Local start-ups drive supply chain improvement and environmental sustainability\ UK O2 – Merger in the time of COVID\ UK Journalism on the precipice\ UK BT – Fibre up, dividends down\ Vocus to acquire Stuff Fibre & UFF sold to Australian investors



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Welcome to the Venture Insights newsletter!
In this week’s edition, we look at: 

  • Local start-ups drive supply chain improvement and environmental sustainability
  • UK O2 – Merger in the time of COVID
  • UK Journalism on the precipice
  • UK BT – Fibre up, dividends down
  • Vocus to acquire Stuff Fibre & UFF sold to Australian investors

CHART OF THE WEEK

Funding in-flows for short-listed local start-ups, 2015 – 2019 (A$m)



Source: Pitchbook, Venture Capital portfolio company websites

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Local start-ups drive supply chain improvement and environmental sustainability

Global greenhouse gas emissions contribution in 2016, by sector



Source: World Resources Institute

Local start-ups have a vital role in improving environmental and economic outcomes in supply chains, and we have identified four critical sectors where start-ups can make a difference. Start-ups are creating innovative solutions to transform supply chains in the logistics, agriculture, food and beverage, and Greentech sectors. Most start-up fundraising rounds in the past 5 years are backed by venture capital. However, the Federal Government’s green bank vehicle – Clean Energy Finance Corporation – has also been an important investor in renewable and circular economy venture capital, and non-monetary support from state governments has also been important. This support should be maintained.
The telco industry and other tech providers will also find some opportunities in the market for efficiency and sustainablility. The increasing use of IoT, artificial intelligence, and cloud-based platforms offers a new growth avenue for telcos and the IT industry, which are also taking steps to reduce their own energy use. But devices and software will dominate new value creation. Start-up success also requires existing businesses to adopt new technologies and integrate their solutions into the supply chain. Businesses, including telcos and IT companies, can provide their support by becoming a preferred supplier, customer, distribution partner, or an investor. To read our report, click here.

Click to read report

UK O2 – Merger in the time of COVID

OIBDA, revenue, and mobile service revenue growth



Source: ENDERS ANALYSIS, COMPANY REPORTS

O2’s merger with Virgin Media seems more of a marriage of convenience than a determined pursuit of synergy benefits. With the owners effectively selling their stakes, the combination will be well-advised to exercise caution in any convergence strategy that they pursue. O2’s results this quarter appear to be fairly decent with all metrics ticking up slightly, although caution is advised in interpretation and pressure on ARPU has not eased. With the mobile sector reasonably well insulated from COVID-19 and O2 likely to fare better than most in out-of-contract discounts, the short-term outlook is relatively robust, but competitive and macroeconomic vulnerabilities remain on the horizon. For more details, click to read a report from our UK research partner, Enders Analysis.

Click to read report

UK Journalism on the precipice

Press advertising change since 2012 (%)



Source: AA/WARC, ENDERS ANALYSIS

Journalism is on the precipice with more than £1 billion likely to fall off the industry’s topline. Several years of projected structural revenue decline in advertising and circulation have occurred in just the past few weeks of the coronavirus pandemic, with no letup in sight. The UK’s rich heritage of independent journalism is at risk, with responses by Government and ‘big tech’ multinationals welcomed but ultimately inadequate. We make two further recommendations for engagement in this report. Journalism enterprises from the small, local and specialist outfits through to national household brands will either fail or remain on a path to future failure. For more details, click to read a report from our UK research partner, Enders Analysis.

Click to read report

UK BT – Fibre up, dividends down

Openreach full fibre build plans (net adds, m)



Source: Openreach full fibre build plans (net adds, m)

BT’s March quarter appeared to have been going reasonably well until COVID-19 hit, with full year guidance still being broadly met, but the new financial year will be hit harder, with BT Sport, SME and new fibre connection revenue particularly vulnerable. BT’s full fibre roll-out has been temporarily slowed by COVID-19, but it is accelerating its ambitions regardless increasing both its 12-month (4.0m to 4.5m) and longer term (15m to 20m) coverage targets. BT is suspending and then rebasing its dividend, in part to cover the above costs. While we regard BT’s fibre investment as a good one, investors and analysts alike have been frustrated by a lack of clear multi-year guidance of the benefits, perhaps as a result of BT not wanting to reveal its negotiating hand to the regulator, government and retail partners. For more details, click to read a report from our UK research partner, Enders Analysis.

Click to read report

Vocus to acquire Stuff Fibre & UFF sold to Australian investors

Vocus NZ has agreed to acquire Stuff Fibre for an undisclosed sum. Following the completion of the acquisition, Stuff Fibre’s 20,000 broadband customers will join Vocus’ user base of 479,000 Australian subscribers. Vocus NZ chief executive Mark Callander says Vocus will remain focused on bundle offerings such as fixed broadband, mobile and energy services. This move will enable Vocus to increase its market share across these areas and deliver on customer experience expectations. The purchase of Stuff Fibre is in line with Vocus’ growth strategy and reflects its confidence in Stuff Fibre’ opportunities for growth in the coming years, particularly during uncertain times. Also, First State Investments, an Australian asset management company, has agreed to purchase WEL Networks and Waipa Networks’ stake in UFF Holdings for NZD$854 million. The UFF network provides broadband to more than 237,000 households and businesses in Hamilton and major centres throughout Waikato, Tauranga, Taranaki and Whanganui. The sale is subject to approval from Overseas Investment Office due to the importance of fibre network as a national strategic asset.