February 16, 2016 ReportsMillennials are the mobile generation, and their preoccupation with mobile erodes time spent with other media, but also offers new opportunities for traditional media brands. Millennials have a different relationship with traditional media; mobile has provided them with control over what they consume and the convenience to access content where and how they like. New content forms such as very short videos have added to the mobile experience, creating social discovery opportunities for media to reach millennials.Millennials are the mobile generation, and their preoccupation with mobile erodes time spent with other media, but also offers new opportunities for traditional [...]
February 10, 2016 ReportsVodafone Europe’s service revenue growth continued its trend of gradual improvement, helped by solid contract net adds and sustained high data traffic growth, and is now almost stable. Project Spring network metrics performed strongly in the quarter, and there is some evidence of this translating into better operating performance in Italy, which enjoyed positive mobile service revenue growth for the first time since 2010. Problems remain for the company in its other key mobile markets however, all of which remain in decline. Although these issues may prove temporary, and Project Spring may yet offer them a boost, further pressure is on the horizon due to competitor consolidation and associated regulatory remedies.Vodafone Europe’s service revenue growth continued its trend of gradual improvement, helped by solid contract net adds and sustained high data traffic growth, [...]
January 29, 2016 Reports
Rumoured details of Google’s traffic acquisition deal with Apple and also the size of its Android revenue have prompted many to doubt the search giant’s prospects on mobile.
Compared to previous analyst estimates and in view of Google’s traffic cost structure, we see the reported figures as positively rather than negatively surprising.
Since the mobile economy is still developing around the world, it is in our view misguided to evaluate the success of Android in revenue terms alone, since the OS responds to Google’s broader strategic aims.
Rumoured details of Google’s traffic acquisition deal with Apple and also the size of its Android revenue have prompted many to d [...]
December 17, 2015 ReportsEuropean mobile service revenue growth again improved, albeit marginally, with the quarter’s gain driven by declines easing further in what nevertheless remain the three weakest markets: France, Italy and Spain. Generally stabilising pricing environments were a key factor although ARPUs in these markets remain largely in decline, under continued pressure from strong out-of-bundle revenue declines. In a post-consolidation world, H3G/O2 in the UK and Yoigo in Spain will be the only mobile-only MNOs in the top five European mobile markets, effectively cementing a convergence based future. Consolidation trends might point to the prospect of greater price stabilisation but a fresh land grab for the converged market could derail this. Overall, in spite of healthy underlying data trends, we continue to see medium term growth recovery prospects capped at around 1% given precedent from both the UK, where a healthy economy, healthy pricing environment and strong data trends have failed to exceed this level, and Germany, where post-consolidation revenue growth has reverted to negative territory, both due to competition and consolidation.European mobile service revenue growth again improved, albeit marginally, with the quarter’s gain driven by declines easing further in what nevertheless remai [...]
December 10, 2015 Market Outlook, Reports
UK mobile service revenue growth remained at 0.9% in Q3, but on an underlying basis growth increased 0.1ppts to 1.4%. This continues a trend of very gradual improvement in underlying growth over the past year, while reported growth has stayed constant at around 1% due to the re-introduction of regulated MTR cuts on 1 May 2015. Within the market, performances were mixed. O2 remains a service revenue growth star performer thanks to strong sustained contract net adds and stable contract ARPU while Vodafone’s service revenue growth fell back into decline as its contract ARPU suffered due to a sharp fall in out-of-bundle revenue. EE’s contract net adds were strong, but its contract ARPU growth remains weak, partly due to its renewed contract net adds performance being supported by low ARPU data devices and B2B. Since the end of the quarter, on 28 October, the CMA provisionally approved the BT/EE acquisition without conditions, and on 30 October, the EC opened an in-depth investigation into H3G/O2. Both acquirers would be wise in our view to be wary of making any rapid changes to branding and/or channel strategy, given that EE and O2 account for nearly 60% of UK gross subscriber additions between them and disrupting these sales will have a significant impact on subscriber growth, as EE’s experience since dropping Orange and T-Mobile has shown.
