O2

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  • August 2, 2019

    O2 UK: Lower costs mitigate the challenging environment

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    O2’s service revenue growth slipped decisively into negative territory at -1.8% this quarter as the punishing regulatory regime took its toll. Underlying EBITDA growth of 4% was particularly impressive in the circumstances; likely aided by more direct distribution as well as tight cost control. The coming week will unveil how this compares to peers; we anticipate results which reflect a tough environment with little let-up on the horizon
  • 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
  • June 13, 2019

    O2 UK: holding its own in toughening conditions

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    After a period of significant outperformance, O2’s Q1 results reverted to sector average revenue growth with ARPU down by 3% and all of the growth coming from ‘other’ revenues. Regulation limiting out-of-bundle spending has been a significant drag which will continue to worsen. A more competitive market and a punishing regulatory outlook will make it very challenging to sustain 2018 growth trends as this year progresses
  • 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.
  • April 8, 2019

    The North heads south: European mobile in Q4 2018

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    European mobile service revenue growth dropped to -1.3% – its lowest level in three years – particularly disappointing as growth should be bouncing back post-EU roaming tariff cuts. Having enjoyed relatively favourable dynamics in 2018, the UK and Germany are facing marked changes in momentum from here. Regulation limiting intra-EU call prices could hit hard – up to 6% of revenues and 20% of EBITDA in the UK, although other EU countries may be less exposed due to lower tariffs currently.
  • 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

    O2 UK delivering well on many, but not all, fronts

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    ­­­­O2’s Q4 results delivered market-leading service revenue growth of 3%, double-digit EBITDA growth, sustained strong net adds and low churn. With ARPU service revenue growth flat, all of the growth came from other service revenue including M2M (machine-to-machine) and MVNO; a lumpy category up by more than 40%. Following a period of strong outperformance, O2 will face some challenges in 2019: some cost inflation to mitigate and the risk of a churn increase following December’s outage although experience suggests this is likely to be short-lived.
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  • 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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  • December 3, 2018

    O2 UK: scope for outperformance near-term, solid results thereaft [...]

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    O2 has managed to deliver a solid financial performance over the past several quarters in spite of network constraints which are now resolved. With signs that they are becoming more assertive in the market, and with continued brand strength and low churn, there is scope for that performance to hasten from here. Over the medium to long term, turnaround plans from the other MNOs could thwart outperformance by O2 but with an holistic culture of leading-edge marketing and innovation, we expect at least sustained solid results.
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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.
  • July 26, 2018

    The drive for convergence: a value-destructive strategy

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    Many European telecoms operators are pursuing a fixed/mobile convergence strategy on the pretext that the addition of mobile reduces churn. We see no evidence of churn reduction from this strategy. Discounts required to encourage take-up of fixed/mobile services are often value-destructive, even before competitor reaction: a 10% bundle discount necessitates a 2ppt improvement in churn to wash its face economically. M&A premia on the basis of convergence synergies raise the hurdle even higher. Most UK operators offer very limited discounts on fixed/mobile bundles for now, sensibly focusing on enhanced services. Vodafone is the most aggressive, albeit less so than it is elsewhere. All UK players should hope that it stays this way.
  • 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 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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  • 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 23, 2017

    Disruptive mobile business models – Is TPG going to be ‘Free [...]

    TPG plans to disrupt the A$18bn mobile market by launching its mobile network in Sydney, Melbourne and Canberra by mid-2018 and build out its network to 80% of the population. It will deploy a small cell network across key metros, complemented by a traditional macro network. Free Mobile (France), 2degrees (New Zealand) and FreedomPop (US/Europe) have used disruptive business models to capture share from incumbents. Free Mobile and 2degrees captured about 18% and 23% of market share respectively, and FreedomPop has added approximately 2mn subscribers since launch. With four out of five key factors going in favour of TPG, a roaming deal will also likely accelerate market share gain. However, the incumbent MNOs in the Australian mobile market are already competing on price, coverage and data, and there are many MVNOs in the low ARPU prepaid segment offering competitive pricing and data

  • 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
  • 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

  • June 23, 2017

    UK mobile market Q1 2017: EE leads the way

    UK mobile service revenue growth continued to improve, with reported growth reaching 0.4%. The rate of improvement has, however, started to slow. Pricing remains solid and data traffic continues to grow healthily.Looking forward, there will be some rare regulatory relief from next quarter, as the regulated MTR cuts drop to de minimis levels, helping service revenue growth by about 0.5ppts, and there is a brief respite from the impact of regulated EU roaming cuts before the full effect of their abolition on 15 June. Q3 will not be so comfortable, with the EU roaming abolition taking full effect during the main holiday season.
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  • UK mobile market Q4 2016 – Nearly back to growth
    UK mobile market Q4 2016 – Nearly back to growth
    April 21, 2017

    UK mobile market Q4 2016 – Nearly back to growth

    UK mobile service revenue growth was -0.1% in Q4, a 0.6ppt improvement from the previous quarter. This was helped by some modest price firming, continued strong data growth, and some inflation in handset prices. In the shorter term, the outlook for market service revenue growth is fairly positive, with ARPU-enhancing pricing moves in evidence, supported by continuing strong data volume growth, and existing customer price increases due to take effect from Q2 2017.

  • Slides for Media & Telecoms: 2017 & Beyond Conference
    Slides for Media & Telecoms: 2017 & Beyond Conference
    April 19, 2017

    Media & Telecoms: 2017 & Beyond Conference transcript

    Enders Analysis co-hosted the annual Media & Telecoms 2017 & Beyond conference in conjunction with Deloitte, Moelis & Company, Linklaters and LionTree, in London on 2 March 2017. The day saw over 450 senior attendees come together to listen to 30 leaders and senior executives of some of the most creative and innovative businesses in the media and telecoms sector, and was chaired by David Abraham.