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January 17, 2019Apple and Amazon bury the hatchet
Flash Report, ReportsAmazon’s recent deals with Apple in TV, music and device sales mark a turning point after a decade of frosty relations. The context for this involves shifting priorities at both firms, growing pressure on Apple’s iPhone business, and rivals in common — first and foremost Google, but also the likes of Netflix and Spotify. The uneasy alliance helps both companies consolidate their strengths in the platform competition over media and the connected home — but trouble already brews. -
January 9, 2019European mobile in Q3 2018
Market Outlook, ReportsEuropean mobile service revenue growth slipped again this quarter to -1.0% as the UK and Germany disappointed and the Southern European countries worsened. The gap in service revenue growth rates between the Southern European countries and the UK and Germany increased again to a spectacular 5.5ppts. Spain was perhaps the biggest surprise this quarter with service revenue growth deteriorating by more than 3ppts; primarily due to Vodafone who posted a dire performance on all fronts. Next quarter, a somewhat delayed improvement in trend from the annualisation of roaming tariff cuts in the UK and Germany is possible, competitive intensity in France looks set to intensify as Iliad renews its aggression in the face of slowing momentum. Although there may be some reprieve on the rate of subscriber loss in Italy, Iliad is likely to continue to impose significant ARPU pressure on all operators. -
December 5, 2018TalkTalk stabilising, but strong growth evasive
Focus Report, ReportsTalkTalk had very solid Q2 and H1 results, with broadband net adds staying positive, high speed net adds accelerating, revenue growth above 3% and EBITDA rebounding back to growth. This was helped at the revenue line by a price increase in the quarter and in EBITDA terms by steep Openreach price reductions, with strong revenue growth and any EBITDA growth hard to replicate once these effects have annualised out. The company has nonetheless stabilised its subscriber base, revenue and profitability after some erratic years, with cost-cutting providing some potential for growth going forward. -
November 19, 2018Australian Mobile Telco Market Outlook
Market Outlook, ReportsThe Australian mobile market has been traditionally characterised as a mature market with steady growth driven by population growth and mobile broadband. However, this market is about to see strong innovation (5G) and disruption (TPG-Vodafone merger) in the next few years. We forecast the mobile market will remain the largest segment in the overall telco market with A$22.3bn in revenue by 2022. With the merger between TPG and Vodafone to form a third full service telco in the market, we expect the competitive intensity to increase with incumbents facing pricing and margin pressure from 2018-19 onwards. However, despite TPG’s aggressive initial pricing and service offering, at this stage we have been conservative in our estimates with respect to TPG-Vodafone’s impact on incumbent market shares as we expect a gradual subscriber take-up of the network over 2018-2022. The arrival of 5G and emergence of wireless access to the Internet as an alternative to fixed broadband means that the mobile market will continue to experience strong growth, with ARPUs steadying. Venture Insights believes that 5G coupled with IoT will enable the transition from a connectivity based revenue model to a services based revenue model for mobile operators. -
November 1, 2018Australian Telecommunications Market Outlook
Market Outlook, Reports- The introduction and the rollout of the NBN has been one of the key inflection points in the Australian telco market. However, as the rollout progresses, complaints continue and the tug-of war with RSPs over CVC charges continues. This discord has led to both major and smaller RSPs experiencing a tight squeeze on margins and opportunities for bypass options
- The Mobile segment continues its upward march but the market is about to see the impacts of a new wave of innovation (5G, IoT) and disruption (TPG Vodafone merger) in the next few years. This will severely impact fixed line broadband and nbn’s business case
- The merger between TPG and Vodafone will create a strong third MNO in Australia and long term competition and pricing pressure with Optus and Telstra
