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  • June 17, 2019

    UK mobile market Q1 2019 – Pressure to mount after mixed bag in [...]

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    The UK mobile market posted its slowest growth in more than two years this quarter; just 0.5% service revenue growth although net adds were strong and churn was down. ARPU is under considerable pressure thanks to regulation limiting out-of-bundle spend which will exacerbate as the year progresses. Several other negative developments look set to be layered on the pressures this quarter, including a step-up in competitive intensity as 5G launches –  with H3G’s pricing of unlimited data a sign of a resurgence in its aggression
  • April 23, 2019

    5G to change the shape of UK mobile

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    The capacity boost with 5G will be more important than any speed or latency uplift. We estimate a 7-fold increase in mobile capacity in the UK and 13x+ for O2 and H3G. We view fixed mobile substitution products as quite niche although the number of mobile-only households is likely to creep up. mmWave would have the capacity to substitute for fixed but has many hurdles to overcome. Capacity-constraints have tempered competition of late and their removal risks an increase in intensity, especially as H3G views itself as sub-scale – good for policy makers but another challenge to add to the industry’s woes.
  • March 28, 2019

    UK mobile market Q4 2018: Headwinds gathering for 2019

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    Following record growth last quarter, the UK mobile market took a step down to just 0.9% growth in the quarter to December on the back of increasing pressure in the business market and the impact of out-of-bundle limits. 2019 looks set to be a tough year for the sector with: a series of potentially painful regulatory hits; markedly lower price rises than last year; and early signs of a degree of creeping competitive intensity. We view 5G as a much-needed means of expanding capacity in the sector with upsides from M2M and IoT likely to remain relatively small.
  • March 4, 2019

    MWC – all very exciting but where’s the money?

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    ­­­­The combination of 5G, AI, IoT and big data were evangelised at MWC as generating massive scope for the transformation of multiple industries. That much is probably true, but it is the tech and consultancy companies who will likely receive the benefits, with connectivity revenue likely to be modest. For the operators, 5G brings more capacity much needed for hungry smartphone users, and perhaps the opportunity to transform themselves into a leaner operating model.
  • December 14, 2018

    UK mobile market Q3 2018

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    UK mobile market service revenue grew by 2.4% in Q3, a level not seen since early 2011. However, this 0.6ppt improvement on the growth rate in Q2 was very disappointing in the context of an expected 2-3ppt revenue growth bolster from the annualisation of roaming tariff cuts. EE and O2 shared the top spot for growth, more than double the growth rate of H3G and far ahead of Vodafone which remains in negative territory and had only the slightest uptick this quarter. O2 is likely to be hit by its well-publicised network blackout in December, but experience from a similar problem back in 2012 suggests this will be modest and temporary, and it is otherwise performing well.
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  • September 17, 2018

    UK Broadcast TV is growing very old, very quickly

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    UK mobile market service revenue grew by 1.7% in Q2, up from 1.3% in the previous quarter, a disappointing result in the context of boosts from both IFRS 15 accounting and the annual price rises in the quarter. O2 was the star performer this quarter, with its service revenue growth leaping ahead to claim the top spot. BT/EE’s service revenue growth declined on an underlying basis, with weak contract net adds over the last six months catching up with it, and H3G and Vodafone were slightly improved and steady respectively excluding some one-off effects. Next quarter, the impact from the EU roaming cuts will annualise out, providing a substantial fillip to all operators. Ceteris paribus, this would put market growth in the vicinity of 4%, a figure not reached for years.
  • September 11, 2018

    UK mobile market Q2 2018: Disappointment before dawn

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    UK mobile market service revenue grew by 1.7% in Q2, up from 1.3% in the previous quarter, a disappointing result in the context of boosts from both IFRS 15 accounting and the annual price rises in the quarter. O2 was the star performer this quarter, with its service revenue growth leaping ahead to claim the top spot. BT/EE’s service revenue growth declined on an underlying basis, with weak contract net adds over the last six months catching up with it, and H3G and Vodafone were slightly improved and steady respectively excluding some one-off effects. Next quarter, the impact from the EU roaming cuts will annualise out, providing a substantial fillip to all operators. Ceteris paribus, this would put market growth in the vicinity of 4%, a figure not reached for years.
  • August 7, 2018

    BT Q1 2018/19 results: On target in the short term, making progre [...]