UK mobile service revenue growth remained at 0.9% in Q3, but on an underlying basis growth increased 0.1ppts to [...]December 8, 2015 Reports
Smartphones will deliver half of all time spent online in 2016, and online time on smartphones will grow a further 50% by 2020. They are increasingly replacing the TV’s role as the primary provider of video content. There are stark differences in habits by age: young people’s smartphone use is highly substitutional for other media. Older people, who will account for most of the growth in time online, will add it on top of the time they already spend with other media, particularly TV. The implications of an increasingly mobile-only world are wide-ranging: social discovery and the mobile form factor change what works in content, while in-feed, branded content, payments and subscription are attractive alternatives to display and search advertising on mobile.
Smartphones will deliver half of all time spent online in 2016, and online time on smartphones will grow a further 50% by 2020. The [...]December 2, 2015 Reports
Millennials are not the multimedia generation, as is often asserted, but the first entirely digital generation, and this is best reflected in their obsessive use of smartphones. The importance of mobile is not just as a communication device, because the smartphone has become an all-important tool, which this generation relies on for a much wider range of activities than older demographics. The implications for traditional consumer media are that smartphone distribution and discovery are the key strategic issues for the foreseeable future.
Millennials are not the multimedia generation, as is often asserted, but the first entirely digital generation, [...]November 13, 2015 ReportsVodafone Europe’s revenue growth trend continued to improve, and the improved operating leverage allowed it to return to EBITDA growth after years of decline. Its mobile business was however more mixed, with improved contract net adds but worsening ARPU and revenue still firmly in decline, with growth from its recently acquired cable businesses partially disguising this. The benefits of its Project Spring investment are not yet clear, and the current wave of in-market mobile consolidation may leave Vodafone a weaker player across much of its footprint.Vodafone Europe’s revenue growth trend continued to improve, and the improved operating leverage allowed it to return to EBITDA growth after years of decline. [...]November 9, 2015 Reports
Apple’s results underlined its status as the tech industry’s biggest and most profitable company due to the iPhone, accounting for two thirds of the company’s revenue and capturing three quarters of all smartphone profits. While the iPhone dominates the $500+ handset market, the question is how will this segment develop as smartphone penetration approaches maturity in developed markets and mobile operators restructure handset subsidies. The shift to separate airtime and device plans could increase consumer price sensitivity, but leasing plans with annual replacement, supported by the iPhone’s strong second hand value, bring the opportunity of faster replacement cycles, with upside and downside risks matched.
Apple’s results underlined its status as the tech industry’s biggest and most profitable company due to the iPhone, accounting [...]October 30, 2015 Reports
We attended the Telstra Digital Summit and came away with the following key takeaways: 1) we finally have a Government that will promote technology as an enabler; 2) can the Internet of Things replace the mobile as our primary computing device? 3) technology companies will disrupt telcos; 4) mobile is driving the disruption in customer experience; and 5) the pace of disruption is accelerating.
We attended the Telstra Digital Summit and came away with the following key takeaways: 1) we finally have a Government that will pr [...]October 29, 2015 Reports
EE reported strong mobile contract net adds in Q3, after a string of weaker performances earlier in the year following the closure of Phones 4U and retirement of the Orange and T-Mobile brands. Contract ARPU growth remained at -3.1%, keeping mobile service revenue in modest decline (-1.4%), a disappointing result in comparison to modest positive growth at its rivals in recent quarters, although improving subscriber numbers should start to bridge this gap. Fixed broadband subscriber growth suffered in a competitive quarter, with EE unable to maintain momentum when faced with the launch of BT Sport Europe and corresponding increased marketing spend from Sky.
EE reported strong mobile contract net adds in Q3, after a string of weaker performances earlier in the year following the closure [...]October 23, 2015 Reports
While we expect the NBN rollout to be delayed by 2-3 years, we forecast NBN revenues to grow at a 65% CAGR to reach A$2.0b by 2020. We believe revenues will be driven by subs growth (56% CAGR) with ARPU remaining flat, as we expect CVC charges to decrease in spite of internet traffic growth of 24% CAGR through to 2020. This report provides a deep dive into our NBN forecasts and assesses the key trends and drivers that are emerging as the NBN rollout gathers momentum.
