Ofcom analyst briefing

International Communications Market Report 2015

10 December 2015

1

Agenda Introduction and Market Overview James Thickett, Director of Research

Trends in the television and audio-visual industries Jane Rumble, Director of Market Intelligence Internet and online content Andrew Jackson, Senior Analyst Trends in telecoms Max Fernando, Telecoms Analyst Comparative international pricing Nicholas Collins, Senior Telecoms Analyst Post Steven Cape, Senior Analyst, Market Intelligence

2

Introduction and Market overview James Thickett, Director of Research

3

One of three Communications Markets Reports

International Communications Market Report 2015

Research Document Publication date:

10 December 2015

4

Methodology Combination of industry data (2014 and 2015) and consumer research data (September - October 2015) • Industry data (18 countries) - Telecoms and media industry data: IHS - Pricing: Teligen - Post: WIK - Other third-party sources • Online consumer research (9 countries, >=1000 consumers in each country) to examine the take-up and use of communications services. It focused on: - Device ownership - Use of the internet to watch AV content - Awareness and take up of 4G mobile services and superfast broadband - Main source of news - Use of, and attitudes towards, postal services Third-party sources of data include: comScore, Deloitte, IHS, Populus, PricewaterhouseCoopers, Teligen, Wik Consult and YouGov among others. 5

Communications revenues continue to rise Global communications revenues 2010 - 2014 Revenue (£bn)

Yearon-year growth

1,400

1,200 1,000

£1,089bn 25 73

£1,114bn 26 75

206

216

£1,150bn 26 73

£1,173bn 27 72

£1,190bn 28 72

226

233

244

CAGR 20102014

Radio

3.9%

2.9%

Post

0.7% -0.1%

Television

5.0%

4.3%

Telecoms

0.5%

1.9%

1.5%

2.3%

800 600 400

785

798

825

841

846

200 All

0 2010

2011

2012

2013

2014

Source: Data derived from various sources: PwC Global Entertainment and Media Outlook 2015-2019 @ www.pwc.com/outlook for television and radio revenues, Wik Consult / Ofcom estimates for postal revenues. IHS / industry data / Ofcom for telecoms revenues. Ofcom has used IMF 2014 average exchange rates in converting from local currency to GBP. 6

UK ranked 5th in terms of revenue Communications sector revenues, 2014 YoY % change

Revenue (£bn)

1.1%

USA

3.0%

JPN

6.0%

CHN

172 79

19

22

50

100

150

19

8

7

25 16 15 14 7 2 2 4 2 1 7 6 2 1 9 3 1 4 20

0

4

7

300 3

350

55 Telecoms

12

Television Post

6

Radio

2 27 11

5 10

14 1 36 20

250 1 48

3 0 25 4 1 1 21 3 1 18

30 15 0.6 07

200

6

19 6

13 316

1 135

29

UK FRA GER ITA AUS ESP NED SWE POL SGP KOR BRA RUS IND NGA

29

101 110

110 0

1.5% -1.0% -0.5% -8.4% 1.0% -8.3% -4.0% -0.4% -1.7% 2.8% 4.4% 3.9% 3.4% 11.1% 4.3%

103

2

43

4 1 23 21 20

30

40

50

60

Source: Data derived from various sources: PwC Global Entertainment and Media Outlook 2015-2019 @ www.pwc.com/outlook for television and radio revenues, Wik Consult / Ofcom estimates for postal revenues. IHS / industry data / Ofcom for telecoms revenues. Ofcom has used IMF 2014 average exchange rates in converting from local currency to GBP. 7

Trends in the television and audio-visual industries Jane Rumble, Director of Market Intelligence

8

Global TV revenues up 5% YoY Global TV industry revenues by source Annual revenue (%) £206bn

£216bn

£226bn

£233bn

£244bn

85

88

92

94

99

100% 80%

Public TV license fees

60% 20

20

20

21

21

40% 20%

Advertising

Subscriptions All

101

108

113

118

125

2010

2011

2012

2013

2014

0%

Source: Data derived from PwC Global Entertainment and Media Outlook: 2015-2019 9

Rapid increase in online TV revenue Online TV and video revenue for selected ICMR countries Online TV video revenue (£m) 1,000

908

800 643 579 515

631 600 414 400

200

242 188 102

366 311 233 177 105 57

389

386 330 222 167 123 83

Online TV video revenue (£bn) 8 6.8 7 5.8 6 5

4.4

4 2.7

3

261 185

2

1.3

1.7

1

0

0 UK

FRA 2009

2010

GER 2011

2012

2013

JPN

USA

2014

Source: IHS / industry data / Ofcom. 10

Take-up of pay TV varies by country Take up of pay and free-to-air television: 2014 TV homes (%)

