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Amazon in talks to settle EU e-book probe; French regulator blocks Altice's SFR offer

Street Talk Episode 40 - Digital Banks Take a Page Out of 'Mad Men'

Broadband Only Homes Skyrocket In 2018 Validating Top MSOs Connectivity Pivot

Power Forecast Briefing: As retirements accelerate, can renewable energy fill the gap?

2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Fundamentals View


Amazon in talks to settle EU e-book probe; French regulator blocks Altice's SFR offer

TOP NEWS

*Amazon.com Inc. is intalks with EU antitrust regulators to clinch a fine-free settlement for ayear-long probe into its e-book deals with publishers, Reuters reports,citing a person familiar with the matter. The source reportedly said it is tooearly to determine whether the talks will result in an agreement.

* Frenchfinancial markets regulator Autorité des marchés financiers, or AMF, said thatAltice NV's buyoutoffer for SFR does not comply with rules and it will not allow Altice to make anew offer, Le Figaro reports.Altice said in a statement that it regrets AMF's decision and reserves theright file an appeal with the Court of Appeal of Paris.

AND IRELAND

* DiscoveryNetworks UK & Ireland extendedits exclusive sales partnership with Sky plc's advertising arm Sky Media for 'schannel portfolio in the U.K. and Ireland. Under the long-term deal, Sky Mediawill take charge of the entire advertising inventory for channels such asAnimal Planet(UK), DiscoveryChannel (UK), Investigation Discovery (UK), and .

*EE Ltd. willexclusively distribute GoogleInc.'s Pixel and Pixel XL smartphones in the U.K., the telco said.The handsets are available to pre-order for consumer and business customers.Google is a unit of AlphabetInc.

*Twitter Inc. launchedits Moments feature in Ireland, in a bid to attract more users, The Irish Times (Dublin) reports.The feature enables users of the microblogging platform to curate tweetsrevolving around a specific theme.

,SWITZERLAND AND AUSTRIA

* CFOGunnar Wiedenfels will leave the company on March 31, 2017, Finanz Nachrichten reports.He will join Discovery Communications in New York. The search for his successorhas already begun.

*Telecoms services distribution firm Televes Deutschland announced an expansionto its management team. Jochen Kummerer, the current product manager, is nowalso overseeing marketing duties, Info Digital reports.In addition, Ralf Schwellnus will be managing the company's business inNordrhine Westphalia.

*Sky Deutschland GmbHlaunched its virtual reality app Sky VR for iOS and Android devices, Meedia reports.A total of 20 different 360-degree videos will be available at launch, with theoffering to be expanded over the coming months.

*Seven years after the launch of Sky 3D, the channel announced plans to closedown, DWDL reports.The service closed due to a lack of interest from consumers, according to thereport.

*RTL Group's RTLDeutschland launched new advertising campaigns for its video-on-demand serviceTV Now and reworked the product logo just seven months after its initiallaunch, DWDL reports.In addition, the service now support Google Chromecast.

*Bernard Mourad, deputy director of SFR Group's media division, resignedto become the director of Emmanuel Macron's presidential campaign, La Tribune reports,citing an Agence France-Presse source close to the operator.

*Bouygues Telecom isthe leading 4G network in France, ahead of Orange SA, according to an audit published byradioelectric frequency administrator Agence Nationale des Fréquences, Le Figaro reports.Bouygues Telecom had deployed 9,500 sites by September, placing it in the leadamong the four French operators.

*Webedia acquired Oxent, organiser of the Electronic Sports World Cup ESWC andpublisher of the tournament platform, for an undisclosed amount, Les Echos reports.Webedia also entered into exclusive negotiations to buy Bang Bang Management,which manages professional players and produces e-sports content forbroadcasters.

*Bouygues Telecom is testing a new 4G set-top unit developed by to allowusers to connect to the internet at home via the mobile network rather than alandline, CB News reports.A spokesperson for the company said that the experiment will allow the operatorto roll out the service, based on the customer feedback. Unit rental costs €3per month with a fee of €24.99 per month for unlimited usage.

, BELGIUM AND LUXEMBOURG

*Amsterdam-based VimpelComLtd. saidits Algerian subsidiary Djezzy upgraded its network with 4G/LTE high-speedmobile service. With the launch, VimpelCom has now implemented 4G/LTE in nineof its 14 markets.

