Mobile and Wireless Technology

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    July 8, 2014

    European mobile in Q1 2014: Underlying remains weak, but consolid [...]

    European mobile service revenue growth improved to -7.6% in Q1 2014 from -9.0% in the previous quarter, but most of the improvement came from a drop in the regulated MTR cut impact, with underlying growth only improving 0.2ppts. This is in spite of continued improvements in GDP growth and the highest level of consumer confidence in six years, confirming that the often-blamed economic conditions actually have been having little impact on the market, with competitive intensity the real cause. For this very reason, the approval by the EC of in-market mergers in Germany and Ireland has been warmly welcomed by the industry and investors. Our view is that market repair is dependent on a change of attitude of the incumbents towards long term investment and away from chasing short term subscriber share via price discounting; consolidation may well help with this, but it is neither necessary nor sufficient.
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    June 24, 2014

    UK mobile market Q1 2014: Heading for positivity

    UK mobile service revenue growth remained relatively healthy at -1.6% in Q1 2014, despite the absence of some favourable one-off factors in the previous quarter, consolidating the improvements seen in 2013. Underlying growth improved a touch to 0.3%, and given that the regulatory impact will drop out next quarter, reported revenue growth may well turn positive in Q2. Service revenue growth among the ‘big three' has re-converged to around -3% to -4%, with Vodafone improving due to strong recent subscriber gains, and EE worsening slightly after a strong previous quarter. H3G's growth worsened due to the previous quarter including some one-off benefits, but it remains very strong at 10%, with contract ARPU having stabilised. We expect the market environment to continue to be relatively benign, with the biggest disruptive threats Vodafone, which is currently competing on quality but may become more aggressive on price if it loses patience, and the fixed line operator MVNOs, who have significant distribution disadvantages but nonetheless can harm the market with discounted pricing.

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    June 19, 2014

    Putting out Fires: Amazon’s phone

    Amazon has announced a new smartphone, the Fire Phone – a premium-priced device with some unique features and solid hardware; only available in the US at first, its high price and small number of apps limit its appeal. Although initial sales are likely to be low and mainly confined to Amazon Prime members, in the short term the purpose of Fire Phone is simple: to drive increased mobile sales of everything Amazon sells. In the longer term, Amazon needs to avoid being locked out of digital media purchasing on smartphones, increasingly the primary connected device – this is a first, although insufficient, step in that direction.

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    May 21, 2014

    Vodafone Q4 2013/14 results: Still weak, recovery some way off

    Vodafone Europe's service revenue growth improved by 1.1ppts to -8.5% in the March quarter, but this was all driven by a waning regulatory impact, with underlying growth nudging down slightly. The company's service revenue growth improved a fraction more than its competitors, but it has barely narrowed the substantial gap, and contract net adds share fell after three consecutive quarters of improvement. Hopes for a recovery in underlying growth still centre on M&A, with EC decisions due in June, and on the Project Spring investment paying off, but this is unlikely to result in improved financial metrics for a year at least.

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    May 11, 2014

    Virgin Media Q1 2014 results: Volume, revenue and profitability i [...]

    Improving volume trends and ARPU drove Virgin Media's cable revenue growth to improve from 3.0% to 3.6%, helped by a firm price increase implemented during the quarter. Underlying OCF growth improved more dramatically, from -1% to +6%, with synergy benefits, lower marketing costs and lower premium channel cost growth some of the main drivers. While volume growth is still modest, solid ARPU growth and cost control should allow continued strong OCF growth through the rest of the year.

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    May 5, 2014

    Facebook extends its ecosystem

    At its f8 developer conference, under the slogan “Build, Grow, Monetise”, Facebook rolled out a slew of new policies and initiatives designed to boost its appeal amongst users, app developers and advertisers. In its drive to encourage developers to build more apps that support the social network, Facebook is attempting to position itself as a “cross-platform platform” with 1 billion+ users that sits on top of iOS, Android and other mobile operating systems. Key announcements included App Links, an open source solution enabling linking across apps, which may drive additional usage, and Facebook Audience Network, an app ad network rolling out this year, which should drive additional margin and could challenge Google AdSense.