100%

3 13 23

80%

41

17

31

68

70

78

87 77 59

66

63

55 32

Pay TV

85

83

69

30

Free TV

97 83

20%

38

67

71 99

40%

34

37

45

60%

15

17

62

33

29

22

0% UK FRA GER ITA USA JPN AUS ESP NED SWE POL SGP KOR BRA RUS IND CHN NGA +4

+2

0

0

0

Source: IHS/ industry data/ Ofcom

0

+2

+7

+1

-1

-1

0

+3

+2

+3

0

+1

+4

YoY pp change in pay TV households 11

UK consumers more likely to watch TV online… Use of any online services to watch TV or films Proportion of respondents (%) 100 88 80

7 15

85 76

71

10 13

60

8 16

16

85 78

73 7 9

14

9

61

9 15

12

79 11 16

7 11

40 66

20

61 50

45

FRA

GER

57

57

61

AUS

ESP

43

Within the last: Year Month Week

52

0 UK

ITA

USA

JPN

SWE

Source: Ofcom consumer research October 2015. Base: All respondents 12

…driven by free catch-up services Use of free-to-access broadcaster catch-up TV services Proportion of respondents (%) 100 82 80

60

13

26

15

24

40

70

67 54 18

17

24

13 16

16 20

48

44 29

20

28

31 5 8

22

17

USA

JPN

64

67

65

14

15

15

19

24

20

32

28

30

AUS

ESP

SWE

Within the last: Year Month Week

0 UK

FRA

GER

ITA

Source: Ofcom consumer research September - October 2015 13

…and growing popularity of SVoD Use of non-broadcaster SVoD services Proportion of respondents (%) 60

56 7

47 40

11

8 13

30 27

6 20 8

37

37

8

6

8 38

26 13

16

FRA

GER

10

27

18

19 4 5

12

10

Week

8

22 15

9

Within the last: Year Month

9

11 7

37

10

0 UK

ITA

USA

JPN

AUS

ESP

SWE

Source: Ofcom consumer research – October 2015

14

Back catalogue films, the most accessed content on SVoD Types of content accessed via SVoD services

37

38

17 11 14

5

12 16 13 13 20

17

16

20

18

32

20

30

41

44

52 46 58

57 50 44

44 44 38 39

34 32

27

40

32

40

53

42 47

59

67 57

52 45

43

54

62

65 65 48

60

48

80

61 63 60 58 69

Proportion of respondents who use a SVoD service (%)

0 Recently released films/movies

UK

Back-catalogue films/movies

FRA

Programmes/series Programmes/series Original made in own made in the US* programmes made country by the service provider

GER

ITA

USA

JPN

AUS

ESP

Children's programmes

SWE

Source: Ofcom consumer research September – October 2015 15

Increase in VoD enabled devices Household ownership of Connected TV sets UK personally use a tablet = 54% UK personally use a smartphone = 67%

Proportion (%) of all respondents 60

45

42

41

40

40

39

36

32

30

17

20

0 UK

FRA

GER

ITA

USA

JPN

AUS

ESP

SWE

Source: Ofcom consumer research September - October 2015

16

UK watches more catch-up on connected TVs Types of AV content watched on a connected TV Proportion (%) of respondents 100 80

70

70 63

60 40

48

53 41 43

54 51 54

53 43

39 32

51

50

54 45

49 49 51

50

60

54 44

37

53 44

55

51

48

43 33

36

25

24

20 0 Live TV broadcast over the internet UK

FRA

Catch-up TV GER

ITA

Video-on-demand or internet streamed films USA

Source: Ofcom consumer research September – October 2015

JPN

AUS

ESP

Watching video clips (e.g. via YouTube) SWE

Viewing to ‘traditional’ live TV down 5% YoY in UK Daily TV viewing per head, 2013 - 2014 Minutes

Proportional change in minutes of viewing per person per day, 2013 - 2014

300 250

282 262 220

221

264

260 239

221

204

224

2014 average

196

200

200

239 223 mins

157

153

150 100 50 0 UK

FRA

GER

ITA

USA

JPN

AUS

ESP

NED

SWE

POL

KOR

BRA

RUS

CHN

Source: Médiamétrie, Eurodata TV Worldwide. Note: Figures include timeshifted viewing via DVR. 18

Internet and online content

Andrew Jackson, Senior Convergence Analyst

19

Internet share of all advertising spend is highest in the UK and China Internet share of all advertising spend (%)

