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Summary
The UK is the largest communications market in Western Europe, boasting service revenue of US$60bn in 2013. Mobile data was the largest contributor to growth in 2013, driven by network upgrades and skyrocketing smartphone and tablet adoption. This trend will intensify in 2014 as more users adopt LTE. The main driver on the fixed side will be the adoption of fiber-based services, benefitting BT the most. The UK pay-TV market, which will reach 68% household penetration in 2018, has become more competitive with the entry of new IPTV players and Liberty Global's recent acquisition of Virgin Media.

Key Findings
The United Kingdom is the largest communications market in Western Europe, boasting service revenue of about US$60bn in 2013. Through 2018, however, only Italy will grow at a slower rate in the region, which is in part due to the UK's delayed adoption of new technologies, such as LTE and fiber. All four large operators are now offering 4G services commercially, with Three being the last to join the LTE crowd in December 2013. Moving forward, expansion of 4G and Wi-Fi networks presents a significant opportunity for equipment vendors. Network upgrades and skyrocketing smartphone and tablet penetration rates were the primary drivers of the increased mobile data usage in 2013, the single largest contributor to overall market growth during the year. This trend will intensify in 2014 as more users adopt LTE. The MNO Everything Everywhere, for example, reported in Q3 2013 that 64% of new and renewing postpaid customers selected 4G contracts or 4G-ready devices, and its mobile data revenue was up eight percentage points year on year, accounting for 56% of ARPU. A key trend in mobile infrastructure is to achieve cost reductions through network consolidation and sharing: EE has been consolidating the Orange and T-Mobile networks and has a 3G and 4G network sharing agreement with Three; Vodafone and O2 have begun to roll out a network-sharing arrangement too. We expect future differentiation to be driven by value-added services such as Vodafone's planned NFC-based mobile wallet service, a larger variety of MVNO-driven offerings and converged fixed-mobile offerings. Indeed, converged services will become the norm in the UK communications market in the next couple of years, and those players that will be unable to offer such services will find themselves at a serious disadvantage. The main driver of the expansion on the fixed side will be adoption of fiber-based services, with FTTx access lines expected to grow from the current 0.2% of all fixed lines to 11% in 2018, benefitting BT most significantly. The UK pay-TV market, which will reach 68% household penetration by year-end 2018, has become more competitive with the appearance of new IPTV players and the recent acquisition of Virgin Media by Liberty Global. There is speculation that Three and O2 may consider a merger, but complex network sharing agreements, spectrum ownership-related issues and opposition from Vodafone could hinder such an alliance in the short term.

Synopsis
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Table Of Contents

United Kingdom: Investments in LTE and Fiber Broadband Networks Will Help Keep Revenue Stable
Table of Contents
Executive Summary
Market and Competitor Overview
UK in a regional context
Economic, demographic and political context
Regulatory environment
Demand profile
Service evolution
Competitive landscape
Major market players
Segment analysis
Mobile services
Fixed services
Pay-TV
Identifying Opportunities

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