*Dutch consumer and market authority ACM has not investigated the effects on theradio market caused by the merger of Talpa's and Telegraaf Media Group's radiobusinesses, Media Magazine reports.Persgroep's radio station Q-Music Nederland expressed concerns that the mergercould cause unbalance in the market, but according to the ACM, no officialnotification of this was submitted.

*Philips Lighting teamed up with Google for linking the Philips' smart Huelighting systems to the Google Home application, Beurs.nl reports.Financial details of the cooperation were not disclosed.

NORDIC COUNTRIES

*Ericsson ABconfirmed plans toslash about 3,000jobs in Sweden as part of ongoing cost-saving measures. The job cuts, whichwill affect the tech firm's operations in six sites across the country, willcome from production, research and development and sales and administration.

*The expiration date of NokiaCorp.'s public buyout offer for Alcatel-Lucent has been extended, Nokia said.Legal action has been taken against the French stock market authority'sclearance of the buyout offer, causing the expiration date to be movedindefinitely.

* announced a rightsissue of about 3 billion Swedish kronor, in connection with the company'sacquisition of TDCA/S unit TDC Sweden. The issue is subject to approval by Tele2shareholders during their annual general meeting on Oct. 27.

*Tele2 Sweden saidthat it chose Akestam Holst as its new advertising agency. The telecom companyheld talks with several ad agencies this autumn.

*Telia Co. AB saidit launched its app for hosting enterprise cloud services, Telia Appmarket, inNorway. Appmarket, which hosts a range of services for enterprise customers,was launched in Sweden, Finland and Lithuania in 2015.

SOUTHERN EUROPE

* appointedYousef Al-Obaidly the new CEO of DigiTürk, effective immediately, following acquisitionof the latter, accordingto a company release. Al-Obaidly has been with beIN Media for 14 years, and iscurrently the group's deputy CEO as well as president of beIN SPORTS France.

*VimpelCom and CK Hutchison Holdings Ltd. agreed a one-year lockup period ontheir Italian jointventure, as well as a right of first refusal on each other's share,Telecompaper reports,citing Corriere della Sera. Bothcompanies also reportedly agreed not to lower their indirect stake in themerged WIND TelecomunicazioniSpA-3 Italia entity below 50% during the first year of the mergerbeing effective.

*Telefónica SAlaunched its Wi-Fi management tool Base App, available to local subscribers ofMovistar residential broadband services, Telecompaper reports.The free app can reportedly be used as a remote control to manage users' homenetworks, and will be available for download from the end of October.

EASTERN EUROPE

* launched Apple Pay inRussia, the 10th country where the service is available, Reuters reports.For the initial rollout, Apple has partnered with MasterCard Russia's Sberbank,according to the report.

*Russia's Mail.ru purchased mobile games design firm Pixonic for $30 million,Telecompaper reports.Established in 2009, Pixonic currently has 100 employees, and reported 619million Russian rubles in revenues for the first half of 2016, according to thereport.

*O2 Czech Republic aswill expand its video-on-demand portfolio with new film titles from unitTwentieth Century Fox FilmCorp., as well as 12 recent films from the Berlin, Cannes andVenice film festivals, Telecompaper reports.The films can be watched via O2 TV, PCs and mobile devices, at prices rangingfrom 30 Czech koruny to 120 koruny per title.

*Polish broadcasting watchdog KRRiT greenlit TVN SA's request to change the name of its TVN MeteoActive channel to HGTV, the lifestyle channel owned by TVN parent , Broadband TV News reports.Following the regulatory approval, TVN will launch HGTV in Poland in January2017.

FEATURED NEWS

M&AReplay: Asia-Pacific deals through Sept. 30: Samsung, BandLab,LINE: S&P Global Market Intelligence provides a wrap-up ofAsia-Pacific media and communications deal announcements, completions andupdates from Sept. 19 to Sept. 30.

The Daily DoseAsia-Pacific: Wharf telecom unit sold for $1.2B; Google, HTC partner for Pixelphones: Hong Kong-based Wharf Holdings agreed to sell its telecombusiness Wharf T&T to a consortium of private equity firms TPG Capital andMBK Partners, while Google teamed up with Taiwanese handset maker HTC toproduce the new Pixel smartphones.

The Pay Check:Murdochs' compensation jumps YOY: Fiscal 2016 pay packages of 21stCentury Fox Executive Chairman Rupert Murdoch and CEO James Murdoch are amongthose highlighted in the latest installment of The Pay Check.