- Growth and broader acceptance in public cloud solutions is driving growth in the data markets as the corporate market is increasingly consolidating their voice, data and applications traffic
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October 31, 2018US department stores, Amazon, and omnichannel fashion retail
Market Outlook, ReportsAmazon is finding women’s fashion, a missing piece of its household-centric model, a tougher nut to crack than downmarket apparel. Higher-end US department stores are pushing back with an omnichannel model, emphasising long-term partnerships, a clever full-price/outlet model, and experiences which cross the online-offline divide. In apparel, Amazon and big box retailers have already triumphed over lower-tier American department stores, and even prestigious fashion brands are finding it harder and harder to refuse cooperation with the giants. -
September 17, 2018UK Broadcast TV is growing very old, very quickly
Market Outlook, ReportsUK mobile market service revenue grew by 1.7% in Q2, up from 1.3% in the previous quarter, a disappointing result in the context of boosts from both IFRS 15 accounting and the annual price rises in the quarter. O2 was the star performer this quarter, with its service revenue growth leaping ahead to claim the top spot. BT/EE’s service revenue growth declined on an underlying basis, with weak contract net adds over the last six months catching up with it, and H3G and Vodafone were slightly improved and steady respectively excluding some one-off effects. Next quarter, the impact from the EU roaming cuts will annualise out, providing a substantial fillip to all operators. Ceteris paribus, this would put market growth in the vicinity of 4%, a figure not reached for years. -
September 11, 2018UK mobile market Q2 2018: Disappointment before dawn
Market Outlook, ReportsUK mobile market service revenue grew by 1.7% in Q2, up from 1.3% in the previous quarter, a disappointing result in the context of boosts from both IFRS 15 accounting and the annual price rises in the quarter. O2 was the star performer this quarter, with its service revenue growth leaping ahead to claim the top spot. BT/EE’s service revenue growth declined on an underlying basis, with weak contract net adds over the last six months catching up with it, and H3G and Vodafone were slightly improved and steady respectively excluding some one-off effects. Next quarter, the impact from the EU roaming cuts will annualise out, providing a substantial fillip to all operators. Ceteris paribus, this would put market growth in the vicinity of 4%, a figure not reached for years. -
August 30, 2018IoT in Transport – rise of the connected transport market
Focus Report, ReportsThe Internet of Things is set to transform the transport industry by driving real-time connectivity between vehicles and transport infrastructure. In Australia, the transport IoT market is forecast to generate about A$5bn in revenue in the next five years. -
August 20, 2018Sky UK 2017/18 full year results: Winning the game of content
Focus Report, ReportsSky maintained strong revenue growth of 5% in 2017/18, with EBITDA and operating profit both bouncing back into strong positive territory after the UK Premier League rights hit of 2016/17. The UK grew revenue well and profits better; Italy performed well and should improve much further given the retreat of its principal competitor; Germany is more challenged, but extra content investment may aid sustained growth. Sky is proving adept at managing content costs and revenue in a changing environment, with investment, cost control and monetisation all being put to effective use as the content type demands it. -
August 7, 2018BT Q1 2018/19 results: On target in the short term, making progre [...]
Focus Report, ReportsBT’s Q1 results were fairly robust given a number of one-offs hitting in the quarter, with revenue growth of -2% in line with full year guidance, EBITDA growth of 1% ahead of plan, and a number of metrics looking promising. Openreach’s newly announced volume discount plans offer advantages in growing high and higher speed volumes, infrastructure competitiveness and regulatory pricing pressure, while giving up little in external revenue, a win-win-win for BT at least. Full-fibre regulation appears to be slowly moving towards more clarity, but is still far too unclear to justify an accelerated investment, with critical issues being ducked (for now) by government and Ofcom alike. -
August 2, 2018Revenues down, guidance in the balance: Vodafone Q1 2018/19 resul [...]
