Mobile and Wireless Technology

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    November 1, 2013

    Could AT&T turn around Vodafone?

    Amid ongoing speculation that AT&T will make a bid for Vodafone post its Verizon Wireless divestment, in this note we consider the validity of AT&T's hypothesis that there is "a huge opportunity for somebody" to repeat the US experience of heavy capital investment coupled with firm pricing in Europe

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    October 24, 2013

    EE Q3 2013 results: 4G rises in a weak market

    EE's 4G base continued to accelerate, with 8% of its contract subscribers now on a 4G plan less than a year after launch, and it should accelerate further with the launch of cheaper 4G handsets allowing much lower entry price points from next month. However, the market remains weak, with EE's underlying growth still negative, and any benefits of 4G being more-than-countered by accelerating weakness in overage and prepay revenues. Firmer price increases are needed for full market repair, but these appear more evasive than ever with Ofcom's recent decision severely restricting the scope for mid-contract adjustments.

  • October 20, 2013

    Apple takes the high road

    Apple's two new iPhones both secure its grip on the high end (for now) and extend a cautious toe into (slightly) cheaper waters. They will not deliver a step change in global sales growth, but should deliver solid performance. 9m unit sales at launch are impressive, but 200m updates to iOS 7 (double last year's figure) point to the continuing strength of Apple's ecosystem and its ability to deploy innovative new features. We continue to believe there is room in Apple's portfolio for a $350-$450 phone without weakening Apple's quality of experience or brand positioning, but this is clearly now off the agenda for another year.

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    September 19, 2013

    European mobile in Q2 2013: Still terrible; investment and consol [...]

    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

  • September 12, 2013

    Microsoft and Nokia: marriage of irrelevance

    Microsoft dominated PCs and Nokia mobile phones, but both are irrelevant in the dominant model for tech in the next decade, smartphones and tablets. An acquisition may have been necessary, but by itself it solves nothing. Smartphones are now half of all mobile phone sales, and the 255m smartphones and tablets sold in Q2 2013 dwarf the 76m PCs sold. Microsoft now powers less than a quarter of all the personal computing devices being sold. Microsoft retains a leading position in enterprise and in console gaming. But if it cannot return to relevance in consumer, the strength of the whole business will suffer.

  • August 22, 2013

    UK mobile market Q2 2013: 4G on a budget

    UK mobile market revenue growth improved in Q2, rising to -3.6% from -5.0% in the previous quarter, but we see this as driven entirely by an easing in the regulated MTR impact, with underlying growth actually dropping. O2's revenue growth has continued to improve, Vodafone and EE's revenue growth both improved roughly in line with the market, and H3G's growth declined but remained much above the other three Both Vodafone and O2 announced plans to launch 4G on 29 August but both also have modest roll-out plans, with only 13 cities due to be covered by the end of the year, leaving both with less than half the coverage of EE, and H3G is not planning to launch until Q4. There is some debate over how much consumers are likely to value 4G, with a number of consumer surveys putting interest at a low level. Our own survey is consistent with this, but reveals that interest among high-end smartphone owners – who tend to spend more on handsets and airtime – is very much higher O2 is now selling all its upper end contract plans under the ‘O2 Refresh' structure, which splits handset and airtime fees but in such a way as to allow it to make good margins on handset sales, a clever way to take advantage of smartphone popularity as opposed to working against it as many operators do. The other operators may well follow suit

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    August 6, 2013

    UK internet device and consumption forecasts to 2020

    Reports of the death of the PC have been greatly exaggerated, but rapid adoption of mobile devices is changing how, when, where and why consumers access the internet. Over the next few years, we forecast that PC user growth will be limited to population growth, smartphone penetration will rise from two thirds currently to over 80% by 2020, and tablet users will converge to the same level as the PC audience. In addition, we project that overall internet consumption will nearly double by 2020, with PC-based usage declining before levelling out, and smartphone and tablet use increasing threefold. Of the traditional media sectors, we expect print media to be the most negatively affected by the rise of the mobile internet, with less impact on radio and TV viewing and advertising likely to be relatively resilient.

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    August 6, 2013

    Virgin Media Q2 2013 results: Steady under new management

    Virgin Media's subscriber figures were slightly soft in Q2, even accounting for seasonality, with transaction distractions and reduced marketing spend likely contributing. RGU ARPU growth however remains strong at well over 2%, and increased marketing activity around high speed broadband by competitors will give the company the ongoing capability to keep pricing firm. The company management has had a number of changes, but Liberty Global's overall strategy – profitable growth, not subscriber chasing – would indicate that any changes in approach will not be radical.

