002 is 470 million units. Key constraints on the level of shipments in Europe: At current pricing levels, we see pay-TV penetration struggling to exceed 60% by 2010. And the rapid continued price inflation in the pay-TV offerings of Sky, the cable companies and ITV Digital will make even this target difficult to achieve. As our recent note on household expenditure (Time and Money) indicated, the poorest 40% of the population have very little surplus cash. Increasing prices means that pay-TV is moving even further beyond the reach of this group.
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July 31, 2001
NTL – A False Dawn?
ReportsWe look at the recent improvements in NTL performance but suggest that continued progress towards cash generation in unlikely. In our view, NTL will miss its guidance for cash flow in 2002 and 2003 by substantial amounts, making its financial position increasingly unstable. Our view is that NTL will use up its existing cash resources long before it turns cash positive. The problems are exacerbated by the large amounts of NTL's debt that need to refinanced in 2004 and 2005. But market comments on NTL's liquidity position have not been as insightful as they might be. This is where the real attention should have been focused.
Sector Fixed Line (Internet and Voice). -
July 28, 2001ITV Digital
ReportsThis note has been prompted by a flurry of activity in UK television media: the renaming of ONdigital (ITV Digital') and its absorption into the ITV mother ship; the launch of ITV Sport, a new pay-TV channel aimed at sports enthusiasts; the impending final results of BSkyB (Sky') on 25th July 2001 (dealt with in a separate note issued on 20th July) and the renewed concerns over the funding of the UK cable companies. ITV Digital itself stresses the importance of thinking about the 'platform' and its associated channel, ITV Sport separately. ITV Digital and its shareholders, Carlton and Granada, are highly optimistic about the future performance of the platform. We look at each of the many reasons for optimism that they have advanced. There is strength in many of their arguments, but we still see their breakeven target as very difficult to achieve.
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July 17, 2001Internet Access in the UK
ReportsThis report updates our thinking on the market segmentation of Internet access in the UK, one year after we buried the European portal model (Portal Strategies, May 2000). It analyses the connectivity needs of large businesses, medium-sized and small enterprises, and residential customers.
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July 11, 2001BSkyB’s Results and the State of Pay-TV in the UK
ReportsNTL's share price slide over the last few weeks has focused attention again on the prospects for UK pay-TV. This report extends the analysis to the two largest European incumbents, France Telecom and Deutsche Telekom. We look at trends in market share, wholesale and retail pricing, and the impact of increased competition. We identify the companies' strategies in the face of these forces and show the impact of stretched balance sheets on corporate actions.
Sector Pay TV. -
July 6, 2001
Marconi and DWDM
ReportsMarconi blames reduced capital expenditure budgets for its troubles. We suspect the truth is more complex. Operators and CLECs have put a lot of optical bandwidth into Europe. This looked sensible when expected traffic growth was 100%+ a year. Now, operators see much lower demand growth, so they have little incentive to invest in Marconi's bandwidth-enhancing DWDM technologies. New investment will not come in volume until existing capacity is used. We think this will occur in late 2002, not at the turn of this year as Marconi predicts. Demand will then rise again at a healthy clip. But will Marconi be able to retain its position in Europe or will Ciena or Cisco, with their newer technologies, have captured its major customers? We examine the impact of a potential decrease in consumers' expenditure by looking at the experience of the early 1990's recession in the UK. We put forward a simple model of how consumers' TMT expenditure might change in the event of recession in 2002.
Sector Fixed Line (Internet and Voice). -
July 5, 2001
UK B2C E-Commerce
ReportsThis report updates our UK E-Commerce 2000 report from December 2000 and our European B2C E-Commerce Update of April 2001. It draws mainly on data provided by the British Market Research Bureau (BMRB) collected in February 2001.
Sector E-commerce. -
July 1, 2001
DWDM in Europe
ReportsThis report is based on more than 40 interviews with existing online advertisers, agencies and online properties. It highlights the main barriers to growth and sets a challenging agenda for industry participants.
Sector Fixed Line (Internet and Voice). -
June 21, 2001
BT Rights Issue Pointers
ReportsThis is the first of a series of notes on the outlook for the core fixed-line businesses of BT and the other European incumbent telcos. In order to prepare investors for the coming rights issue we briefly consider the issues that face BT's core operations. The follow-on note will provide a more in-depth analysis. Our main points are as follows:
Sector Fixed Line (Internet and Voice). -
June 18, 2001
3G Infrastructure
ReportsEstimates of the cost of building 3G networks in large European countries have tended to cluster around $5 billion per operator. This, in addition to the embarrassing large licence fees paid to governments, is acting as a drag on stock market performance. This figure is exactly what we would have predicted based on our modelling of 3G costs contained in our June report. Sweden is nearly twice the size of the UK, and the regulator's coverage requirements are probably the strictest in Europe - in theory the whole of population has to be covered. But costs are reduced because Europolitan will share its network with the Hutchison 3G venture in all areas of the country outside the four biggest cities.