Data Dispatch:Media & comm PE deal values swell in 2016: The just-endedquarter was a busy one for private equity investments in the media andcommunications space.

SouthernEurope video spotlight: Netflix localizes Turkish platform: In thismonthly feature, S&P Global Market Intelligence provides a roundup of newsrelated to over-the-top, video-on-demand and other online video initiatives ina range of southern European markets, including Portugal, Italy, Spain, Turkeyand Greece.

London techcommunity defiant in wake of Brexit uncertainty: London's venturecapital circles are defiant in a city grappling with its future role followingthe U.K.'s vote to leave the European Union.

FEATURED RESEARCH

: An unprecedented waveof advertising powered by strong spending on politics and sports events ishitting cable shores. A more conservative trend emerges from our latestlong-term forecast, however, as a decidedly more temperate multichannelsubscriber outlook balances out cable's competitive advantage in pinpointingdemographics. For our detailed analysis, see our exclusive new report.

: Major ad agency holding groupsproduced largely positive results in the second quarter, with gains in digitaladvertising helping to offset turbulence related to currency fluctuations,terrorist attacks around the globe and the decision of the U.K. to leave theEuropean Union.

: Accordingto new forecasts from SNL Kagan, cable operators will transition toward moresoftware-focused virtual converged cable access platforms beginning in 2017 andwill increase their spending on these platforms to $670.6 million in 2021.

: TiVo, one of the TV industry pioneers of the DVR, wants theworld to understand that it is more than just a hardware vendor.

Sylvia EdwardsDavis, Anne Freier, Koen Pijnappels and Esben Svendsen contributed to thisreport. The Daily Dose has an editorial deadline of 7 a.m. London time. Someexternal links may require a subscription.


Listen: Street Talk Episode 40 - Digital Banks Take a Page Out of 'Mad Men'

Mar. 20 2019 — Some fintech companies are making hay with digital platforms that tout their differences with banks, even though they are often offering virtually the same products. In the episode, we discuss with colleagues Rachel Stone and Kiah Haslett the deposit strategies employed by the likes of Chime, Aspiration and other incumbent players such as Ally Financial, Discover and Capital One. Those efforts conjure up memories of a Don Draper pitch in Mad Men and likely will enjoy continued success.

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Technology, Media & Telecom
Broadband Only Homes Skyrocket In 2018 Validating Top MSOs Connectivity Pivot

Highlights

The segment stood at an estimated 23.6 million as of Dec. 31, 2018, accounting for 24% of all wireline high-speed data homes.

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Mar. 20 2019 — The U.S. broadband-only home segment logged its largest net adds on record in 2018, validating Comcast Corp.'s and Charter Communications Inc.'s moves to make broadband, or connectivity, the keystone of their cable communication businesses.

The size and momentum of the segment also put in perspective the recent high-profile online-video video announcements by the top two cable operators as well as AT&T Inc.'s WarnerMedia shake-up and plans to go toe-to-toe with Netflix in the subscription video-on-demand arena in the next 12 months.

We estimate that wireline broadband households not subscribing to traditional multichannel, or broadband-only homes, rose by nearly 4.3 million in 2018, topping the gains from the previous year by roughly 22%. Overall, the segment stood at an estimated 23.6 million as of Dec. 31, 2018, accounting for 24% of all wireline high-speed data homes.

For perspective, broadband-only homes stood at an estimated 11.3 million a mere four years ago, accounting for 13% of residential cable and telco broadband subscribers.

The once all-powerful, must-have live linear TV model, which individuals and families essentially treated as a utility upon moving into a new residence, increasingly is viewed as too expensive and unwieldy in the era of affordable, nimble internet-based video alternatives. This has resulted in a sizable drop in penetration of occupied households.

As a result, continued legacy cord cutting is baked in and broadband-only homes are expected to continue to rise at a fast clip, with the segment's momentum in the next few years compounded by Comcast's, Charter's and AT&T's ambitious moves into online-video territory.

Note: we revised historical broadband-only home estimates as part of our fourth-quarter 2018, following restatements of historical telco broadband subscriber figures and residential traditional multichannel subscriber adjustments.

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Q4'18 multichannel video losses propel full-year drop to edge of 4 million

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Q4'18 multiproduct analysis sheds more light on video's fall from grace

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Watch: Power Forecast Briefing: As retirements accelerate, can renewable energy fill the gap?