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    BT’s Q1 results were fairly robust given a number of one-offs hitting in the quarter, with revenue growth of -2% in line with full year guidance, EBITDA growth of 1% ahead of plan, and a number of metrics looking promising. Openreach’s newly announced volume discount plans offer advantages in growing high and higher speed volumes, infrastructure competitiveness and regulatory pricing pressure, while giving up little in external revenue, a win-win-win for BT at least. Full-fibre regulation appears to be slowly moving towards more clarity, but is still far too unclear to justify an accelerated investment, with critical issues being ducked (for now) by government and Ofcom alike.  
  • June 20, 2018

    European mobile in Q1 2018: North–South divide to exacerbate

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    In this report we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or incomplete, and we have updated previous period figures where better information has come to light. A copy of the underlying data in spreadsheet format is available to our subscription clients on request.
  • June 14, 2018

    UK broadband, telephony and pay TV trends Q1 2018: Diverging stra [...]

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    UK residential communications market revenue growth strengthened in Q1, but this was entirely driven by an overlapping price increase from BT, and the decline in market volume growth continues. Continued pressure on both subscriber volume growth and ARPU has led to diverging strategies, with most operators focused on sustaining ARPU, but TalkTalk chasing volumes at the low end, with the former approach currently proving more successful. Looking forward, the benefit of BT’s price rise will fall away completely next quarter and market revenue growth will likely resume its downward trend, but the nadir may be within sight if the flight to quality persists at most operators  
  • June 8, 2018

    UK mobile market Q1 2018: Primed for revenue acceleration

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    Service revenue growth for the UK mobile market improved in the first quarter of the year, lifting from 1.0% to 1.2%. There was an easing of the EU roaming regulatory impact helping growth improve, but the SIM-only drag likely grew to counteract this, suggesting a modest underlying improvement overall. We expect continued market growth improvement in the coming year due to a number of tailwinds, namely annual price rises, the arrival of IFRS 15, and the EU roaming impact dropping out. The fundamentals of the market remain solid: competition is rational; pricing is firm; data demand is strongly rising; supply is partially constrained; MVNOs and convergence do not appear a threat.  
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  • May 30, 2018

    BT new Consumer strategy: Converging, but in a good way

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    BT has emphasised ‘convergence’ in its new Consumer strategy, but it has avoided most of the usual fixed-mobile convergence mistakes, with separate brands, minimal discounting and only slightly flawed converged products. The general strategy is to improve customer service to improve market share trends (particularly in broadband), enable premium products/positioning, and allow for cross-selling of a strong set of converged (in a broader sense) products, which is very sensible in our view. It does require extra spending in the short-term to improve customer service and the perception thereof (particularly in broadband) before premium positioning and cross-selling can be effective, therefore improved trends at the bottom line may take some time to come through.
  • May 23, 2018

    BT Q4 2017/18 results: Slowing broadband bites, but recovery pos [...]

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    BT Group met expectations for the 2017/18 financial year, but future guidance is very modest compared to previous performance and financial market expectations, with 2018/19 revenue and EBITDA both guided to decline by around 2% with capex rising. In our view, this weakened outlook is primarily driven by the ongoing slowdown and increasing competitiveness of the UK broadband market, with operating metrics at BT Consumer particularly weak. BT’s re-vamped strategy looks good in parts, and could deliver the incremental improvements necessary to outperform the new (much more modest) expectations, helped by existing – and likely continued – strength in mobile.
  • May 15, 2018