2009

2014

50 43

39

40

30 20 10

43

42

34 27

30

15

30 27

26

18

17 10

31

29 21 22

20 15

16 12

25

23

20

19

21

14

14

10 4

4

76

0 UK FRA GER ITA USA JPN AUS ESP NED SWE POL SGP KOR BRA RUS IND CHN Source: Warc data (www.warc.com) Please refer to notes on adspend data for further detail and source information. http://www.warc.com/NotesOnAdspendData

UK fixed internet advertising spend continues to grow but declines elsewhere Fixed internet advertising expenditure per head: 2010-14 Internet advertising spend per head (£) 2010

2011

2012

2013

2014

100

92.22 84.29

82.10

80

70.39

60 44.30

65.92

51.36 34.25

40 19.02

20

15.60

0 YoY Growth

UK

FRA

GER

ITA

USA

JPN

AUS

ESP

NED

SWE

5%

16%

0%

3%

-4%

-8%

-16%

-2%

5%

8%

Source: Ofcom analysis based on data from PwC Global Entertainment and Media Outlook 2015-2019 @ pwc.com/outlook. Interpretation and manipulation of data are solely Ofcom’s responsibility. IHS/Ofcom for population figures 21

UK mobile internet advertising spends remains the greatest Mobile advertising expenditure per head: 2010-14 Internet advertising spend per head (£) 2010 2011 25

24.77

2012

2013

2014

23.69

20

17.66 13.37

15 10

6.95

5

1.06

2.80

2.00

1.17

0.58

0 YoY Growth

UK

FRA

GER

ITA

USA

57%

29%

34%

20%

75%

JPN

AUS

ESP

NED

SWE

13%

116%

51%

16%

64%

Source: Ofcom analysis based on data from PwC Global Entertainment and Media Outlook 2015-2019 @ pwc.com/outlook. Interpretation and manipulation of data are solely Ofcom’s responsibility. Population figures from Ofcom/IHS 22

Smartphone and tablet use continues to grow across comparator countries Use of smartphones and tablets Respondents (%) 100 79

80 67

70

66

51

40

38

74

69

60 44

83

77 57

52 42

35

37

34 25

20 0 UK

FRA

GER

ITA

USA

Smartphones

JPN

AUS

ESP

SWE

Tablets

Source: Ofcom consumer research September – October 2015 23

Laptop and desktop online consumption is broadly similar between countries Top ten web properties accessed on laptop and desktop computers UK

FRA

Google 1 Google Sites Sites Microsoft +1 Facebook 2 Sites Microsoft -1 3 Facebook Sites

GER

Google Sites

USA-

ITA

Google Sites

+1

Facebook

-

-1

Microsoft Sites

Google Sites

JPN -

Facebook

-

Facebook

+2

ItaliaOnline

-

Yahoo Sites -1

+2

AUS

ESP

Google Sites - Google Sites - Google Sites -

Microsoft Sites

-

Microsoft Sites

+1

Facebook

-

Yahoo Sites

Facebook

Microsoft Sites Unidad - Medios Digitales

+1

CCMAmazon +1 Benchmark Sites

-1

Microsoft Sites

+1

Microsoft Sites

-1

FC2 inc.

-1

Yahoo Sites

5 BBC Sites

+1

Webedia Sites

eBay

-1

Banzai

+1

Amazon Sites

+1

LINE Corporation

N

News Corp Australia

N

Prisa

6 eBay

+1

Yahoo Sites -

Axel Springer SE

-

Wikimedia Foundation +1 AOL, Inc. Sites

-1

DMM

+2

TripAdvisor Inc.

N

Yahoo Sites

7 Yahoo Sites

-3

Orange Sites

-

Deutsche Telekom

-

Amazon Sites

-

Schibsted Media Group

-

Hubert +1 eBay Burda Media

N

Amazon Sites

-1

Solocal Group

Wikimedia 8 Foundation

Sites 9

TripAdvisor Inc.

10 Apple Inc.

-1

UnitedInternet Sites Wikimedia -1 Foundation Sites N

+3

-

-

Amazon Sites

4

-

-

+2

-

Mode Media -

Amazon Sites

-

Wikimedia Foundation Sites

-1

Vocento

Wikimedia Foundation Sites

N

Rakuten Inc

-2

eBay

-3

Schibsted +1 Media Group

+1

-1

Yahoo Sites -5

CBS Interactive

-

Facebook

N

Mode Media

N

Amazon Sites N

-

Gruppo Editoriale Espresso

eBay

-2

Kadokawa Dwango Corporation

N

Telstra Corporation Limited

-2

Alibaba.com Corporation

N

Source: comScore MMX, home and work panel, August 2014 and August 2015, persons 15+ 24

N

But mobile online consumption varies much more Top ten web properties accessed on a mobile phone, by country UK

FRA

Google 1 Sites

CCMBenchmark

2 Facebook

Webedia Sites

3 BBC Sites

Axel Springer SE

4

Amazon Sites

5 Sky Sites

Groupe Amaury

GER

Deutsche Telekom AccuWeather Sites Axel Springer SE Shazam Entertainment Ltd

Daily Mail Microsoft 7 Sites Yahoo 8 Sites 9 eBay

Group

Yahoo Sites

Banzai

Amazon Sites

Indeed

BUZZFEED.C Mediaset OM España

AOL, Inc.