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    August 5, 2013

    Notes on a cheap iPhone

    A cheaper iPhone has been discussed almost since the original launch in 2007, but we believe costs have fallen and the market developed to the point that it now makes sense for Apple to offer a $200-$300 (unsubsidised) model. We see a positive but fairly small financial impact on Apple. The key benefit would be defensive: by extending the ecosystem and preserving iOS as developers' first choice, Apple would secure the whole portfolio. We believe a well-executed and distributed $200-$300 iPhone would sell double-digit millions of units – a significant challenge to Android OEMs and Google. However, the US market's pricing structure might limit the impact there.

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    July 21, 2013

    Vodafone Q1 2013/14 results: Uneven bounce

    Vodafone Europe's reported organic service revenue growth improved in the June quarter for the first time in over a year, albeit to the still-somewhat-unimpressive figure of -7.2%. This was however helped by slightly improving MTR cuts and the previous quarter being hit by the leap year effect; on an underlying basis growth declined again. Contract net adds continue to be weak, ARPU continues to suffer from the dilutive Vodafone Red tariffs, and the company continues to invest heavily in fixed line and lightly in mobile, the wrong way around in our view

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    July 18, 2013

    Japan’s recorded music still one of a kind

    Recorded music retail sales in Japan were flat in 2012 at $5.8 billion on the unexpected bounceback of CD sales, amidst the ongoing collapse of mobile music sales

    Smartphone adoption is driving up internet track sales, which topped mobile track sales in 2012, but the internet's price discount to mobile is squeezing track revenues

    Japan will be dynamic in 2013 and beyond for ‘access' subscription services, newly launched by Sony, J-pop label-backed RecoChoku, and carriers

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    July 8, 2013

    Google + Android and mobile

    By the end of 2013 there will be more iOS and Android devices in use than PCs. Google is using Plus and Android to reposition itself to take advantage of this, extending its reach and capturing far more behavioural data. We believe a helpful way to look at Google is as a vast machine learning project: mobile will feed the machine with far more data, making the barriers to entry in search and adjacent fields even higher. For Google, Apple's iOS is primarily another place to get reach: we see limited existential conflict between the two. However, mobile use models remain in flux, with apps and mobile social challenging Google's grip on data collection.

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    June 4, 2013

    European mobile revenue growth and outlook Q1 2013: Hitting a nad [...]

    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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    June 2, 2013

    UK mobile market Q1 2013: 4G progresses but does not transform

    Overall UK mobile revenue growth slipped slightly in Q1, dropping 0.4ppts to -4.3%, although, taking into account the leap year effect, underlying growth likely improved a touch, marking the second quarter of growth being at least stable. EE announced 4G subscriber figures for the first time, reporting 318k subscribers at the end of the quarter, a very respectable figure given coverage, handset and price tier limitations. We expect this figure to grow strongly as coverage rolls out and 4G handset availability spreads, but the 4G revenue premium is still unlikely to be significant in 2013. The outlook for revenue growth in the rest of 2013 is fairly positive – the MTR impact will partly drop out from Q2 onwards, boosting reported revenue by over 2ppts, some mid-contract price increases will take effect, and pricing (so far) has remained reasonably stable.

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    June 26, 2012

    UK mobile user survey 2012: networks over handsets (apart from th [...]

    In this report we show the findings of our 2012 UK mobile user survey. The report is a wide ranging analysis of the mobile market based on our consumer research, focusing on the competitive landscape among the mobile operators and smartphone manufacturers, and the changing consumer behaviour that has and will continue to impact the market

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    June 26, 2012

    UK mobile user survey 2012: networks over handsets (apart from th [...]

    In this report we show the findings of our 2012 UK mobile user survey. The report is a wide ranging analysis of the mobile market based on our consumer research, focusing on the competitive landscape among the mobile operators and smartphone manufacturers, and the changing consumer behaviour that has and will continue to impact the market

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    Carphone Warehouse
    May 9, 2012

    Carphone Warehouse March quarter results: Prepay declines continu [...]