    Covert growth in UK mobile

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    The UK mobile market is growing strongly – we estimate revenues by 5% and EBITDA by 8% in 2017 – excluding one-off regulatory drags and the loss of non-profit-generating handset revenue. Regulatory price cuts end in mid-2018, and the handset effect will disappear from all reported figures from April 2018, leaving scope for very positive headline growth next year – considerably better than its European comparators and the sluggish UK fixed market. The outlook for the UK mobile industry is the best it has been in a decade, with significant growth in data demand, price increases, some supply constraints, rational competition, and major regulatory drags rapidly fading.          
  • April 11, 2018

    UK mobile market Q4 2017: Swings, roundabouts, and auctions

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    UK mobile service revenue growth worsened to 0.9% in the quarter from 1.5% in the previous quarter, although this was entirely due to an ARPU drop in BT/EE’s business segment. BT/EE’s consumer business is still growing strongly, and all the other operators improved their growth due to the EU roaming cut impact reducing in intensity. Looking forward, there are no further regulatory shocks on the horizon, and the annual price increases implemented in March/April are higher than previous years due to higher underlying rates of inflation. While SIM-only is likely to continue to rise, we still expect revenue growth in 2018 to be robustly positive at a similar or higher level than that of 2017. In the recent 4G/5G auction, O2 won all of the currently useable 4G spectrum available, and the 5G spectrum was split between all four operators, with H3G winning less that the others but (combined with its existing holdings) being nonetheless the largest 5G spectrum holder.
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  • March 2, 2018

    UK broadband, telephony and pay TV trends Q4 2017

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    UK residential communications market revenue growth fell again to 1.2%, with weakening ARPU growth the main driver. New customer pricing remains flat to down, and existing customers are being increasingly discounted, fuelling the ARPU weakness. High speed broadband adoption is proceeding apace, but the high speed premium is fairly thin, muting the impact on ARPU. Regulated wholesale price cuts from Openreach finalised today and due in April 2018 will not help. Looking forward, the March quarter will benefit from price timing effects at BT and Virgin Media, but we fear that the rest of 2018 will follow the current downward trend and the operators will need to adjust to an ex-growth environment.
  • UK mobile market Q4 2016 – Nearly back to growth
    UK mobile market Q4 2016 – Nearly back to growth
    December 18, 2017

    European mobile in Q3 2017: Still growing (just)

    European mobile service revenue growth declined this quarter to 0.3%, likely due in large part to the increased negative impact from the European roaming surcharge cuts, which we estimate at around 0.5-1.0ppts for Europe as a whole. The continued growth was supported by continued ‘more-for-more’ price increases coupled with strong data volume growth. Partially countering this, there has been a step up in competition at the low end in some markets, often driven by the smaller operators. Looking forward, the negative EU roaming impact is likely to decline from next quarter given the end of the summer holiday season, and on balance we would expect positive price increase trends to overcome negative low end competitive trends, at least in the short term. This might change in 2018, as Iliad launches in Italy, and recently consolidated operators become more of a threat.    
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  • December 11, 2017

    UK mobile market Q3 2017

    Mobile service revenue growth dipped this quarter but this was likely entirely due to the predictable (and predicted) impact of the abolition of EU roaming surcharges.  On an underlying basis, growth improved. BT/EE extended its lead in both service revenue and contract subscriber growth terms. EE’s substantial investments in network quality and customer service have driven returns to scale, and its multi-brand approach is working well. Contrasting with the returns to scale seen at EE, TalkTalk’s MVNO has suffered the reverse of this, unable to break-even despite peaking at just shy of 1 million customers, and deciding to retreat to an agency model.  Sky Mobile is performing respectably well in context, but may be headed for scale issues itself.
  • November 17, 2017

    Altice in crisis as formulaic model flounders in France

    The telecoms group has suffered a dramatic stock market correction following its Q3 results, as investors woke up to the continuous decline of its main unit, France’s SFR – leading its CEO to resign. Closure of a tax loophole will further erode SFR’s revenues by up to 4% in 2018. Despite being France’s largest fibre network, SFR’s broadband market share dropped 4ppts over three years. Notwithstanding grandstands on ‘convergence’ and expensive rights acquisitions, it is losing pay-TV subscribers – it looks unlikely to challenge Vivendi’s Canal+ in next year’s Ligue 1 auction. The mobile performance is notably better with the subscriber count stabilised and ARPU rising. Besides sustaining network deployments, to turn around SFR Altice needs to abandon short term fixes, invest in its workforce and customer service, and differentiate through valuable innovation – in other words the opposite of the model followed so far
  • November 13, 2017