Rakuten Inc

Mail Online / Daily Mail

Grupo Heraldo

AOL, Inc.

Yahoo Sites

Mode Media

Grupo Godo

Xing

Shazam Entertainme nt Ltd

TripAdvisor Inc. DAILYMOTION. Yahoo Sites COM

Comcast JIJI Press Ltd NBCUniversal

Leonardo ADV

Microsoft Sites CBS Interactive

Populis

Apple Inc.

Gruppo Mediaset

Twitter

Ciaopeople

AOL, Inc.

News Corp Australia Gumtree Sites

ESP

TripAdvisor Inc.

AOL, Inc.

Yahoo Sites

AUS

Facebook

Cerise Media

Trinity

1 Mirror 0

JPN

Yahoo Sites

Webedia Sites ItaliaOnline

DAILYMOTION. Spotify COM TripAdvisor Yahoo Sites Inc. TripAdvisor Orange Sites Inc.

USA-

Google Sites

Shazam Entertainment Ltd

Mail 6 Online /

ITA

RCS MediaGroup

Yahoo Sites

RCS MediaGroup Vocento Prisa

FASHIONSNAP LIKES.COM .COM Weather 9NEWS.COM. Company, The AU

Schibsted Media Group Zeta Gestión De Medios

AccuWeather Sites

Weblogs SL Sites

Amazon Sites

Source: comScore MMX, home and work panel, August 2014 and August 2015, persons 15+ 25

Trends in telecoms

Max Fernando, Telecoms Analyst

26

Growth driven by mobile and fixed Total comparator country retail telecoms revenue £bn 600

555

574

526

542

87

102

121

143

236

234

232

585 162

574

589

526

555

585

542

125

135

146

158

173

180

105

107

108

111

114

117

152

159

162

172

173

172

144

141

139

133

125

119

2009

2010

2011

2012

2013

2014

USA

EU

589 173

400

200

227

217

206

73

81

89

99

110

124

131

124

114

105

96

87

0 2009 2010 2011 Mobile Data Fixed Broadband

2012 2013 2014 Mobile Voice Fixed Voice

BRIC & Nigeria

Asia Pacific

Source: IHS / industry data / Ofcom

27

The US and China contributed almost half of the total retail telecoms revenue in 2014 Telecoms service retail revenues, by sector £bn 200

172 Fixed 34

150

110 100 114 50 0

29 5 15 9

19 4 11 4

25 3 15 6

16 2 10 4

24

79

Fixed broadband

25

43 23

Mobile

11

15 5 8 3

14 3 8 3

7 1 4 1

4 1 3 1

6 1 4 1

3 1 2 0

20 5 13 2

30 6 15 9

19 3 12 4

82 15 1 13 2

5

6 0 6 0

UK FRA GER ITA USA JPN AUS ESP NED SWE POL SGP KOR BRA RUS IND CHN NGA 0.4 -5.2 -1.3 -8.2 2.5

2.6

0.4 -9.3 -0.1 2.1 -2.3 4.3

1.5

3.0

5.0

6.6

9.8

5.1

5 year CAGR (%)

Source: IHS / industry data / Ofcom

28

PSTN lines fell in most countries while managed VoIP connections grow Fixed voice connections per 100 population Connections per 100 people 80

61 60

54

9

45 39

40 20

60

21

37 5

41 16

45

22

38 3

40 7

52

42 31

22

24

31

25

35 23

0

39

36

18

10

33 10

21

16 4 13

26

Managed VoIP connections

20

34

23 4 19

27 2 25

2 2

19 1 18

PSTN lines 0 0

UK FRA GER ITA USA JPN AUS ESP NED SWE POL SGP KOR BRA RUS IND CHN NGA

Total YoY 1.5 -0.8 -0.4 0.0 -1.1 -0.3 -2.0 -0.2 -1.2 -1.8 -1.6 -0.2 -1.4 0.0 -1.9 -0.2 -1.1 -0.1 change