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    April 27, 2014

    Facebook: mobile acceleration continues

    Facebook has successfully transitioned its business to mobile, with the number of mobile users now exceeding those on PC, and mobile newsfeed ads accounting for nearly all revenue growth and over half of total revenue, now on a $10 billion annual run-rate. North America and Europe continue to account for the vast majority of revenue and revenue growth, despite flat audience penetration in both regions, as increasing mobile consumption and advertiser take-up have driven sharp increases in ARPU, particularly in the US. Despite tougher comparables and declining desktop revenue going forward, the rapid ramp up in mobile ad revenue, plus initiatives such as video ads, ads on Instagram and planned mobile ad network, should deliver strong growth through 2014 and into 2015.

  • April 21, 2014

    UK internet device and consumption forecasts to 2020

    The boom in mobile device sales accelerated in 2013, with more than four times as many smartphones and tablets as PCs shipped in the UK: smartphones accounted for three quarters of mobile phone sales, and shipments of tablets surpassed PC sales, which fell sharply. By 2020, we forecast that smartphone penetration will rise from two thirds of the population to over 80%, and the number of tablet users will exceed 60%, outstripping the PC internet audience, which we expect to shrink. We now predict that the majority of internet usage will go to mobile devices this year and three quarters by 2020. Mobile is well on its way to becoming the predominant access platform in the UK, as in the US, and most, if not all, future growth in commercial internet revenues will be driven by mobile devices.

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    March 24, 2014

    European mobile in Q4 2013: Focused on consolidation

    European mobile service revenue growth again disappointed in Q4, dropping slightly from -8.9% to -9.1%, with underlying revenue growth dropping a little further from -6.0% to -6.3%, again reaching a record low. There had been hopes that improved GDP growth would drive a volume rebound, that price declines would start to annualise out, and that declining out-of-bundle usage would wane in its impact as this usage declined. In the event, ongoing price competition from smaller operators, MVNOs and quad play offerings, combined with surging use of OTT communications platforms, have dominated trends. In the medium term, the development of 4G and Vodafone's Project Spring may bring some much needed network differentiation back to the market, allowing pricing power to return to the larger operators. However, it will be 2015-2016 before these factors come into play: in the short term, the main source of optimism is consolidation.

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    March 14, 2014

    UK internet: mobile inflection point

    Strong growth in UK sales of mobile devices in 2013, with tablet shipments overtaking declining PC sales, pushed smartphone and tablet penetration up to about 63% and 35% respectively, in line with our forecasts. We estimate that mobile devices now account for 50% of time spent online in the UK, the lion's share via apps, reaching this milestone sooner than expected. Mobile internet usage looks set for further growth in 2014 and beyond, with PC-based consumption flattening. After a slow start mobile monetisation is also rising fast, with UK advertising and e-commerce to mobile devices accelerating and closing the gap with that on the PC. We expect much, if not all, future growth in commercial internet revenues to be driven by mobile devices.

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    March 13, 2014

    UK mobile market Q4 2013: Bouncing up

    UK mobile market service revenue growth improved on both a reported and underlying basis by 1.2ppts in Q4, a very welcome result after six consecutive quarters of declining underlying growth. Reported revenue is still in decline, at -1.6%, but it is the most modest decline among larger European countries, and compares to -5.0% in early 2013. EE is still leading in 4G coverage and performance, with around twice the coverage of its nearest rivals of basic 4G, double speed 4G now covering around 30% of the population, and plans for quadruple speed 4G to launch in 2014. Vodafone may prove the biggest network challenger going forward, with plans to increase capex as part of its Project Spring initiative. Maintaining (or increasing) the current level of pricing is key to the industry returning to revenue growth in 2014. We would note that the smallest operator, H3G, is fairly unlikely to return to being a price discounter and put pressure on market prices, leaving the onus on the ‘big 3' to stay disciplined, with a small but significant risk from SIM-only MVNO offers gaining more traction.

