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 [...]
July 24, 2015 Reports
Apple delivered strong results in Q3 2015, selling a record number of iPhones for the June quarter, though iPad sales slid dramatically as consumers switch to ‚Äėphablets‚Äô and the company did not provide any detail on early sales of Watch, its biggest product launch since 2010.¬†We remain bullish both on the iPhone and the Watch‚Äôs long term potential, though the latter remains a work in progress and, like many of Apple‚Äôs existing customers, we await the next iteration with interest; by contrast the iPad may have peaked already.¬†Rising revenue from App Store, up 24% year-on-year, as well as new products like Apple Music and Apple Pay, should continue to boost the contribution from Services, and we expect this to evolve into a more material part of the business, but ultimately it‚Äôs still all about the iPhone.
Apple delivered strong results in Q3 2015, selling a record number of iPhones for the June quarter, though iPad sales slid dramatic [...]
July 16, 2015 Reports
We believe Telstra has stolen a lead on its competitors with the launch of Air. We believe this network will be hard to replicate and will therefore drive customer retention and acquisition benefits for Telstra. WiFi is also increasingly important to help manage network capacity pressure while providing new revenue opportunities to telcos (critical given the pressure on core telco revenue).
We believe Telstra has stolen a lead on its competitors with the launch of Air. We believe this network will be hard to replicate a [...]
June 30, 2015 Reports
Video is critical for Australian telco‚Äôs growth prospects but a standalone strategy is fraught with difficulty. We believe telco‚Äôs best strategy is to be an enabler of video by partnering with video operators whether OTT and increasingly traditional (FTA offers a real opportunity as it evolves its multi-screen proposition).
Video is critical for Australian telco‚Äôs growth prospects but a standalone strategy is fraught with difficulty. We believe telco‚ [...]
June 25, 2015 Reports
European mobile service revenue growth improved once more in Q1, rising 1.1ppts to -1.6%, continuing a trend of underlying growth improvement that started in Q3 2014. The improvement was mainly driven by easing declines in France and Italy but deteriorating performance in Spain meant that Europe-wide growth did not improve by as much as in the last two quarters.¬†Pricing stabilisation appears again to be the main driver of recovery (in those countries that are recovering) with more rational pricing allowing operators to monetise rapid data usage growth. However, more price cut moves have been made in France since the end of the quarter, Italy remains an inherently unstable market and Spain again suffered this quarter from convergence discounts.¬†As data usage continues to grow rapidly, customer concern for high quality data networks increases, which makes investment in superior 4G networks a clearer differentiator for operators to convey to customers. The UK market leads the EU5 in this regard, and has taken advantage through rationally priced tiered data plans, but this effect spreading to the rest of the EU5 is a source of optimism as 4G roll-outs continue across Europe.
European mobile service revenue growth improved once more in Q1, rising 1.1ppts to -1.6%, continuing a trend of underlying growth i [...]
June 24, 2015 Reports
The UK broadband market remained strong in Q1 2015, backed up by healthy volumes, with a modest weakness in ARPU causing revenue growth to slow to 4.5% from 5.7% in the previous quarter. ARPU growth was particularly weak at BT and Virgin Media, with part of this due to one-off factors, but part due to the dilutive effect of increased promotional activity.¬†Broadband volumes continued to modestly accelerate, pay TV volumes modestly decelerated and line rental growth levelled off. The highlight was high speed broadband, with market net adds continuing to rise, driven by increased marketing and BT‚Äôs roll-out reaching more rural areas where the speed improvement is more marked.¬†Since the end of the quarter, Vodafone launched a new consumer dual play product. Launch pricing is at the bottom end of the current price curve, but not well below it, suggesting that it is wisely imitating EE‚Äôs approach of cross-selling a profitable product as opposed to deep discounting on broadband to build mobile market share
The UK broadband market remained strong in Q1 2015, backed up by healthy volumes, with a modest weakness in ARPU causing revenue gr [...]