Source: IHS / industry data / Ofcom 29

A significant proportion of UK adults have a fixed line at home but are not regular users Household take-up and personal use of fixed telephony services Proportion of respondents (%) 100

80

84

78

73 63

78

68

79 72 60

60

49

Landline at home

70

68

65

50 43

42

36

40

34

Regularly use a home landline

20 0 UK

FRA

GER

ITA

USA

JPN

AUS

ESP

SWE

15

5

6

12

6

29

18

9

8

-3

-1

+4

+3

+3

+2

+1

+2

N/A

Source: Ofcom research, September - October 2015

Percentage point difference Delta on last year’s pp difference 30

Fixed broadband continues to grow …

107 251

Fixed broadband connections

96

Connections (millions)

79

100

2009

75

5 7 10 13 6 7 3 3 5 8 1 2 16 19 11 21 12 27 8 18

49 18 24 20 26 25 29 13 14

32

50 25

2014

0 UK FRA GER ITA USA JPN AUS ESP NED SWE POL SGP KOR BRA RUS IND CHN 5.3

5.7

3.2

1.8

4.0

8.6

5.7

6.2

2.3

5 year 1.9 10.0 10.5 3.5 13.3 16.9 18.0 18.5 CAGR (%)

Source: IHS / industry data / Ofcom 31

… as does fixed broadband data usage Ave. monthly fixed broadband data volume per person GB per month 49

50 40 32

31

2009

30

23 24

22 19

20

11

10

10 3

17

15

13

9

7

3

3

UK

FRA

GER

ITA

USA

46

33

29

23

45

3

3

2014

5

6

8

2

2

JPN

AUS

ESP

NED

SWE

SGP

KOR

16

44

34

27

41

24

15

0 5 year CAGR (%)

Source: IHS / industry data / Ofcom 32

UK leads EU5 for high speed broadband takeup but lags other countries Fixed broadband connections 30Mbit/s or higher, end 2014 Proportion of connections (%) 100 83

81

89

80 62

60 40

46 35 21

20

19

12

50 42 28

24

16

11

4

3

0 UK FRA GER ITA USA JPN AUS ESP NED SWE POL SGP KOR BRA RUS IND CHN

10

4

12

3

29

6

2

7

5

4

-12

-4

3

2

5

0

4

YoY pp change

Source: IHS / Ofcom / operator data 33

Mobile revenues fell by just over £500m Total comparator country retail mobile telecoms revenue, by service £bn

400 322

300

55 32

336

353

370

379 125

139 33

67

82

104

35

38

39

37

227

217

200 100

236

234

232

2010

2011

2012

2013

5 year CAGR

-0.1%

3.3%

Mobile internet 11.2%

20.5%

Messaging

-9.3%

1.1%

Voice

-5.1%

-2.7%

378 Total

206

0 2009

Annual growth

2014

Source: IHS / industry data / Ofcom 34

Smartphones help push mobile data services

Use of data services on mobile phones

39 29 24 50 38 35 32 46 36

75 39 21

34

33

40

41

75 50

68 69 72

69 68 62 74 72

46

60

88

92

89 67

80

54

100

88 87 83 90 73

Proportion (%) of mobile users

20 0

SMS UK

Email FRA

GER

ITA

Instant messaging USA

JPN

AUS

Twitter ESP

SWE

Source: Ofcom consumer research September - October 2015

35

The top reason to purchase 4G is the increased speeds, in most countries Reasons for choosing to purchase 4G Proportion (%) of respondents who have or are likely to get 4G

10

35 37 31 30 38 31 44 38 44

26 24 19 20 24 9 20 20 15

8

20

26 22 32 29 26 31 24 39 19

33 39 29 36 34 29 38 29

46 24 22

36 40 34 35

31

21

21

32 32

43 43 39 23

27

30

33 31

44

36 36

40

35 38

50

49 48 45

60

0 Quicker download speeds

More reliable data connection

UK

FRA

Quicker streaming speeds

GER

ITA

Improved data coverage

USA

JPN

To take To keep up with It was provided advantage of technology automatically by newest phones developments the operator without me doing anything

AUS

ESP

SWE

Direction of arrow indicates a statistically significant difference compared to last year Source: Ofcom consumer research September - October 2015 36

Mobile data usage increases Average per-capita monthly mobile data use 3,097

MB per month 3500

1,329 1,537 1,369 2,024

2013 2014

128 197 96 181 8 18 81 126 31 53

280 529

500

448 481 239 370 169 313

1000

909

1500

251 362 198 397 271 398 469 684 853

2000

1,495

1,771

2500

2,305

3000

0 UK FRA GER ITA USA JPN AUS ESP NED SWE POL SGP KOR BRA RUS IND CHN NGA

44 101 47

46 108 64

7

54

85

34

89

16

48

54

89 119 55

71

YoY change (%)