  • March 7, 2014

    Slides for Media & Telecoms: 2014 and Beyond, part 2

    Slides from the presentations by the following speakers at the Media & Telecoms: 2014 and Beyond conference on 4 February 2014: James Purnell, BBC; Dido Harding, TalkTalk; NIcola Mendelsohn, Facebook; John Paton, Digital First Media; Mike Darcey, News UK; Ashley Highfield, Johnston Press; Michael Comish, Tesco.

  • March 7, 2014

    Media & Telecoms: 2014 and Beyond, part 2

    Enders Analysis co-hosted its annual conference, in conjunction with BNP Paribas and Deloitte, in London on 4 March 2014. The event featured talks by 13 of the most influential figures in media and telecoms, and was chaired by Sir Peter Bazalgette. This report provides edited transcripts of the talks given by seven of those speakers: James Purnell, BBC; Dido Harding, TalkTalk; Nicola Mendelsohn, Facebook; John Paton, Digital First Media; Mike Darcey, News UK; Ashley Highfield, Johnston Press; Michael Comish, Tesco.

  • March 5, 2014

    Media & Telecoms: 2014 and Beyond, part 1

    Enders Analysis co-hosted its annual conference, in conjunction with BNP Paribas and Deloitte, in London on 4 March 2014. The event featured talks by 13 of the most influential figures in media and telecoms, and was chaired by Sir Peter Bazalgette. This report provides edited transcripts of the talks given by six of those speakers: Sir Martin Sorrell, WPP; Gavin Patterson, BT; Andrew Griffith, BSkyB; Thomas Rabe, Bertelsmann; David Dyson, Three UK; David Abraham, Channel 4.

  • March 5, 2014

    Slides for Media & Telecoms: 2014 and Beyond, part 1

    Slides from the presentations by the following speakers at the Media & Telecoms: 2014 and Beyond conference on 4 February 2014: Andrew Griffith, BSkyB; Thomas Rabe, Bertelsmann; David Dyson, Three UK.

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    February 21, 2014

    Facebook & WhatsApp – an expensive limited defence

    In an audacious move to minimise the risk of mobile social disruption, Facebook is to acquire leading messaging app Whatsapp for up to $19 billion, or $42 per user, or 11% of Facebook's current market cap. Messaging platforms are becoming the new social media, particularly for younger demographics, and while Facebook/WhatsApp will be huge in mobile, other services could still side-step into Facebook's territory. The price for WhatsApp may be justifiable to counter the threat, but Facebook has only bought one of many, and paying a full price may encourage the others; expensively buying every competitor does not feel like a long-term strategy.

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    February 10, 2014

    Vodafone Q3 2013-14 results: Limited signs of turnaround, all eye [...]

    Vodafone Europe's revenue growth was again weak, flat on the previous quarter in reported terms at -10%, but underlying revenue growth declined slightly, despite a strong recovery in GDP growth. There are some limited signs of recovery – improved contract net adds, sustained data volume growth, an end in sight to ARPU dilution – but realistically Vodafone's admirable organic investment push will not reap rewards within the year. More near term interest is on M&A, with Vodafone shopping for fixed line operations, important in-market mobile consolidation regulatory decisions coming up, and interest in Vodafone itself possible after the Verizon deal closes later this month.

     

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    January 16, 2014

    UK 2G licence fee proposals: Higher and higher

    Ofcom has been instructed by the UK government to charge the mobile operators ‘full market value' for the 2G spectrum they have been using for many years, despite there being no liquid market for the spectrum. Ofcom's general approach to such an imponderable question is eminently sensible, but we disagree with the detail of their methodology on three key aspects, which makes the current proposed charges over three times too high in our view, effectively charging the industry a one-off tax of £4.5bn. The elevated fee levels are (perhaps) still affordable on their own, but coupled with other recent regulatory decisions the UK is in danger of being seen as a hostile regulatory environment, with negative consequences for future investment levels.

