Growth in energy and business focussed MVNOs \ ACCC taking the fight to Google \ Webscale Playbook – Alphabet \ Multiple SVOD subscriptions – UK trends



 



In this week’s edition, we look at the rise of energy and business focused MVNOs, the ACCC initiating court proceedings against Google, our continuing series on webscale network operators (this week is Alphabet) and Quadrant PE’s bid to acquire OOH player, QMS Media.

CHART OF THE WEEK

UK Household SVOD Penetration



Source: ENDERS ANALYSIS, RSMB

Growth in energy and business focussed MVNOs

MVNO Subscriber Market Share



Source: VENTURE INSIGHTS MOBILE MARKET MODEL

On 29th October 2019, Venture Insights presented their views on the Australian MVNO market at Telstra Wholesale’s Business Connect conference in Sydney. MVNO subscribers have grown at a CAGR of 10% (2011-18) compared with MNO handset subscribers which have grown at a CAGR of 0.9%. Our survey data shows that MVNOs have over 20% market share in metro areas and we believe this is set to rise given some 40% of metro respondents who were considering shifting providers indicated they would select a MVNO as their next provider. Our survey also showed that a high proportion of customers would consider taking a broadband service if offered by their energy provider and with AGL’s plan to acquire Southern Phone we expect to see growth in the convergence of energy and data services. We also believe new MVNOs will enter and target the business market – since we expect NBN’s business broadband products will enable more challengers to enter the business market and these new players will also become MVNOs over time in order to bundle 4G and 5G mobile services and take advantage of 5G network slicing for higher quality business mobile services.

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ACCC taking the fight to Google

Total Australian Advertising Expenditure (%)



Source: ACCC DIGITAL PLATFORMS INQUIRY, VENTURE INSIGHTS

Following through on its announcement to bring legal action against the tech giants, the ACCC in a world’s first, has initiated proceedings in the Federal Court against Google, alleging that it engaged in misleading conduct and made false or misleading representations to consumers about the personal location data that Google collects, keeps and uses. Earlier in the year, when the final report of the Digital Platforms Inquiry was made public, the ACCC announced that it is pursuing up to five investigations into the conduct of Google and Facebook that could potentially result in court proceedings. With around 30 cents of every dollar spent on advertising in Australia currently going to global players (representing more than 60% of digital AdEx), it was only a matter of time before the tech giants found themselves in the regulatory cross hairs. This is a global trend – Google is at risk of facing similar investigations into its location tracking practices in other geographies as well. For a more detailed look at the ACCC’s Digital Platforms Inquiry report and the key takeaways, click through to read our report.

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Webscale Playbook – Alphabet



Alphabet is out to prove that it is more than just an advertising business. The core business generates massive amounts of cash every quarter which has allowed the company to invest heavily in its network, with capex amounting to a telco (about 15-20% of revenues over the last 12 months). Alphabet also spends another ~15% of revenues on R&D. The goal of these investments is help the company enter (or create) new markets, with less ad-dependent business models. Alphabet’s vast network infra supports the company’s cloud computing and device portfolio, as well as AI-based projects in transportation (Waymo), logistics (Project Wing), and healthcare (Verily). For a more detailed look how Alphabet is expanding its network infrastructure investments, click through to read a report from our US-based research and consulting partner, MTN consulting.

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Multiple SVOD subscriptions – UK trends

Number of UK SVOD Households and Average Number of Subs



Source: ENDERS ANALYSIS, RSMB

With the influx of streaming services from major operators soon to arrive there is the potential for an even greater shift in the video landscape. The question of how many subscriptions consumers have the appetite for is integral when gauging the likelihood that new services will be successful, and appraising whether Netflix’s lead in the sector is unsurmountable. While it is somewhat difficult to predict, with accuracy, how the new services will fare, looking at current trends in the UK SVOD market could point to how the market is likely to behave. Greater variety and quality of services will likely increase the average number of subscriptions but given the siloing nature of these services, Netflix’s incumbency, library and distribution are its strength; new entrants will battle for a supplementary role. Similar to the UK, Australian households have also expressed an appetite for multiple SVOD subscriptions. Venture Insights expects this trend to accelerate with multiple new streaming services set for launch in the next two months. For a more detailed read, click through to read a report from our UK research partner, Enders Analysis.

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PE swoops in on OOH player



Australian PE firm Quadrant Private Equity has made an all cash offer of $421m for Australian OOH player QMS Media. QMS owns 40% of NZ based MediaWorks which is in the market to sell its loss making TV business. Australian FTA operator Nine Entertainment is rumoured to be interested in acquiring some of the MediaWorks assets. With this acquisition, Quadrant PE would be hoping to replicate the success of its last acquisition in this space – APN Outdoor. Larger players such as KKR have been rumoured to be interested and could emerge with a competing offer. The Australian media industry has been experience lower growth and a tough operating environment driven by digital disruption. But the OOH market has remained immune so far and registered strong growth over the last decade. It is not surprising then that the sector has seen its fair share of M&A activity in the last couple of years. For a more detailed look at the state of the OOH market in Australia, click through to read our report.

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