Source: IHS / industry data / Ofcom 37

4G mobile coverage increased in most comparator countries 4G population coverage (%) by country 98 99 100 100

73

76

51

2013 2014

42 36

32

39

47

60 40

80

99 85 87

77

82

97 98

92

66

63

80

68 75 81

84

100

90 100 99 99

Population coverage (per cent)

1 2 1

9 11

20 0

UK FRA GER ITA USA JPN AUS ESP NED SWE POL SGP KOR BRA RUS IND CHN NGA 21

7

11

38

1

17

2

29

9

0

14

1

0

10

15

1

72

2

YoY pp change

Source: IHS 38

Asia Pacific countries and the US have the highest proportion of 4G connections 4G as a proportion of total mobile subscriptions: end 2014 Proportion of mobile connections (%) 80 63

60

51 40

40 28

25

20

14

3

39

39

37

27

22

21

5

13

FRA

GER

1

4

2014

24

19

12

4

2013

11

3

4

ESP

NED

0 UK

ITA

USA

JPN

AUS

SWE

SGP

KOR

Source: IHS / industry data / Ofcom 39

Comparative international pricing Nick Collins, Senior Telecoms Analyst

40

Price benchmarking methodology • We compare UK prices to those in the other EU5 countries and the US • Pricing model developed by Teligen • Includes tariffs from the largest providers of each service (over 15,000 in 2015) • Takes connection fees, hardware costs and promotions into account • Construct five household usage profiles and consider the minimum price required to fulfil these requirements

41

Summary of households usage profiles used in the analysis ‘Typical’ household type

Summary

Fixed voice

Mobile voice

1 Basic needs

A low use household

Medium use

Low use

None

None

None

None

Free-toair

A basic 2 Late adopters broadband High use household

Low use

Low use

Low use

Low use

None

Free-toair

High use

High use 4G

High use

Basic pay-TV with DVR

None

Basic pay-TV with HD DVR

None

Premium pay-TV with HD & DVR

A mobile 3 ‘power user’

4

A mobileonly household

Connected A family family household

None

Medium use

An affluent Sophisticated 5 two person Low use couple household

High use

Medium use

Medium use

Mobile Mobile Fixed line Mobile Television messaging phone data broadband broadband

High use

Medium use

Medium use

Medium use

None

Medium use

High use superfast

Source: Ofcom 42

Examples of combinations of multi-play and single service offers Fixed voice Multi-play offer

Household requirement Mobile Fixed b/band

Multi-play fixed voice & broadband Single mobile tariff

Single services Multi-play offer

Triple-play fixed voice, fixed broadband &

Single services Multi-play offer

Single TV service bundled TV service

Single mobile tariff

Single services Multi-play offer

Television

bundled TV service

Multi-play landline & Single broadband

Single mobile tariff

Quad-play fixed voice, fixed broadband, mobile and TV service

Single services

Source: Teligen 43

UK stand-alone fixed voice prices increased by 12% in 2015 Comparative stand-alone ‘weighted average’ fixed-line voice pricing Average monthly price (£)

12%

30

32

29

26

28

28

27

28

21

21

22

23

30

29

30

29

27

Household 2 (400 mins)

27

29

25

26

26

27

Household 1 (300 mins)

2015

32

21

2014

32

20

2015

21

24

18

15 19

0

UK 3

FRA 4

GER 5

Household 5 (100 mins)

2014

23

26

21

-11%

2015

23

24

2015

23

24

2014

20

24

28

21

23

5%

25

20

2015

40

23

14%

2014

60

20

4%

2015

80

19

2014

100

2%

2014

120

ITA 6

ESP 2

USA 1

Household 4 (200 mins)

2015 rank

Source: Ofcom, using data supplied by Teligen 44

UK weighted average mobile prices increased by 12% in 2015 Comparative stand-alone ‘weighted average’ mobile pricing Average monthly price (£)

2015 rank 1 UK

0

100

2014 9916 28 28 23 44 2015 8917 31 35 21 54

2 FRA

2014 2015

4 GER

2014 2015

3 ITA

2014 2015

5 ESP 2014 2015

6 USA 2014 2015

200

300

400

54

12%

64

0 71020 29 41 22 52 53 81024 28 45 23 49 59 0 1014 32 43 49 51 66 93 912 35 41 55 37 83 88 0 1214 27 36 49 35 63 89 1014 30 33 48 39 60 83 0 1315 30 44 47 40 64 97 1215 38 57 51 39 80 93 0 26 31 41 64 57 53 74 27 32 41 54 62 49 69