Mar. 19 2019 — Steve Piper shares the outlook for U.S. power markets, discussing capacity retirements and whether continued development of wind and solar power plants may mitigate the generation shortfall.

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Credit Analysis
2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Fundamentals View

Mar. 15 2019 — On November 20, 2018, a joint event hosted by S&P Global Market Intelligence and S&P Global Ratings took place in London, focusing on credit risk and 2019 perspectives.

Pascal Hartwig, Credit Product Specialist, and I provided a review of the latest trends observed across non-financial corporate firms through the lens of S&P Global Market Intelligence’s statistical models.1 In particular, Pascal focused on the outputs produced by a statistical model that uses market information to estimate credit risk of public companies; if you want to know more, you can visit here.

I focused on an analysis of how different Brexit scenarios may impact the credit risk of European Union (EU) private companies that are included on S&P Capital IQ platform.

Before, this, I looked at the evolution of their credit risk profile from 2013 to 2017, as shown in Figure 1. Scores were generated via Credit Analytics’ PD Model Fundamentals Private, a statistical model that uses company financials and other socio-economic factors to estimate the PD of private companies globally. Credit scores are mapped to PD values, which are based on/derived from S&P Global Ratings Observed Default Rates.

Figure 1: EU private company scores generated by PD Model Fundamentals Private, between 2013 and 2017.

Source: S&P Global Market Intelligence.2 As of October 2018.

For any given year, the distribution of credit scores of EU private companies is concentrated below the ‘a’ level, due to the large number of small revenue and unrated firms on the S&P Capital IQ platform. An overall improvement of the risk profile is visible, with the score distribution moving leftwards between 2013 and 2017. A similar picture is visible when comparing companies by country or industry sector,3 confirming that there were no clear signs of a turning point in the credit cycle of private companies in any EU country or industry sector. However, this view is backward looking and does not take into account the potential effects of an imminent and major political and economic event in the (short) history of the EU: Brexit.

To this purpose, S&P Global Market Intelligence has developed a statistical model: the Credit Analytics Macro-scenario model enables users to study how potential future macroeconomic scenarios may affect the evolution of the credit risk profile of EU private companies. This model was developed by looking at the historical evolution of S&P Global Ratings’ rated companies under different macroeconomic conditions, and can be applied to smaller companies after the PD is mapped to a S&P Global Market Intelligence credit score.

“Soft Brexit” (Figure 2): This scenario is based on the baseline forecast made by economists at S&P Global Ratings and is characterized by a gentle slow-down of economic growth, a progressive monetary policy tightening, and low yet volatile stock-market growth.4

Figure 2: “Soft Brexit” macro scenario.5

Source: S&P Global Ratings Economists. As of October 2018.

Applying the Macro-scenario model, we analyze the evolution of the credit risk profile of EU companies over a three-year period from 2018 to 2020, by industry sector and by country:

  • Sector Analysis (Figure 3):
    • The median credit risk score within specific industry sectors (Aerospace & Defense, Pharmaceuticals, Telecoms, Utilities, and Real Estate) shows a good degree of resilience, rising by less than half a notch by 2020 and remaining comfortably below the ‘b+’ threshold.
    • The median credit score of the Retail and Consumer Products sectors, however, is severely impacted, breaching the high risk threshold (here defined at the ‘b-’ level).
    • The remaining industry sectors show various dynamics, but essentially remain within the intermediate risk band (here defined between the ‘b+’ and the ‘b-’ level).

Figure 3: “Soft Brexit” impact on the median credit risk level of EU private companies, by industry.

Source: S&P Global Market Intelligence. As of October 2018.

  • Country Analysis (Figure 4):
    • Although the median credit risk score may not change significantly in certain countries, the associated default rates need to be adjusted for the impact of the credit cycle.6 The “spider-web plot” shows the median PD values for private companies within EU countries, adjusted for the credit cycle. Here we include only countries with a minimum number of private companies within the Credit Analytics pre-scored database, to ensure a robust statistical analysis.
    • Countries are ordered by increasing level of median PD, moving clock-wise from Netherlands to Greece.
    • Under a soft Brexit scenario, the PD of UK private companies increases between 2018 and 2020, but still remains below the yellow threshold (corresponding to a ‘b+’ level).
    • Interestingly, Italian private companies suffer more than their Spanish peers, albeit starting from a slightly lower PD level in 2017.

