Telecom

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  • February 3, 2017

    Sky on track: H1 2017 results

    Sky H1 2017 results are broadly in line with company guidance on revenues, costs and synergies given at the 2016 Investor Day. The core focus since the formation of European Sky in November 2014 has been investment for growth in all sectors of the business (i.e. retail products, content offers and customer service), an approach that is beginning to bear fruit. Sky Italy had a notably “excellent” start to the year. Most eye-catching in the results release was the planned launch in fiscal 2018 of an IP alternative to Sky’s DTH service. That speaks volumes about the know-how Sky has accumulated over the last ten years in meeting customer demands and building customer relationships.

  • February 1, 2017

    BT Q3 2016/17 results: Strong core, let down elsewhere

    BT had a solid enough quarter, with revenue and EBITDA growth dipping due to pre-warned temporary factors, consumer continuing to outgrow business, and very solid operating trends evident, especially in high speed broadband and mobile. This has of course been entirely overshadowed by the profit warning, with prospective weaknesses in UK public sector and international corporate of far more concern than the contained, albeit surprising, accounting irregularities in Italy. BT has a large share of revenue and a much smaller share of profit from corporate/government data network/IT services, which are erratic in nature and arguably in long term decline in their current form, and without major changes they will continue to be so.

  • December 16, 2016

    UK broadband, telephony and pay TV trends Q3 2016: Peak growth?

    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. Volume growth in the core three products – broadband, line rental and pay TV – in contrast 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. Virgin Media is putting extra pressure on the other operators through its network extension roll-out, broadband speed advantage and improving pay TV service. Sky and TalkTalk are becoming increasingly aggressive in marketing high speed broadband to help protect themselves (and perhaps also to boost ARPU), with Openreach’s high speed net adds being mostly derived outside BT’s retail divisions for the first time this quarter.
  • December 16, 2016

    TalkTalk Group Q2 2016/17 results: Growing profits, slowing reven [...]

    TalkTalk’s broadband subscriber decline has re-accelerated, with retail weaker than wholesale, and its consumer revenue is declining at 6%. This is partly due to price change timings, partly due to last year’s cyber-attack, but also partly due to underlying weak retail broadband subscriber growth. EBITDA did grow strongly, although this was in part due to less subscriber growth. The new pricing plans will likely drive more short term revenue weakness, but could potentially drive lower churn in the medium term, and they have renewed TalkTalk’s price competitiveness, particularly on high speed products.

  • The Internet of All Things - Towards the Hyper-connected World
    The Internet of All Things - Towards the Hyper-connected World
    December 6, 2016

    The Internet of All Things – Towards the Hyper-connected Wo [...]

    The Internet of Things offers enormous opportunities for Australian organisations to be pioneers in the convergence of operational and information technology. Many organisations across different industries are now realising value in a hyper-connected world. We discuss the nature of the Internet of Things, the current and future adoption rates amongst both consumers and industries, the challenges and issues associated with device uptake as well as the future of the Internet of Things.
  • December 2, 2016

    Brexit impact on UK-EU trade in creative services

    Brexit poses direct risks to exports to the Continent of regulated services, such as audiovisual (AV) media services, if the UK ceases to qualify for the Single Market. Since 1994, the EU has formalised a ‘cultural exception’ in the World Trade Organisation (WTO) and in all trade agreements aside from the European Economic Area (EEA). Many countries have emulated the policy since, making it challenging for the UK’s AV cluster to gain significant additional market access from future bilateral trade deals.

  • November 25, 2016

    SFR and the downsides of the LBO model

    France’s number two telecoms operator has suffered extensive damage since the 2014 takeover by Altice, which engaged in a slash-and-burn leveraged buy-out. Market share loss has triggered a revenue decline, with uncertainty of when this might stabilise. Increased investments will barely allow SFR to stand still in the competitive race for 4G and fibre deployment. Cash flow, while in decline, is sufficient to meet high debt payments – but rising bond yields could pressure P&L. SFR aims to appeal to subscribers through enlarged bundles of content sourced mainly from Altice investments in media, but execution seems geared to achieve VAT optimisation and augment the group’s political influence – which may be needed as massive job cuts are planned.