While we expect the NBN rollout to be delayed by 2-3 years, we forecast NBN revenues to grow at a 65% CAGR to reach A$2.0b by 2020. [...]October 14, 2015 Reports
European mobile service revenue growth improved to the highest in over four years driven by improvements in the three slowest growing markets of late. Out-of-bundle revenues are still declining at a rate of over 10% but data revenue growth trends point to underlying strengths in the revenue profile. Looking at the longer term picture begs the question as to whether the quarter’s improvement can be repeated over the next 18 months, transforming the industry into one with extremely healthy revenue growth of 5%-10%; on balance we are not very optimistic. Two major in-mobile transactions are yet to be approved by the EC, namely H3G/O2 in the UK and an H3G/Wind JV in Italy. The recent precedent from Denmark is somewhat discouraging, although the Danish consolidation was unusual in some respects. Nonetheless comments from the new competition commissioner Margrethe Vestager suggest that regulatory caution towards 4-to-3 mergers is still high. Progress towards convergence is continuing with few operators in a post-consolidation world being either 100% fixed or 100% mobile. Convergence has to date been discount-led and damaging to market revenues, but post-consolidation, operator rhetoric has been reassuringly more focused on intentions for increased investment in both LTE mobile networks and high speed fixed networks.
European mobile service revenue growth improved to the highest in over four years driven by improvements in the three slowest growi [...]September 24, 2015 Reports
While we don’t expect the overall size of the Telco market to change materially, we do expect product share to change over the next five years. We expect Fixed Voice to decline to 7% of the overall market from 15% currently driven by challengers offering VOIP style plans to take share from Telstra. We are in the midst of a material change in how Telco products are delivered and consumed, this report assesses these changes and provides our market outlook.
While we don’t expect the overall size of the Telco market to change materially, we do expect product share to change over the ne [...]September 16, 2015 Reports
New ‘s’ versions of the iPhone 6 and 6Plus will help to maintain Apple’s grip on the high-end smartphone market. A notebook-sized iPad Pro and revamped Apple TV round out this year’s iOS device upgrade. iPhone sales may be further boosted by a new leasing plan, initially US-only, allowing users to upgrade handsets each year more easily, which also should enable the company to take a share of the used iPhone market, and could even be a precursor to an Apple MVNO. While the new iPad and Apple TV are unlikely to have a material impact on profits in the near term, they should be seen in the context of the wider battle for control of the connected office and home.
New ‘s’ versions of the iPhone 6 and 6Plus will help to maintain Apple’s grip on the high-end smartphone market. A notebook-s [...]September 2, 2015 Reports
Ten months after the acquisition of France’s SFR by Numericable, cost cutting targets appear likely to be exceeded, but the promised resumption of revenue growth may still take time to materialise as downward price pressures persist and the subscriber base has yet to stabilise. Profitability has increased faster than expected, while debt ratios look sustainable and set to decline. The challenge is to relaunch marketing while achieving the guided ambitious EBITDA margin growth. Investments, even if lower than planned, may be enough to sustain network competitiveness. The rationale for consolidation between Numericable, Bouygues and/or Iliad remains strong. But Numericable’s model looks sustainable without this. Side investments in media may at best bring political clout. The main risk stands with parent company’s Altice’s debt-finance expansion.
Ten months after the acquisition of France’s SFR by Numericable, cost cutting targets appear likely to be exceeded, but the promi [...]August 27, 2015 Reports
The UK is now a smartphone society: by the end of this year smartphone users will exceed the PC internet audience and by 2020 we project penetration will reach 83%. The average smartphone user now spends an hour and three quarters a day online, significantly more than the equivalent for PC and tablet, and phones already account for nearly half of all time online. We are positive on tablet user numbers, and think PCs will be resilient, especially for work users. All in all we expect connected time in 2020 to be 21 billion hours higher than in 2015, up over 35%. Commercial revenues via smartphones and tablets still lag their share of internet usage, but the monetisation gap versus the PC is closing fast: the newer devices accounted for 27% of internet search and display advertising last year, up 8ppts versus 2013, and 36% of e-commerce transactions, up from a quarter a year earlier. Consumers are already thinking mobile-first; businesses will have to follow.
The UK is now a smartphone society: by the end of this year smartphone users will exceed the PC internet audien [...]August 26, 2015 Reports
UK mobile service revenue growth dipped a touch in Q2, falling to 0.9% from 1.0% in the previous quarter, although all of the dip and more was due to the reintroduction of mobile termination rate cuts in the quarter, with underlying growth rising to 1.3%. O2 is now the fastest growing operator in both contract net adds and service revenue growth terms, exceeding even the much smaller H3G, and its revenue growth lead over EE and Vodafone expanded during the quarter. BT’s consumer mobile launch was relatively successful from BT’s perspective, with it garnering 100k subscribers in the first three months, but this appeared to have no impact at all on the mobile operators, which had a relatively strong quarter for contract net adds in spite of this. We conclude that much of the fixed line MVNO base growth is coming from impulsively upgrading prepay users, consumers wanting a spare SIM and other MVNO customer bases – sources that do not threaten the MNOs.
