• With the European Commission’s decision to block the H3G/O2 merger annulled and with new H3G management sounding a very pro-consolidation tone, the prospect of mobile operators going from four to three in the UK seems to be back on the cards
• Both H3G/Vodafone and H3G/O2/Virgin Media combinations seem possible although each has its own complexity—existing network sharing arrangements being one of them
• With 5G delays and mounting costs following the decision to ban Huawei, consolidation is increasingly feeling like the most viable option for H3G whose returns are already too low and falling rapidly

Contents

Executive Summary

Scale at the heart of H3G’s woes

Sector shrinking in spite of booming demand

H3G’s financial performance is deteriorating

European Commission merger-blocking decision overturned

Two would-be suitors in the frame

What about the towers?

Capacity MVNO a likely remedy

Competitive intensity likely sustained with remedies

List of charts/tables

Figure 1: UK MNO Market Shares, 2019

Figure 2: Contract subscribers (m)

Figure 3: Mobile service Revenue (£m)

Figure 4: Last 12 months data traffic by operator (PB)

Figure 5: Service revenue per GB by operator (£)

Figure 6: ROCE using spectrum at current value

Figure 7: UK mobile market service revenue growth

Figure 8: H3G service revenue and EBITDA growth

Figure 9: Spectrum holding by operator (MHz)

Figure 10: Vodafone forecast use of cash (€m)

Figure 11: UK mobile networks and infrastructure