June 17, 2015 Reports
UK mobile service revenue growth continued to improve, rising to 1.2% in Q1, a modest figure but still the best of the five largest European mobile markets, albeit weaker than the UK consumer fixed line market (4%-5%).¬†O2 continued to be the strongest grower of the ‚Äėbig 3‚Äô, and maintained over 40% share of contract net adds. Both Vodafone and EE appear to have suffered from the demise of Phones 4U, having been its biggest (and latterly its only) network operator suppliers. EE is also suffering from the gradual withdrawal of its Orange and T-Mobile brands, which is forcing it to work harder to both attract and retain customers.¬†Vodafone launched a competitively priced consumer fixed broadband offer on 10 June. EE has shown that there is an opportunity for Vodafone to have some limited success cross-selling broadband through its shops, but O2's mobile-only success and EE's struggles in its mobile business suggest that this will not drive improved mobile performance
UK mobile service revenue growth continued to improve, rising to 1.2% in Q1, a modest figure but still the best of the five largest [...]
June 16, 2015 Reports
We have synthesised the key themes from the latest Internet Trends Report from Mary Meeker at Kleiner Perkins Caufield & Byers. We don‚Äôt purport this to be our own ideas, but provide it as an interesting resource (see below for Australian ramifications). Three key trends are evident to us from the report: the shift to mobile, the shift to a service economy and finally that disruption of traditional industries is likely to continue for some time yet.
We have synthesised the key themes from the latest Internet Trends Report from Mary Meeker at Kleiner Perkins Caufield & Byers. [...]
June 5, 2015 Reports
The latest numbers for Q1 2015 show strong device and internet user growth, with more of the population online than ever before, including more than 90% of under-55s. Growth amongst older groups, however, has slowed to a crawl.¬†Participation in online activities is up across the board, but digital media data shows spend on ebooks and digital music struggling, with the latter being heavily impacted by the rise of unlimited streaming models such as Spotify.¬†The story of mobile's surge continues, with almost a half of e-commerce transactions and a third of search and display ad spend now going to mobile. Most of these mobile devices are Android, but iPhone seems to have gained long term share with its larger phones. Google services, however, have cross-platform reach.
The latest numbers for Q1 2015 show strong device and internet user growth, with more of the population online than ever before, in [...]
June 4, 2015 Reports
Vodafone Europe‚Äôs revenue growth improved again in the March quarter, but not by as much as the previous trend, or by as much as the mobile market in general.¬†Operational trends look more solid, with data growth continuing to accelerate and Project Spring delivering improvements in some markets.¬†The biggest blip was in Germany, a quad play market for Vodafone, and we remain sceptical of the operational benefits of convergence as Liberty Global merger speculation re-surfaces.
Vodafone Europe‚Äôs revenue growth improved again in the March quarter, but not by as much as the previous trend, or by as much as [...]
December 18, 2014 Reports
The European mobile market had a rare quarter of solid improvement in Q3, with reported service revenue growth improving by over 2ppts to -4.7%, helped by a 1ppt improvement in regulated MTR cuts (which have now dropped to near zero) and a 1ppt improvement in underlying growth.¬†The improvement appears largely driven by improved pricing trends, with the improvement in Italy particularly strong. However we feel that pricing is still in general in a fragile equilibrium, with the potential longer term structural improvements - consolidation and network focus - yet to be made.¬†Consolidation has certainly progressed, but more in-market mobile deals need to be made, and while current levels of investment are encouraging, with accelerating data volume growth also encouraging, they will take some time to have an effect at the consumer level.
The European mobile market had a rare quarter of solid improvement in Q3, with reported service reven [...]
December 17, 2014 Reports
A merger between BT and EE would create a converged operator directly serving around half of the UK adult population with fixed broadband, mobile or both services.¬†We remain sceptical of the direct benefits of quad play and cross-selling, but we can see the benefits of merging the largest fixed and mobile operators under a single brand, and the long term strategic sense of owning both networks in case converged service offerings do become more important.¬†The implications for other market participants are mixed, with benefits in the short term from the distraction of a large merger, and perhaps some regulatory concessions, but a longer term threat from the enlarged brand, and BT having a much enlarged customer base over which to spread content costs.
A merger between BT and EE would create a converged operator directly serving around half of the UK a [...]