    BT Q2 2017/18 results: Unresolved issues

    BT Group revenue growth dipped to -1.5% from an instance of rare modest positive growth in the previous quarter, albeit mostly due to a predicted price timing effect in Consumer and revenue growth predictably going from bad to worse in Global Services. The bright spots were continued strong 4% revenue growth at EE, with an acceleration in mobile-related revenue also helping other divisions, and strong growth of 5% in external revenues at Openreach driven by accelerating fibre adoption by competitor customers. A number of very important regulatory/policy/legal issues remain unresolved, including 5G spectrum auction rules, leased line pricing, FTTC pricing and FTTP roll-out rules, but without a number of these going BT’s way the outlook remains tough for at least the next 18 months
  • October 6, 2017

    European mobile in Q2 2017

    European mobile service revenue growth witnessed a rare growth spike this quarter with growth rising to 0.5%, likely due in large part to the reduced impact this quarter from the European roaming cut regulation, but also helped by a slight softening of MTR cuts and continued ‘more-for-more’ price increases. In the upcoming September quarter this roaming regulation holiday will end and the full impact of ‘free roaming’ will be felt, with the impact intensified by the quarter containing the main summer holiday season, thus the spike in mobile service revenue growth is likely to more-than-reverse. ‘Worry free’ data has always had consumer appeal, but it appears to have also reached operator appeal given its improved economics, and given its reported success at improving ARPUs we expect zero-rated launches to continue

  • October 4, 2017

    UK Mobile Market Q2 2017

    Mobile service revenue growth continued to improve on a reported basis, rising to 1.1% from 0.3% in the March quarter, but most of this improvement came from a significant dip in the MTR cut drag, with underlying growth improving by a much more modest 0.2ppts. The quarter also benefited from the current round of in-contract price increases, which were more widespread and at a higher level than last year, and also from a brief holiday in the impact of roaming cut regulation, with the full abolition of retail charges only being implemented on 15 June, too late to have a major impact in the current quarter. Looking forward, the roaming regulation holiday will end with a jolt in the September quarter, with a full three months of zero retail roaming charges coinciding with the main holiday season for mobile consumers, which could impact market growth by up to 2ppts by our (tentative) estimates
  • August 9, 2017

    BT Q1 2017/18 results: Back to growth (for now at least)

    BT Group revenue returned to growth, at least temporarily, helped by overlapping price rises in consumer, one-off regulated price cuts on leased lines annualising out, and mobile handset sales improving. Regulatory news was unusually positive, with Openreach taking the initiative on FTTP, and BT winning an appeal against damaging leased line regulation, which may end up being significantly eased. BT continues to do well in consumer and struggle in business markets, with the ongoing deceleration in the consumer broadband market the main cloud on the horizon.
  • June 29, 2017

    European mobile in Q1 2017: Stuck at zero

    European mobile service revenue growth remained stuck at zero in Q1, with a heightened impact from the mobile termination rate cuts in Germany and price promotional activity in southern Europe mitigating improving markets in the UK and France.‘More-for-more’ price rises continued both during the quarter and after, and appear to be more widespread than the 2016 increases. This should be driving revenue growth at a healthier rate than zero, and may well do as out-of-bundle revenue declines fade away in significance and regulated MTR and roaming cuts annualise out. The regulatory impact should improve next quarter, as the UK MTR impact drops, Germany at least gets no worse, and the roaming impact has a lull prior to the ‘free roaming’ mandate taking effect towards the end of the quarter. From Q3, however, the ‘free roaming’ effect will be in full force, and will negatively impact operators in northern European and smaller European countries in particular