COVID-19 impact on mobile ARPUs\ COVID-19 UK TV impact\ VHA/TPG Focus on Infrastructure\ European mobile in Q4 2019

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Welcome to the Venture Insights newsletter!
In this week’s edition, we look at the impact of COVID-19 on Australian mobile, COVID-19’s impact on UK TV, VHA’s proposal to co-invest in NBN and our views on it, and European mobile performance in Q4 2019.

CHART OF THE WEEK

What is the main reason you are thinking about changing your mobile service provider in Australia?



Source: VENTURE INSIGHTS CONSUMER SURVEY MARCH 2020, N=384

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COVID-19 impact on mobile ARPUs, 5G adoption and MVNO wholesale prices 

Willingness to move to 5G mobile (March 2020)



Source: VENTURE INSIGHTS CONSUMER SURVEY MARCH 2020, N=1,016

Prior to COVID-19, Venture Insights had highlighted pressure on mobile ARPUs due to competition and increased interest in cheaper plans (such as those offered by Belong and Aldi Mobile). Our latest (March 2020) consumer telco survey shows price is still the key purchasing factor for mobile. In addition, the survey showed increased MVNO growth with 37% of the survey respondents looking to switch to MVNOs/resellers indicating a continued focus on price saving. Our survey also showed that interest in 5G takeup had declined from 52% in 2019 to 43% in 2020. With the expected pressure on household spending due to COVID-19 , we question whether mobile operators will be able to charge a premium for 5G over this time period – e.g.: Telstra’s plan to charge an A$15 5G premium for its lower plans from 30 June 2020. Post-COVID-19, we expect continued pressure on retail ARPUs as economic downturn seems inevitable. As such whilst we expect continued growth for MVNOs/resellers, there may also be pressure on wholesale MVNO prices by MNOs in an attempt to manage industry ARPUs. For more details, click on to read our report.

Click to read report

COVID-19 UK TV impact

TV advertising as a proportion of total revenue mix (%)



Source: COMPANY REPORTS, ENDERS ANALYSIS

COVID-19 has led to an unprecedented decline in advertiser demand for TV, and while the steepest drop has occurred, broadcasters will feel the impact over a long period of time. Programming costs are being cut or deferred, but it is not possible—or even sensible—to reduce total programming budgets significantly in the mid-term due to existing contractual commitments. Increased government support in the form of advertising spend, a loosening of Channel 4’s programming obligations—the lifeblood of the independent production sector—and revisions to existing measures will be required to ensure a flourishing, vibrant sector for the future. For a more detailed look at the various mitigation measure broadcasters could put in place and the impact of declining advertising spending will have on the broadcasting sector, click to read a report from our UK research partner, Enders Analysis. 

Click to read report

VHA/TPG Focus on Infrastructure Investment and Small Cells

We got an insight into Australia’s post-2020 broadband future on Tuesday, with VHA’s announcement at the 2020 CommsDay Summit that it was ready to co-invest with NBN to replace copper with fibre in certain situations. VHA also noted the importance of TPG’s assets for its mobile network, including 27,000km of trunk fibre, small cell sites in urban areas, 4G spectrum, and hundreds of thousands of existing fibre building connections. The benefits of this infrastructure consolidation are evident.

Venture Insights’ view is that Australia should consider new models of mobile and fixed infrastructure investment and sharing – as per our previous report on mobile network sharing. The established models of full vertical integration in mobile and of public funding in fixed are approaching their use-by date. Co-investment models imply new corporate vehicles to build, own and operate telecommunications infrastructure. These vehicles can be structurally and functionally separate from retail activities, and can form the basis for new infrastructure sharing arrangements that cut capital costs while maintaining competition at the retail level. This trend is already evident in 5G radio infrastructure sharing in other markets such as the UK, Denmark, Finland, China and Singapore, and we believe will accelerate here as the Australian industry feels the impact of the inevitable COVID-19 economic slowdown.

European mobile in Q4 2019

Reported mobile revenue growth—top 5 European markets



Source: ONS, ENDERS ANALYSIS, COMPANY REPORTS

European mobile service revenue growth improved by 1ppt to -1.2% primarily as a consequence of diminished competitive intensity in France. Trends elsewhere were largely flat. The mobile sector is playing an important role in tackling COVID-19 and is likely to be relatively resilient in the short term with a broadly neutral financial impact. Longer term it will be exposed to the fortunes of the economy. There are reasons to believe that the improvement in trends evidenced in the last quarter may continue as churn reduction takes the heat out of some markets, cuts to intra-EU calls annualises out and for most countries, end-of-contract notifications will only begin to impact in 2021. For a more detailed look at the European mobile market, click to read a report from our UK research partner, Enders Analysis

Click to read report

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