December 8, 2014 Reports
UK mobile service revenue growth stayed positive in Q3 2014, albeit at a slightly lower level than last quarter, an achievement given performance in recent years, but a slight disappointment given the previous improving trend. Pricing trends were a little worrying, but data volumes continue to accelerate markedly.¬†With Phones 4U ceasing to trade towards the end of the quarter, Q4's subscriber shares will be largely determined by where its prior customers end up. With these representing 13% of market gross adds which implies 65% of net adds, the impact is significant.¬†Merger talks underway with the parents of O2/EE and BT, with H3G reportedly getting involved, will have an impact whether they lead to a deal or not; if either EE or O2 (or both) remain independent within the UK, they will likely need reinvigorating and re-motivating as to their raison d'etre or risk drifting without a clear direction.
UK mobile service revenue growth stayed positive in Q3 2014, albeit at a slightly lower level than last quarter, an achievement giv [...]
December 1, 2014 Reports
The shift to mobile continues, with the smartphone replacing the laptop as the device with the most users, although the rate of tablet adoption has slowed somewhat.¬†This shift will change the online revenue mix, with mobile being better suited to content, native and video advertising than traditional display and search. Mobile devices also now account for the majority of visits to retail sites, and more than a third of spend online.¬†We see large age-based differences across all internet activities, but the split is particularly significant for smartphone adoption and usage, with only a quarter of over-55s using smartphones, and only a third of those reporting downloading apps.
The shift to mobile continues, with the smartphone replacing the laptop as the device with the most u [...]
November 14, 2014 Reports
Vodafone Europe enjoyed a sharp improvement in mobile service revenue growth in its Q2, with the decline reduced to 5% from 8% the previous quarter.¬†Part of this was due to a reduced regulatory impact, part was due to one-off factors, but underlying improvements are still clear across all major markets, with price declines attenuating and a significant improvement in competitive performance.¬†In the short term the partial stabilisation of pricing is perhaps the result of a fairly fragile equilibrium which could shatter at any time, but Vodafone's aggressive network investment and surging data volumes give confidence in a sturdier recovery going forward.
Vodafone Europe enjoyed a sharp improvement in mobile service revenue growth in its Q2, with the decl [...]
November 7, 2014 Reports
The Sky Deutschland platform, which will fall under BSkyB's control by mid-November, continues to post strong subscriber growth, thanks to steady gross additions and declining churn.¬†However, average revenue per user remains flat year-on-year, and declined sequentially for the first time in over four years, raising questions about Sky's capacity to sustain the recent pace of total revenue growth.¬†On current trends, cash flow break-even will not happen before the last quarter of calendar 2016, months before the possible price hike from a new domestic football rights auction. Meanwhile, deployment of Sky's connected TV services appears to be keeping OTT competitors at bay.
The Sky Deutschland platform, which will fall under BSkyB's control by mid-November, continues to pos [...]
October 27, 2014 Reports
EE's 4G adoption continued to surge, with 1.4m net adds, over 80% of new contract sales taking 4G and just under 40% of contract base having adopted it. Mobile service revenue growth however slowed to -2.4% from -1.1% the previous quarter, with an extra regulatory hit from the EU's ¬ĎConsumer Rights Directive' doing some of the damage, as well as some underlying weakness. Operating revenue growth (i.e. including fixed and revenue from MVNOs) was much healthier, helped by the fast growing fixed broadband business, but growth in mobile is crucial to driving profitability given the operating leverage involved.
EE's 4G adoption continued to surge, with 1.4m net adds, over 80% of new contract sales taking 4G and [...]
September 25, 2014 Reports
European mobile service revenue growth improved by 0.5ppts to -7.2% in Q2 2014, but all of this and more was driven by a reduced regulatory impact; underlying growth has been stuck at around 6% for the last four quarters, with progress in some areas consistently being countered by further pricing pressure. Industry consolidation has progressed to some extent, but would have had little impact in the quarter. Further in-country mobile/mobile mergers are more than likely but uncertainty driven by the changing European Commission may be delaying decisions to move forward. The UK example shows that consolidation is not necessary for market repair, but in the present environment the smaller operators in continental Europe have every incentive to be as disruptive as possible to encourage their acquisition, so further mergers cannot come soon enough.