UK mobile service revenue growth dipped a touch in Q2, falling to 0.9% from 1.0% in the previous quarter, altho [...]August 21, 2015 Reports
UK residential communications market revenue growth accelerated to 5.8% in Q3, from 5.0% in the previous quarter, helped by an overlapping price rise at BT, and supported by firm pricing and accelerating high speed adoption elsewhere. In contrast, volume growth in the core three products continues to slow, with little sign that this will ever re-accelerate. In the longer term we cannot see ARPU growth acceleration continuing to fully compensate, and market revenue growth might also have peaked. With Virgin Media’s continuing network extension and improving pay TV service putting pressure on the other operators, Sky and TalkTalk are protecting themselves by aggressively marketing high speed broadband. Correspondingly, this quarter marks the first time that Openreach’s high speed net adds were mostly derived outside of BT’s retail divisions.
UK residential communications market revenue growth accelerated to 5.8% in Q3, from 5.0% in the previous quarter, helped by an over [...]August 11, 2015 Reports
Virgin Media’s subscriber figures bounced back in Q2 after a weak Q1, and consumer revenue growth also improved to a respectable 3% despite continued headwinds from VAT changes. The UK broadband market remains tough, and BT Sport Europe’s launch in Q3 will not make it any easier, but Virgin Media’s access to this and all other sports channels means that it should be able to remain above the fray. The network extension program is likely to give further growth impetus from 2016, and the company is laying the groundwork for network speed upgrades which will maintain its speed advantage for at least the medium term.
Virgin Media’s subscriber figures bounced back in Q2 after a weak Q1, and consumer revenue growth also improved to a respectable [...]August 6, 2015 Reports
EE remains the slowest growing of the ‘big 4’ UK MNOs or the only one in decline with service revenue growth at -1.8%, a touch lower in reported terms despite a slight underlying improvement. Adjusted EBITDA margin improved to a record 26.6%, a somewhat fortunate compromise on the loss of gross adds share since the demise of Phones 4U – and associated reduction in (expensive) third-party gross adds. In a seasonally low broadband quarter, EE actually gained net adds share, showing resilience to heightened marketing from Sky and underscoring the merits of EE’s in-store cross-selling strategy.
EE remains the slowest growing of the ‘big 4’ UK MNOs or the only one in decline with service revenue growth at -1.8%, a touch [...]August 5, 2015 Reports
Vodafone Europe’s slow but steady improvement in service revenue growth continued into the June quarter to reach -1.5% from -2.6% in the previous quarter, and -8.2% just one year ago. This was driven in roughly equal parts by subscriber growth improvements and ARPU, with both likely benefiting from Vodafone’s Project Spring investment, rapidly growing mobile data and an easing of competitive aggression. Mobile service revenue is still declining at 2-3%, making margin stabilisation still challenging for now, but there remains room for further improvement, and revenue stabilisation is at last in sight
Vodafone Europe’s slow but steady improvement in service revenue growth continued into the June quarter to reach -1.5% from -2.6% [...]August 4, 2015 Reports
BT had a solid all round Q1, with broadband share robust, fibre growth still strong, revenue growth bouncing up a little on the business side and cost control robust.
BT Sport Europe launches this quarter, and will boost revenues but raise costs by more; we continue to believe that the extra net costs can easily be covered by group-wide costs savings to allow group EBITDA to continue growing over the full financial year.
The broadband market is increasingly characterised by high headline pricing coupled with heavy promotional discounting, and BT’s early headline price rise scheduled for September continues this trend.
BT had a solid all round Q1, with broadband share robust, fibre growth still strong, revenue growth bouncing up a little on the bus [...]July 29, 2015 Reports
Video is critical for NZ telcos growth prospects. While there is an attractive opportunity for a direct strategy, we believe telcos best strategy is to be an enabler of video by partnering with video operators whether OTT and increasingly traditional. We view Spark as the exception to a partner strategy, but can it get scale?
Video is critical for NZ telcos growth prospects. While there is an attractive opportunity for a direct strategy, we believe telcos [...]