The UK's telecommunications market, one of Europe's largest, is characterised by fierce competition in the mobile and broadband sectors, and by an innovative broadcast sector that has pioneered business models for distributing digital content. Accordingly, UK mobile and broadband penetration is comfortably ahead of the European average, while digital TV uptake has reached 90 per cent of the population. Consumer prices across the board have fallen steadily, while network capabilities have been greatly expanded following recent investments by BT and Virgin Media in next generation networks.
EverythingEverywhere, the new joint venture established to run the merged operations of T-Mobile UK and Orange UK, is now the largest mobile operator in the UK with a market share of around 37 per cent. It's followed by O2, which has a 29.3 per cent slice, and Vodafone is in third place with, roughly, a 25 per cent share. Vodafone has for some time been little more than a yield play given its decent dividend, but its operating strategy has seemed unclear following a previous multi-billion pound global acquisition spree. Now, Vodafone is going back to basics, attempting to downsize and focus its structure, and to improve its future earnings and cash flows. This new, clearer focus got off to a good start with the sale of its 3.2 per cent stake in China Mobile in September for £4.3bn, quickly followed by the £3.1bn sale of its stake in Japanese banking group, Softbank. What's more, its stakes in Verizon Mobile and SFR could go the same way in 2011.
BT continues to lead in the broadband market, but that lead has been eroded by TalkTalk, demerged from Carphone Warehouse last year, and having now migrated Tiscali subscribers to its own network. There's also increasing competition from traditional mobile operators, including O2 and Orange, which have been reporting strong uptake of broadband services. Cable operator Virgin Media and satellite broadcaster BSkyB have also reported strong broadband subscriber growth on their networks.
Although the fixed-line sector has been in decline for years, and is likely to remain so in the short term, this could be reversed by the launch later this year of internet protocol television (IPTV) initiative, YouView. That's a collaboration between several telecoms and broadcasting companies, such as the BBC, ITV, Channel 4, TalkTalk and BT. YouView seems to be seen by TalkTalk as the answer to its long-standing failure to provide a pay-TV service to subscribers although, given the multi-play bundled packages on offer from Virgin, Sky, and BT, it remains to be seen whether it can actually deliver the subscriber traction that has thus far eluded it.
At the business end, however, the two now-independent parts of the old Cable & Wireless business - C&W Communications and C&W Worldwide - remain saddled with large debts and, certainly in the case of the former, shrinking markets. That's in stark contrast to many of the mid-market business telecoms services providers, including the likes of Daisy and Alternative Networks, which last year managed strong trading, aided by value-adding acquisitions.
|NAME||PRICE (p)||MARKET CAP (£m)||PE RATIO||YIELD (%)||1 YEAR PRICE CHANGE (%)||LAST IC VIEW|
|CABLE & WIRELESS COMMS.||50||1323||10.1||15.1||-14.8|
|CABLE & WIRELESS WWD.||71||1887||6.3|
|TALKTALK TELECOM GROUP||163||1490||0.0|