Focus Report, ReportsEBITDA growth guidance of 1-5% is in question with group revenues flat to down. Counting AMAP growth in local currencies helps, as will cost control and roaming relief. Sustaining growth in Germany will be key; convergence-led ARPU declines could prove to be something Vodafone can’t afford. Vodafone’s UK business performed strongly in terms of mobile subscribers and fixed business financials, although revenue growth is still lacklustre. Profitability is expected to increase markedly, boosted 10ppts by roaming tariff relief. Although we view Iliad’s business model in Italy as unsustainable, it will nonetheless continue to put significant pressure on Vodafone Italy’s ARPU, which is almost three times that of Iliad’s package. -
July 26, 2018The drive for convergence: a value-destructive strategy
Focus Report, ReportsMany European telecoms operators are pursuing a fixed/mobile convergence strategy on the pretext that the addition of mobile reduces churn. We see no evidence of churn reduction from this strategy. Discounts required to encourage take-up of fixed/mobile services are often value-destructive, even before competitor reaction: a 10% bundle discount necessitates a 2ppt improvement in churn to wash its face economically. M&A premia on the basis of convergence synergies raise the hurdle even higher. Most UK operators offer very limited discounts on fixed/mobile bundles for now, sensibly focusing on enhanced services. Vodafone is the most aggressive, albeit less so than it is elsewhere. All UK players should hope that it stays this way. -
June 20, 2018European mobile in Q1 2018: North–South divide to exacerbate
Market Outlook, ReportsIn this report 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 incomplete, and we have updated previous period figures where better information has come to light. A copy of the underlying data in spreadsheet format is available to our subscription clients on request. -
June 19, 2018Advertising after the turning point: When offline is the exceptio [...]
Market Outlook, ReportsOnline advertising became the majority of all UK ad spend last year, in step with China but ahead of all other major markets. Direct response has further increased its share to 54% of UK ad spend, fuelled by the self-serve platforms of Google, Facebook and Amazon, while content media nets just 11% of the online advertising pot. We estimate that all online-delivered channels - including "pure play" online properties, broadcaster VOD, digital out-of-home and online radio - could account for well over 60% of UK ad spend by 2020, but only with improved commitment to industry governance. -
May 30, 2018
BT new Consumer strategy: Converging, but in a good way
Flash Report, ReportsBT has emphasised ‘convergence’ in its new Consumer strategy, but it has avoided most of the usual fixed-mobile convergence mistakes, with separate brands, minimal discounting and only slightly flawed converged products. The general strategy is to improve customer service to improve market share trends (particularly in broadband), enable premium products/positioning, and allow for cross-selling of a strong set of converged (in a broader sense) products, which is very sensible in our view. It does require extra spending in the short-term to improve customer service and the perception thereof (particularly in broadband) before premium positioning and cross-selling can be effective, therefore improved trends at the bottom line may take some time to come through. -
May 23, 2018
BT Q4 2017/18 results: Slowing broadband bites, but recovery pos [...]
Flash Report, ReportsBT Group met expectations for the 2017/18 financial year, but future guidance is very modest compared to previous performance and financial market expectations, with 2018/19 revenue and EBITDA both guided to decline by around 2% with capex rising. In our view, this weakened outlook is primarily driven by the ongoing slowdown and increasing competitiveness of the UK broadband market, with operating metrics at BT Consumer particularly weak. BT’s re-vamped strategy looks good in parts, and could deliver the incremental improvements necessary to outperform the new (much more modest) expectations, helped by existing – and likely continued – strength in mobile. -
May 21, 2018Virgin Media Q1 2018 results: Good, but beware headlines
Focus Report, Market Outlook, ReportsThe highlight of Virgin Media’s Q1 results was the return to growth for its UK cable ARPU (+1.3%), although the improvement in trend should be interpreted with caution due to accounting changes. Headline group revenue growth of 5.2% was boosted by profit-neutral handset sales, with underlying growth of around 3.2% – still strong in the sector context. Virgin Media continues to do relatively well in the increasingly challenging UK broadband market, but with evidence of limited pricing power, sluggish roll-out and subscriber growth, revenue trends look set to slow. -
