UK mobile market Q1 2019 – Pressure to mount after mixed bag in Q1

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UK mobile market Q1 2019 – Pressure to mount after mixed bag in Q1

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UK mobile market Q1 2019 – Pressure to mount after mixed bag in Q1
The UK mobile market posted its slowest growth in more than two years this quarter; just 0.5% service revenue growth although net adds were strong and churn was down
ARPU is under considerable pressure thanks to regulation limiting out-of-bundle spend which will exacerbate as the year progresses
Several other negative developments look set to be layered on the pressures this quarter, including a step-up in competitive intensity as 5G launches –  with H3G’s pricing of unlimited data a sign of a resurgence in its aggression


Executive summary – Pressure to mount after mixed bag in Q1

Executive summary – emerging headwinds

Market and competitive trends

  • UK mobile market – just about growing
  • Competitive performances – network outage drags O2, EE bounces
  • Net adds – EE dominates
  • Churn improvement for many
  • ARPU trends mixed with Vodafone and O2 under pressure
  • Pricing – flatter pricing for extra capacity with H3G aggressive on unlimited data pricing
  • Data volume growth bolstered by Ofcom rulings
  • Financial performance: margins trending upwards
  • 5G launch to ease capacity constraints

Emerging headwinds

  • Several headwinds in 2019
  • Out-of-bundle regulation already hitting trends
  • Contract price rise outlook greatly diminished
  • Annual licence fees pop up again; a drag on EBITDA
  • Intra-EU calls could be a very meaningful drag
  • End-of-contract notifications a potential hit to EBITDA


  • IFRS 15 reporting note
  • Zero-rating
  • Previous contract price increases for existing customers
  • Spectrum

List of charts/tables

Figure 1. Outlook for change in mobile trends in 2019 by operator

Figure 2. Reported mobile service revenue growth

Figure 3. UK mobile market net adds (000s)

Figure 4. Reported mobile service revenue growth by operator

Figure 5. Contract net additions (000s)

Figure 6. Contract gross additions share

Figure 7. Annualised contract churn

Figure 8. Contract ARPU growth

Figure 9. SIM-only share of contract

Figure 10. ‘Sweet spot’ bundle with iPhone 6s/7/8/XR

Figure 11. SIM-only pricing by data allowance (current price in solid markers, March price hollow)

Figure 12. Data volume growth by operator

Figure 13. Data volume growth vs. data usage per smartphone

Figure 14. Capex by operator, last 6 months (£m)

Figure 15. EBITDA margin by operator, trailing 12 months

Figure 16. Cashflow (EBITDA-capex) margin by operator, last 12 months (£m)

Figure 17. Spare capacity per operator (PB per year)

Figure 18. Timeline of UK mobile capacity

Figure 19. Outlook for change in mobile trends in 2019 by operator

Figure 20. Operators’ restrictions on out-of-bundle spending before new regulation

Figure 21. MNO price increases

Figure 22. RPI year-on-year growth

Figure 23. Annual licence fees (£m per MHz per annum)

Figure 24. Title Drag from ALF change on EBITDA

Figure 25. Bolt-on offers for international calls from mobiles

Figure 26. Scenario analysis – revenue and EBITDA drag from EU calls price cap

Figure 27. End-of-contract notifications by mobile providers

Figure 28. UK zero-rated data offers

Figure 29. Select previous MNO price increases

Figure 30. Mobile network operator spectrum ownership (both up and down MHz)