  • December 19, 2013

    2013 round up and topics for next year

    2013 has seen yet another year of strong growth in consumer adoption of mobile devices and screens adding to the challenges facing traditional media. Press and radio have long been affected, but television is now starting to feel the heat. BT and Sky's contest for premium pay-TV sports rights has intensified. August saw the launch of BT Sport, while BT's acquisition of the European football rights in November was a clear statement of intent, spending half of Channel 4's total programming budget on approx. 200 hours of content. The UK has seen buoyant advertising growth of around 4% in 2013, with similar growth expected in 2014, in the context of the strongest economic recovery in Europe.

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    December 16, 2013

    UK mobile market Q3 2013: Flattening out

    UK mobile market service revenue growth improved on a reported basis in Q3 to -3%, but was unchanged on an underlying basis, still not a bad result after six consecutive quarters of underlying growth declining, albeit in the context of rapidly improving macroeconomic conditions. All four operators now offer 4G services, with O2 and Vodafone launching within the quarter and H3G in December. EE will nonetheless maintain its coverage and speed advantage for 2014, but others (most likely Vodafone) may challenge thereafter. H3G is offering 4G at no extra cost, reflecting its focus on unlimited data and meeting the capacity requirements for this, and O2 has recently cut its 4G tariffs to match those of 3G (but with a high minimum entry point), leaving EE the only operator with an explicit 4G premium. The overall outlook is mixed – we would expect some improvement to revenue growth into 2014 as the MTR impact wears off and the dilutive effect of unlimited tariffs wane, but this may be countered by a lack of mid-contract price increases, and while 4G is likely to benefit all as it drives data volumes and encourages package upgrades, the impact will be gradual.

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    December 3, 2013

    European mobile in Q3 2013: Improving to minus nine

    In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request

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    November 15, 2013

    Vodafone Q2 2013/14 results: A mountain to climb, with a hill of [...]

    Vodafone Europe's revenue growth declined again, as it underperformed a weak market, with pricing pressures still suppressing growth despite recovering macroeconomic conditions. Project Spring is a limited step in the right direction, with European mobile network investment only £3bn out of the £7bn total, but the potential network outcome – 4G coverage better than 2G is now – is impressive. Improving regulatory and economic conditions will give a limited boost in the short term, and the network investment will take years not months to pay off, leaving a long wait before sustainable improvement is seen.

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    November 13, 2013

    Vivendi 3.0: Back to square one?

    The Vivendi empire is shrinking in revenues, cash flow and also in debt: Activision Blizzard and Maroc Télécom were sold in 2013, SFR will be spun off. We expect SFR's topline revenue decline to halt in H1 2014, ending the pain from the disruptive launch of Free Mobile in 2012. With SFR and Bouygues Telecom intending to conclude a network-sharing agreement outside urban areas by the end of 2013, SFR should have a more positive story to tell investors when it comes to the Paris stock market in late 2014. With SFR spun off, Vivendi 3.0 will own just Canal+, Universal Music Group (UMG) and GVT (telecoms operator in Brazil), three companies without visible synergies. The end point appears to be the full dissolution of the Vivendi conglomerate.

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    November 7, 2013

    Virgin Media Q3 2013 results: Resilient to new challenges

    Virgin Media had a very solid quarter, with cable households returning to growth, cable revenue up 4%, underlying group revenue up 2%, and underlying OCF up 3% despite extra content costs weighing. Subscriber net adds were not as strong as last year, when DSL competitors were weakened by supply constraints, but there is little sign of a substantial impact from BT Sport or TalkTalk and BT's YouView-based TV offerings. BT's foray into sport has however had an effect on profitability, as it has with BT itself and Sky, with Virgin Media's premium content costs rising from both BT and Sky.