May 18, 2018Vodafone/Liberty Global deal: Slim economics and regulatory risk
Focus Report, Market Outlook, ReportsVodafone’s acquisition of Liberty's assets in Germany and Central Europe is likely to face regulatory scrutiny at the EU – and possibly also German – level. We view Vodafone’s expectation of closure in mid-2019 with no remedies as unlikely. The economics of the deal for Vodafone are slim, highly reliant on extracting sizeable synergies, and vulnerable to operational risk and potential remedies for regulatory approval, particularly in Germany. While we see some synergy benefit from combining two cable assets in Germany, we are unconvinced of meaningful benefits from combined fixed/mobile offerings. -
May 15, 2018
Covert growth in UK mobile
Focus Report, Market Outlook, ReportsThe UK mobile market is growing strongly – we estimate revenues by 5% and EBITDA by 8% in 2017 – excluding one-off regulatory drags and the loss of non-profit-generating handset revenue. Regulatory price cuts end in mid-2018, and the handset effect will disappear from all reported figures from April 2018, leaving scope for very positive headline growth next year – considerably better than its European comparators and the sluggish UK fixed market. The outlook for the UK mobile industry is the best it has been in a decade, with significant growth in data demand, price increases, some supply constraints, rational competition, and major regulatory drags rapidly fading. -
April 11, 2018
UK mobile market Q4 2017: Swings, roundabouts, and auctions
Focus Report, ReportsUK mobile service revenue growth worsened to 0.9% in the quarter from 1.5% in the previous quarter, although this was entirely due to an ARPU drop in BT/EE’s business segment. BT/EE’s consumer business is still growing strongly, and all the other operators improved their growth due to the EU roaming cut impact reducing in intensity. Looking forward, there are no further regulatory shocks on the horizon, and the annual price increases implemented in March/April are higher than previous years due to higher underlying rates of inflation. While SIM-only is likely to continue to rise, we still expect revenue growth in 2018 to be robustly positive at a similar or higher level than that of 2017. In the recent 4G/5G auction, O2 won all of the currently useable 4G spectrum available, and the 5G spectrum was split between all four operators, with H3G winning less that the others but (combined with its existing holdings) being nonetheless the largest 5G spectrum holder. -
March 2, 2018UK broadband, telephony and pay TV trends Q4 2017
Flash Report, ReportsUK residential communications market revenue growth fell again to 1.2%, with weakening ARPU growth the main driver. New customer pricing remains flat to down, and existing customers are being increasingly discounted, fuelling the ARPU weakness. High speed broadband adoption is proceeding apace, but the high speed premium is fairly thin, muting the impact on ARPU. Regulated wholesale price cuts from Openreach finalised today and due in April 2018 will not help. Looking forward, the March quarter will benefit from price timing effects at BT and Virgin Media, but we fear that the rest of 2018 will follow the current downward trend and the operators will need to adjust to an ex-growth environment. -
February 26, 2018
Virgin Media Q4 2017 results: Growth limited by market pressures
Flash Report, ReportsVirgin Media’s Q4 performance was a little softer than expected, with subscriber figures quite weak and no improvement in ARPU growth despite a better implementation of its annual price rise. The cause is however likely market-driven, with broadband demand slowing and all operators struggling for ARPU growth, and Virgin Media does now lead the market for subscriber, RGU and revenue growth.The prospects for 2018 are solid if not spectacular, with Project Lightning driving market share gains and ARPU defended by a network speed advantage that will last for many years yet. -
February 9, 2018Tencent: gaming giant heads west
ReportsTencent, by some counts the world’s most valuable media and entertainment company but still relatively unknown outside Asia, is riding games growth to global clout. The company offers a blueprint for successfully integrating media and entertainment companies, saving on overheads while retaining key talent and organisational culture . Tencent’s recent investments in Snap and Spotify suggest media platform ambitions beyond games in the West, but close ties to the Chinese government could complicate regulatory approval for strategic acquisitions.
