CHART OF THE WEEK

Average monthly nbn customer data traffic, FY16 to FY20

Telstra and nbn Co FY20 update: increasing wireless and enterprise competition will drive price pressure

nbn plans by download speed (%)

Telstra’s and nbn Co’s FY20 results show the early impact of COVID-19, but also contain indications of underlying shifts in the industry. We expect rising competition for fixed broadband subscribers as the mobile network owners (MNOs) try to maximise returns from the 5G mobile investment by launching 5G fixed wireless. Telstra’s announcement it will roll out 5G fixed wireless will step up this rivalry.

nbn Co is growing its enterprise business strongly. This is good news for end users, but not so much for the rest of the industry, which is seeing data and IP prices fall fast.
We also see signs that mobile pricing may be heading upwards. If this is borne out, we also expect to the mobile network operators taking a look at their mobile wholesale pricing as well. Click here to read our report.

Optus 1QFY20 and Vocus FY20 update: revenues fall amidst declining telco market

Operating and financial metrics – Optus Mobile

As we remarked last week, pricing pressure is evident all over the telco industry. Pre-COVID-19, we noted rising pressure on mobile ARPUs due to competition and increased consumer interest in cheaper plans. We forecast that COVID-19 would exacerbate these pressures, and this has been validated by Vocus’, Optus’ and Telstra’s results this week.

For Optus, postpaid ARPU declined likely due to the increased mix of SIM-only plans and data price competition, while prepaid handset ARPU likely declined due to increasing competitive intensity in the lower priced value segment. Vocus saw consumer revenues decline across broadband (-3%), voice (-50%) and mobile (-2%). Voice now contributes only 2% of Vocus’ consumer retail revenues. Energy was the only consumer segment to show a growth (+2%).
5G fixed wireless is emerging as a major point of industry focus. Optus already offers 5G fixed wireless service cheaper than its NBN plans. Vocus may now also resell 5G fixed wireless service after Optus’ recent announcement that it will offer wholesale 5G fixed wireless. Our 2020 surveys found significant interest in 5G fixed wireless broadband amongst both consumers and small businesses. For our full take on the Optus and Vocus results, click the link to our report.

ITV UK H1 2020 results: Clawing out of the ravine?

 Daily minutes of viewing by week in year, 4+ (2019 dotted/2020 solid)

There may be light at the end of the tunnel. After Q2 advertising revenues dropped 43% YoY, ITV has noted that there has been an upward trajectory (July down 23%, August appearing to be even better). This would leave ITV’s advertising revenues down between 15-25% for 2020 (ITV is unwilling to give forecasts). It appears that advertisers are beginning to think further ahead than they have for months—anecdotally, while around 80% of ad revenue is normally booked prior to the month’s start, this had reversed to about 20% in Q2. For more details, click to read a report from our UK research partner, Enders Analysis.

BT UK – COVID-19 hit, fibre promise

BT Group revenue and EBITDA growth

BT’s first full quarter under the shadow of COVID-19 revealed a mix of negative impacts not entirely as predicted, by ourselves or indeed BT itself. The suspension of sport certainly had an impact on BT Sport revenue, but only about half of what we had feared (less than £50 million versus around £100 million), and Openreach was also relatively unaffected, perhaps having returned to full service levels quicker than anticipated. There was a strong negative impact on B2B revenue, but this was much more focused on SMEs than large corporates, with Global’s financials largely unaffected (so far), and mobile (which BT had not specifically warned about) was hit hard across consumer and (especially) B2B, with the results of the other mobile operators suggesting that the effect was market-wide. Click here to request the full report.