500

4%

-0%

-2%

10% 104 102

-3%

Connection 1 (50mins, 0 SMS, 0GB data) Connection 2 (50mins, 25 SMS, 0.1GB data) Connection 3 (150mins, 200 SMS, 0.3GB data) Connection 4 (250mins, 100 SMS, 0.4GB data) Connection 5 (200mins, 50 SMS, 0.5GB 4G data) Connection 6 (100mins, 250 SMS, 2GB data) Connection 7 (300mins, 150 SMS, 1GB 4G data) Connection 8 (500mins, 200 SMS, 5GB 4G data)

Source: Ofcom, using data supplied by Teligen 45

The UK has the cheapest ‘lowest available’ stand-alone fixed broadband prices in 2015 Comparative stand-alone ‘lowest available’ fixed-line broadband pricing Average monthly price (£) YoY change (%)

120 -4%

4%

21%

-5%

19%

100

UK 1

32

24

21

24

32

38

2015

2014

2015

17

17

18

17

19 2015

18

FRA 4

GER 2

ITA 3

28

30

>10Mbit/s, 50GB data

28

26

38

24

2014

12 12

17

24

27

2015

14 14

27

22

2014

19

2015

0

16

2014

20

36

25

36

34

2014

60

38

≥30Mbit/s, 100GB data

2015

32

2014

38

80

40

5%

ESP 6

USA 5

>5Mbit/s, 25GB data

2015 rank

Source: Ofcom, using data supplied by Teligen 46

The UK had the third-lowest prices for mobile broadband services Comparative stand-alone ‘lowest available’ mobile broadband pricing Average monthly price (£) 100

-1%

-10%

0%

-17%

-18%

38%

5GB 4G per month

80 40

60

UK 3

FRA 2

14

13 5 5

9 5 5

11

11

12

15 2015

20

2014

22

2015

12

28

25

2014

13 7

29

2015

13 9

22

2014

19

2014

20

2015

13

14 7

2014

0

15 7

15

2014

20

17

28

2015

16

28

2015

40

31

GER 4

ITA 1

ESP 5

USA 6

3GB 3G per month 1GB 3G per month

2015 rank

Source: Ofcom, using data supplied by Teligen 47

UK premium pay-TV prices fell in 2015 Comparative stand-alone ‘lowest available’ pay-TV pricing Average monthly price (£) -2% -13% 150

1%

-12%

8%

57% 76

10

24

2014

FRA 2

9

Basic pay-TV with HD & DVR Basic pay-TV with DVR

36

9 9

35

36

17 17

39

34

16

11 11

ITA 1

ESP 5

Premium pay-TV with HD & DVR

43

35

38

GER 3

67

2015

22

22 16

9

2014

22

2015

23

19 19

2014

30

17 17

UK 4

17

29

2015

0

24

17

2014

50

10 24

2015

40

66

2014

55

56

2015

63

12

2014

12

2015

100

Licence fee

USA 6

2015 rank

Source: Ofcom, using data supplied by Teligen 48

The UK had the lowest ‘weighted average’ stand-alone prices for three baskets in 2015... Summary of stand-alone ‘weighted average, basket pricing

103 102 155 111 155 188

146 169

234 226 274 303

188 182 229 215 261 288

UK FRA GER ITA ESP USA

UK FRA GER ITA ESP USA

UK FRA GER ITA ESP USA

Monthly cost (£) 400

Connected family

Sophisticated couple

100

41 45 46 49 50 82

200

58 74 81 86 104 126

300

UK FRA GER ITA ESP USA

UK FRA GER ITA ESP USA

0

Basic needs

Late adopter

Mobile power user

1

1

2

1

2

TV (excl. TV licence) Mobile broadband Mobile phone Fixed broadband Fixed voice

UK rank

Source: Ofcom, using data supplied by Teligen 49

...but performed less well in terms of ‘weighted average’ bundle prices

43 40 54 57 64 UK FRA GER ITA ESP USA

UK FRA GER ITA ESP USA

UK FRA GER ITA ESP USA

UK FRA GER ITA ESP USA

97 102

39 35 44 48 57 84 UK FRA GER ITA ESP USA

100

112

200

112 154

168

300

159 130 176 153 206

279

Monthly cost (£)

328

Summary of stand-alone ‘weighted average, basket pricing

Basic needs

Late adopter

Mobile power user

Connected family

Sophisticated couple

0

2

2

n/a

1

3

UK rank

Source: Ofcom, using data supplied by Teligen 50

The UK had the ‘lowest available’ prices for three baskets in 2015, as did France Summary of ‘lowest available’ basket prices