European mobile service revenue growth improved by 0.5ppts to -7.2% in Q2 2014, but all of this and m [...]
September 15, 2014 Reports
Apple has fulfilled its promise to roll out innovative new products this year, launching Apple Watch into the nascent wearables market and Apple Pay, a new mobile payments service, as well as moving the iPhone into ¬Ďphablet' territory. The larger-screened 6 and 6 Plus should revive growth in iPhone sales and ASP, as well as providing another variable to compete in the mid-tier handset segment; Apple Pay further enhances Apple's lock on its customer base. Apple Watch's likely impact is harder to discern; to date sales of smartwatches have been lacklustre but although Apple's offering is the most commercially viable yet, it still feels like a solution in need of a problem.
Apple has fulfilled its promise to roll out innovative new products this year, launching Apple Watch into the nascent wearables mar [...]
September 14, 2014 Reports
Claire Enders set out the implications of a Yes vote in the Scottish independence referendum for the media available in Scotland. She critically examines the SNP's plans for a Scottish media, and argues that Scotland's small population would make an independent media hard to sustain. When the effect of a nationalist 'nation-building' project is factored in too, the overall results would be serious costs to the quality of democracy Scots enjoy.
Claire Enders set out the implications of a Yes vote in the Scottish independence referendum for the media available in Scotland. S [...]
September 8, 2014 Reports
UK mobile service revenue growth finally returned to positive territory in Q2 2014 after three years of decline, largely driven by the MTR impact dropping out, but also helped by a 0.6ppt improvement in underlying growth. Data volumes accelerated markedly during the quarter, with 4G and improved 3G speeds encouraging more video/media activity, which is far more bandwidth intensive (as well as having less of a substitution effect) than text communications activity. As consumers move to higher data bundles, smartphone usage may actually start to enhance ARPU through tariff upgrades as opposed to damage ARPUs through lower out-of-bundle voice and text usage. The outlook remains positive, with headline pricing stable, contract ARPUs stabilising and the competitive environment relatively benign.
UK mobile service revenue growth finally returned to positive territory in Q2 2014 after three years of decline, largely driven by [...]
July 30, 2014 Reports
EE reported impressive operating figures, with 4G net adds accelerating sharply from an already impressive base and mobile contract net adds leading the UK market. Service revenue growth was respectable, but did not improve on the previous quarter despite the surge in premium 4G customers, although profitability did continue to improve as further synergies were realised. EE will maintain a 4G coverage lead over the other operators into 2015, and the base is likely to continue to migrate to 4G in large numbers, but it remains to be seen if it can convert this into improvements on the top line.
EE reported impressive operating figures, with 4G net adds accelerating sharply from an already impre [...]
July 27, 2014 Reports
Vodafone Europe's service revenue growth improved slightly in the June quarter, by 0.6ppts to -7.9%, largely due to it running out of revenue to lose in some segments, but contract net adds were disappointing, with the company still losing ground competitively. Investment in Project Spring is surging with capex double the prior year and 4G coverage accelerating, which is very encouraging for the medium term, but it will be some time before this pays off in revenue and profit terms. Recent in-market mobile consolidation may result in more investment-focused competitive environments, despite the best efforts of regulators to sustain anti-investment price-based competition, but these too will take some time to emerge.
Vodafone Europe's service revenue growth improved slightly in the June quarter, by 0.6ppts to -7.9%, [...]
July 13, 2014 Reports
The UK's love affair with mobile devices continued in Q1 2014, with four times as many smartphones and tablets as PCs shipped during the quarter. Smartphones now account for three quarters of mobile phone sales, and shipments of tablets exceed sales of PCs, though the latter improved during the quarter. The device mix for internet access is changing rapidly: more people now have a smartphone than have a laptop in the home, though the overall PC audience (including desktop) is still larger. For many people, smartphones are becoming the core device to get online, and almost half of all households have a tablet. Commercial revenues derived from mobile devices still trail their share of internet usage but the gap is closing: in Q1, smartphones and tablets generated a third of e-retail sales, while mobile ads represented a fifth of internet search and display advertising.
The UK's love affair with mobile devices continued in Q1 2014, with four times as many smartphones an [...]