    CPW's key operating metrics worsened again in the March quarter, with connection volume growth dropping to -19% and like-for-like revenue growth dropping to -5.5%. Weakness in the UK prepay market continued to affect CPW's results, with volumes again down 30-40%, but contract sales did not mitigate this as much as last quarter, with growth in the UK but declines in continental Europe. Prepay is not likely to improve until the end of 2012, as the volume decline annualises out and more smartphones are available at prepay price points, and contract recovery is dependent on economic recovery.
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    May 2, 2012

    Everything Everywhere Q1 2012 results: Encouraging volume bounce [...]

    EE's subscriber growth in Q1 was solid enough given a market slowdown, but disappointing given T-Mobile's Full Monty tariff launch. With O2's ‘On and On' launched in late March, the outlook for subscriber growth will be tougher in the rest of 2012. Service revenue growth was more encouraging, improving by 1.5 ppts after a disappointing Q4. This appears to have been largely volume driven (i.e. existing users using their handsets more), which is encouraging for the operators yet to report Q1 figures (i.e. Vodafone and O2). The company's main competitive weapon going forward should be the quality of its network – even post-consolidation it will have more 3G sites than any other operator and may be able to use its 1800MHz spectrum to gain a head-start in 4G. However, communicating that both brands have an outstanding network, without encouraging subscribers to migrate to the lower-priced T-Mobile, will be problematic.
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    April 23, 2012

    Vodafone and Cable & Wireless Worldwide: a UK telecoms miles [...]

    Vodafone's proposed acquisition of Cable & Wireless Worldwide is far from a done deal and is unlikely to be completed until September. The cost synergies are real but likely slim, with the main rationale being to cost effectively expand Vodafone's fixed enterprise business in the UK, and to gain the expertise to do this elsewhere. The impact of an acquisition, while gradual, would reverberate for years to come. Wireline wholesalers, then corporate service retailers would be affected, notably BT. Later, the impact could spread to the small business segment. The prospect of Vodafone's re-entry into the UK residential wireline market would remain distant but more likely.
  • April 9, 2012

    UK internet advertising powers ahead

    According to IABUK/PwC, internet advertising grew 14.4% like-for-like in 2011 to £4.8 billion, overtaking press to become the single largest advertising medium. Search was again the main growth driver, surging 17.5% to £2.7 billion last year, while display rose 13.4% and classifieds increased just 5.2% on the weak economy. We now forecast internet advertising will increase 14% in 2012 and 12% in 2013, taking spend to £6.1 billion or 36% of UK advertising, up from 30% in 2011.
  • H3G
    H3G
    April 3, 2012

    H3G FY 2011 results: UK strengthens more, Italy weakens further

    H3G's European operations slightly improved underlying service revenue growth, and EBIT margin improved from 0% to 3%, but the latter figure was flattered by a change in handset subsidy accounting; without this change, EBIT would likely have been negative. The UK and Italian performances further diverged, with UK growth accelerating in H2 to +13%, and Italy decelerating to -14%, despite a renewed (and expensive) push for contract subscribers in Italy. The UK business has positioned itself well for the smartphone revolution, with its all-you-can-eat data plans particularly popular, although the resulting traffic surge may cause service quality problems in the future.
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    March 23, 2012

    UK mobile advertising begins to take off

    UK mobile advertising jumped 157% year-on-year to £203 million in 2011, marginally higher than our forecast of £180 million, with strong growth in both search and display. Mobile advertising now accounts for 6% of internet search and display spend, but still lags mobile devices' share of internet consumption, which has been rising strongly due to rapid smartphone and tablet adoption, and we estimate is now at around 15%. We expect much of the lag between mobile's share of internet consumption and ad spend to disappear over the next five years, indicating continued high growth.
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    March 19, 2012

    Mobile revenue growth and outlook Q4 2011: from bad to worse

    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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    March 19, 2012

    Themes from Mobile World Congress

    Mobile operators, services and handset makers are diverging – they all come to the MWC but have increasingly little to say to each other as their businesses move in very different directions. In the context of -5% European mobile revenue growth, the MNOs at the MWC were a sober bunch, focusing on industrial services, defensive moves around messaging, and a (not unreasonable) plea to regulators for some relief. As competition in Android intensifies between hundreds of black plastic rectangles, the picture for OEMs looks tough but Google's failure to make Android work well for developers may also start to bite, leaving an opening for Nokia and Windows Phone.