Brief reprieve from COVID turbulence: UK mobile market in Q4 2020

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Brief reprieve from COVID turbulence: UK mobile market in Q4 2020

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Brief reprieve from COVID turbulence: UK mobile market in Q4 2020

Contents

Executive summary: brief reprieve from Covid turbulence

UK mobile market: a tentative pickup in trend

Competitive performances: O2 recovers, H3G’s recovery flatlines

Assessing performance: neither service nor total revenue growth are perfect measures

COVID drag worsening into Q1: outlook linked to intercontinental travel

Net adds: Vodafone tempered, EE and O2 resurge

Churn: strong year-on-year declines at EE and O2

ARPU trends remain firmly in decline

O2 belatedly joins in the move to higher in-contract price rises

Pricing: Aggression tempered

Unlimited pricing: everyone takes a breather

Financial performance: better EBITDA trends in Q4

Financial performance: H3G slips into negative cashflow

End-of-contract legislation resumed since end of June—driving churn up for most

Out-of-contract notifications now sent to all subscribers—many of them in Q1 2021

5G spectrum auction: all change on the capacity front

5G spectrum auction: why the bargain basement prices?

5G spectrum auction: negotiations in train on resolving contiguity issues

5G rollout much less aggressive than 4G—for good reason

UK tower companies: increasing activity in a complex market

UK towers outlook: limited growth opportunities, merger potential long-term

Consolidation prospects mounting, but hurdles to overcome

COVID-19 creates longer-term challenges...and opportunities

Virgin Media-O2 merger: preliminary approval announced today

O2-Virgin Media: a merger of convenience

Huawei now banned from 2027 at great cost to the sector

Another blow to Dixons Carphone as O2 and now EE end the relationship

Shared Rural Network agreement finalised

IFRS 15 reporting note

IFRS 15 and means of distribution as a driver of revenue trends

Zero-rating

Previous contract price increases for existing customers

Spectrum ownership

Disclaimer

List of charts/tables

Reported mobile service revenue growth
UK mobile market net adds (000s)
Reported mobile service revenue growth by operator

Reported total mobile revenue growth by operator 

BT/EE total revenue and service revenue growth (IFRS 15)
O2 total revenue and service revenue growth (IFRS 15)
Vodafone total revenue and service revenue growth (IFRS 15)
H3G total revenue and service revenue growth (IFRS 15)
Change in COVID-19 impact from Q3 to Q4 and outlook 2021
Contract net additions (000s)
Annualised contract churn
Contract ARPU growth
SIM-only share of contract subscriptions
MNO price increases in 2021
Inflation-linked price increases, 2018-2021
‘Sweet spot’ bundle with iPhone 6s/7/8/XR/11/12 SIM-only pricing by data allowance (GB)—November 2020
SIM-only pricing by data allowance (GB)—April 2021
SIM-only unlimited data bundle pricing (£/month)
EBITDA margin, last 12 months
EBITDA growth, last six months
EBITDA, last six months (£m)
Cashflow, last six months (£m)
Capex, last 6 months (£m)
Cashflow (EBITDA-capex) margin, last 12 months (£m)
Potential drag from loss of ‘sleepers’
Timing and impact of out-of-contract notifications and discounts
Spectrum holding by operator (MHz)
Operator shares of capacity
Cost of spectrum at actual price paid, reserve price, and historic market prices (£m)
Spectrum acquired and prices paid by operators
Spectrum allocation in the 3.4-3.8 GHz band
Estimated 5G coverage by operator
4G (dotted line) versus estimated 5G (dots) coverage by operator
UK mobile networks and infrastructure
ROCE using spectrum at current value and market shares
UK underlying service revenue vs GDP growth
Residential market shares (including pay TV)
Total market shares (including pay TV)
Huawei’s market shares
UK mobile coverage (% of landmass)
IFRS 15 effect of indirect and direct mobile contract distribution
UK zero-rated data offers
Select previous MNO price increases
Mobile network operator spectrum ownership (both up and down MHz)