33 31 30 35 41 45

161 149 200

114

154

101 122

153 82 94

100

36 37 42 50 57

99

200

87 74 110 101 133 160

243

300

248

Monthly cost (£)

UK FRA GER ITA ESP USA

UK FRA GER ITA ESP USA

UK FRA GER ITA ESP USA

UK FRA GER ITA ESP USA

UK FRA GER ITA ESP USA

0

Basic needs

Late adopter

Mobile power user

Connected family

Sophisticated couple

3

1

2

1

3

TV (excl. TV licence) Mobile broadband Mobile phone Fixed broadband Fixed voice Bundle

UK rank

Source: Ofcom, using data supplied by Teligen 51

The UK performed worst for the highest use households in 2015 Comparison of international household profile pricing, 2015 ‘Basic needs’ household

‘Late adopters’ household

‘Mobile power ‘Connected family’ user’ household household

‘Sophisticated couple’ household

Price Average Average Average Average Average Average Lowest Average Lowest Lowest Average Lowest Average Lowest (£ per standstandstandstandstandbundled available bundled available available bundled available bundled available month) alone alone alone alone alone

UK

41

39

33

58

43

36

103

87

146

97

82

188

159

154

FRA

45

35

31

74

40

37

102

74

169

102

94

182

130

114

GER

46

44

30

81

54

42

155

110

234

168

153

229

176

161

ITA

49

48

35

86

57

50

111

101

226

112

101

215

153

149

ESP

50

57

41

104

64

57

155

133

274

154

122

261

206

200

US

82

84

45

126

112

99

188

160

303

279

243

288

328

248

Source: Ofcom, using data supplied by Teligen 52

The UK’s average rank was unchanged in 2015, but France overtook it to rank top overall Average pricing rankings, by country: 2014 and 2015 Average rank Average rank 2014 2015

Rank

Country

1( )

France

2.0

1.5

2( )

UK

1.8

1.8

3(-)

Italy

2.9

3.3

4(-)

Germany

3.9

4.1

5(-)

Spain

4.5

4.4

6(-)

USA

5.9

6.0

Source: Ofcom, using data supplied by Teligen 53

Post Steven Cape, Senior Analyst, Market Intelligence

54

Letter volumes are down 10.2% since 2010 Billion items 350

309.7

304.5

300 68.3 250

65.9

292.1

285.2

278.2

62.7

59.4

57.0

Europe

200 150

166.7

USA 164.0

155.3

153.2

150.2

BRIC

100

50 0

Asia Pacific

30.3

29.5

28.9

28.1

44.3

45.1

45.1

44.5

27.4 43.6

2010

2011

2012

2013

2014

Source: WIK / Ofcom analysis

55

Revenues more stable over this period… £ billion 80

72.6

74.8

72.7

71.6

72.1

60

24.8

27.9

26.9

25.7

25.1

Europe USA

40 30.9

29.9

28.7

28.4

28.9

BRIC

20

0

Asia Pacific

13.3

13.2

13.0

13.1

13.5

3.5 2010

3.8

4.1

4.4

4.7

2011

2012

2013

2014

Source: WIK / Ofcom analysis Note: Figures are nominal

56

…helped by price increases Change in First Class equivalent stamp price since 2010 2011=1 1.6 1.5 1.4 1.3 1.2 1.1 1 0.9 2011

2012

2013

2014

2015

ITA NED UK RUS FRA SGP SWE AUS BRA ESP USA POL

Source: WIK / Ofcom analysis

57

UK the only European comparator where letter mail revenue rose Change (%) 15

12.7 10.5

10 5

1.6

0.4

2.6

4.3 2.2

2.9

4.7

0 -5

-10

-1.3 -1.2

-1.6

-2.3 -4.4 -8.2

-6.8

-5.7

-15 UK FRA GER ITA USA JPN AUS ESP NED SWE POL SGP KOR BRA RUS IND CHN Source: WIK / Ofcom analysis

58

The proportion of parcels is growing Proportion of parcels in total mail (%) 40

33

20

15 12

7

6

4

0 UK

GER

USA 2013

JPN

NED

SWE

2014

Source: WIK / Ofcom analysis

59

Helped by online shoppers Respondents who received a parcel in the last week (%) 80

73

69

72

71

71 65

60

53 47

52

51

69

65 48

63 51 42

47

47

ESP

SWE

40 20 0 UK

FRA

GER

ITA

Weekly online shoppers

USA

JPN

AUS

Not weekly online shoppers

Source: Ofcom research

60

Questions?

61