CHART OF THE WEEK

5G share of total mobile connections 

Australian Telecommunications Market Outlook

Retail telco market revenue growth rates by segment

We anticipate a negative-growth telecommunications market over the next few years, with slow growth in consumer revenues being offset by declines in the enterprise market. In 2020, we expect COVID19 to have a negative effect on both consumer and enterprise revenues as economic activity declines. Adding the negative impact of declining population growth due to immigration restrictions in 2020 and 2021, we expect -0.6% CAGR for the retail telecommunications market between 2019 and 2023. Our research also shows underlying consumer resistance to mobile price increases. An economic downturn will only exacerbate this resistance, limiting the mobile operators’ ability to capitalise on 5G investment. As a result, we expect 5G takeup and rollout to be slower than we previously anticipated. Given the subdued industry environment, we question whether the merged TPG will disrupt mobile pricing through aggressive discounting. Mobile prices (including wholesale MVNO prices) will be stable and possibly increase, and market shares will only change slowly. Click on to read this report for more details.

HBO Max: Failing to generate retail momentum

Year-on-year trend in HBO revenue*

In a cautionary note on the prospects of the SVOD boom, the 27 May US launch of direct-to-consumer video service HBO Max did not save its parent company Home Box Office from a 5% year-on-year (YoY) decrease in revenues in Q2 2020. This disappointing performance took place despite the formidable stimulus provided to home entertainment demand by the lockdown, alongside a significant advertising and publicity effort. For more details, click to read a report from our UK research partner, Enders Analysis.

TalkTalk UK: Post-lockdown challenges and opportunities

TalkTalk ARPU, subscriber, and revenue growth

TalkTalk started its new financial year with revenue growth declining to -8% in Q1, although this is partly lockdown-related, and costs have also declined as churn plummeted. While backbook pricing continues to be a challenge, new customer pricing continues to firm, which makes its expectation of stable/growing EBITDA for FY2020/21 possible albeit still difficult. The company expects to launch full fibre products from Openreach imminently, and from CityFibre before the end of the year, with the adoption and eventual economics of these crucial to its medium and long-term future. For more details, click to read a report from our UK research partner, Enders Analysis.

ACCC steps up pressure on platform providers

Google revenue breakdown, $USD

The ACCC this week announced Federal Court proceedings against Google, alleging that Google misled Australian consumers to obtain their consent to link personal Google account information with the information collected on non-Google sites by its DoubleClick technology. This doubtless improved the efficiency of Google’s ad targeting, but the ACCC questions whether Google obtained explicit informed consent.

This action opens up another front in its battle with the global platform providers. The ACCC and the federal Government have already decided to impose mandatory business practice regulation in the advertising market. This new action is focussed on data protection. However, the ACCC noted in its July 2019 Platforms Inquiry report that these areas interact and reinforce one another, so this action should be seen a part of a suite of measures designed to address market power in the advertising industry.
In our view, the platforms’ expansion is just getting started. We think they plan to extend their reach into a host of traditional sectors, including finance, retail and logistics. To read our report on the scope of the global platforms’ ambition, click here