Figure 4: “Soft Brexit” impact on the median credit risk level of EU private companies, by country.

Source: S&P Global Market Intelligence. As of October 2018.

“Hard Brexit” (Figure 5): This scenario is extracted from the 2018 Stress-Testing exercise of the European Banking Authority (EBA) and the Bank of England.7 Under this scenario, both the EU and UK may go into a recession similar to the 2008 global crisis. Arguably, this may seem a harsh scenario for the whole of the EU, but a recent report by the Bank of England warned that a disorderly Brexit may trigger a UK crisis worse than 2008.8

Figure 5: “Hard Brexit” macro scenario.9

Sources:”2018 EU-wide stress test – methodological note” (European Banking Authority, November 2017) and “Stress Testing the UK Banking system: 2018 guidance for participating banks and building societies“ (Bank of England, March 2018).

Also in this case, we apply the Macro-scenario model to analyze the evolution of the credit risk profile of EU companies over the same three-year period, by industry sector and by country:

  • Sector Analysis (Figure 6):
    • Despite all industry sectors being severely impacted, the Pharmaceuticals and Utilities sectors remain below the ‘b+’ level (yellow threshold).
    • Conversely, the Airlines and Energy sectors join Retail and Consumer Products in the “danger zone” above the ‘b-’ level (red threshold).
    • The remaining industry sectors will either move into or remain within the intermediate risk band (here defined between the ‘b+’ and the ‘b-’ level).

Figure 6: “Hard Brexit” impact on the median credit risk level of EU private companies, by industry.

Source: S&P Global Market Intelligence. As of October 2018.

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  • Country Analysis (Figure 7):
    • Under a hard Brexit scenario, the PD of UK private companies increases between 2017 and 2020, entering the intermediate risk band and suffering even more than its Irish peers.
    • Notably, by 2020 the French private sector may suffer more than the Italian private sector, reaching the attention threshold (here shown as a red circle, and corresponding to a ‘b-’ level).
    • While it is hard to do an exact like-for-like comparison, it is worth noting that our conclusions are broadly aligned with the findings from the 48 banks participating in the 2018 stress-testing exercise, as recently published by the EBA:10 the major share of 2018-2020 new credit risk losses in the stressed scenario will concentrate among counterparties in the UK, Italy, France, Spain, and Germany (leaving aside the usual suspects, such as Greece, Portugal, etc.).

Figure 7: “Hard Brexit” impact on the median credit risk level of EU private companies, by country.

Source: S&P Global Market Intelligence. As of October 2018.

In conclusion: In Europe, the private companies’ credit risk landscape does not yet signal a distinct turning point, however Brexit may act as a pivot point and a catalyst for a credit cycle inversion, with an intensity that will be dependent on the Brexit type of landing (i.e., soft versus hard).

1 S&P Global Ratings does not contribute to or participate in the creation of credit scores generated by S&P Global Market Intelligence.
2 Lowercase nomenclature is used to differentiate S&P Global Market Intelligence credit scores from the credit ratings issued by S&P Global Ratings.
3 Not shown here.
4 Measured via Gross Domestic Product (GDP) Growth, Long-term / Short-term (L/S) European Central Bank Interest Rate Spread, and FTSE100 or STOXX50 stock market growth, respectively.
5 Macroeconomic forecast for 2018-2020 (end of year) by economists at S&P Global Ratings; the baseline case assumes the UK and the EU will reach a Brexit deal (e.g. a “soft Brexit”).
6 When the credit cycle deteriorates (improves), default rates are expected to increase (decrease).
7 Source: “2018 EU-wide stress test – methodological note” (EBA, November 2017) and “Stress Testing the UK Banking system: 2018 guidance for participating banks and building societies”. (Bank of England, March 2018).
8 Source: “EU withdrawal scenarios and monetary and financial stability – A response to the House of Commons Treasury Committee”. (Bank of England, November 2018).
9 As a hard Brexit scenario, we adopt the stressed scenario included in the 2018 stress testing exercise and defined by the EBA and the Bank of England.
10 See, for example, Figure 18 in “2018 EU-Wide Stress Test Result” (EBA November 2018), found at:https://eba.europa.eu/documents/10180/2419200/2018-EU-wide-stress-test-Results.pdf

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2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Market-Driven View

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