  • November 24, 2016

    Vodafone Q2 2016/17 results: Strong in parts

    Vodafone Europe has improved its mobile service revenue growth to near zero (-0.2%), and narrowed its revenue growth gap to competitors to a mere slither (0.2ppts), allowing it to return to significant EBITDA growth (3.1%). The primary driver for this was however ‘more-for-more’ price increases, which have been followed by competitors only in part, and it is still losing contract subscriber share across its major markets (with significant local variation). Its overall network performance statistics are flat, and customer NPS statistics are improving in some markets and worsening in others. Future outperformance is possible, but by no means guaranteed, and we believe that stabilising market share should be more of a priority than price rises.

  • The changing face of the data centre - Enabling digital transformation
    The changing face of the data centre - Enabling digital transformation
    November 16, 2016

    The changing face of the data centre – Enabling digital tra [...]

    Driven by digital disruption, service innovation is going into overdrive as global and local players compete for a share in Australia’s fast growing data centre market. As Australia’s appetite for everything digital grows, the role of the data centre undergoes transformation from a passive hub to an enabler of innovation. We discuss the key areas of growth within the data centre market and how they are likely to change amidst continual disruption.

  • November 10, 2016

    Virgin Media Q3 2016 results: Continued acceleration

    Virgin Media continued to accelerate in Q3, with subscriber numbers accelerating despite the broader market slowdown, driven by its network extension starting to have a material impact and an enhanced TV offering reversing its pay TV decline. The only weak area was mobile, with revenue and subscriber growth slowing, and convergence stalling. The company hopes that its 4G launch will reinvigorate this; we believe that consumer demand for fixed/mobile convergence remains limited. The early price rise implemented in November will likely help ARPU but harm churn during the rest of the year; for 2017 and beyond the accelerating network extension will increasingly drive volume and revenue growth.

  • The pace of consolidation continues — Superloop acquires BigAir
    The pace of consolidation continues — Superloop acquires BigAir
    October 17, 2016

    The pace of consolidation continues — Superloop acquires BigAir

    Superloop has acquired BigAir to create a wholesale and retail alternative to the nbn across corporate, campus, metro and regional markets in Australia with a merged entity enterprise value of around $500 million. We discuss the key drivers for the acquisition, the impact to the market and immediate outcomes following completion.

  • October 4, 2016

    Trade policy path to Brexit for the UK

    Brexit will take place in March 2019 and the rush is now on to complete the UK’s exit through Article 50 negotiations and set the framework for post-Brexit trade with the EU. Trade-related investment by companies is at high risk from uncertainty; a free-trade area (FTA) for manufactured products should be a priority for 2019. Barriers to trade in services in the EU are more nebulous than tariffs and far more political in Member States, justifying a Comprehensive Economic Partnership (CEP).

  • September 28, 2016

    Clash of the retail titans: Amazon vs Walmart

    The battle in the US between Amazon, ecommerce giant, and Walmart, the retail titan, reflects the changing face of US retail as online drives growth. Amazon, the everything store, innovates on marketplace, warehouse and logistics, and customer tools like Prime, while Walmart fortifies in-store and builds on its strengths. Walmart cannot overtake Amazon online, but it can defend its position as the largest US retailer as Amazon drives an ecommerce future for retailing.

  • September 27, 2016

    European mobile in Q2 2016: Down but resilient

    European mobile service revenue growth worsened slightly in Q2, dropping to -1.2% after three consecutive quarters at -0.8%. Southern Europe significantly outperformed the North, reversing the regional trend of recent years. Mobile service revenue growth was thus quite robust given these factors, helped by price firming in a number of markets, particularly Spain

  • September 14, 2016

    Untapped not tapped out -The over 50s -­ systemic consumption an [...]

    More than one third of the UK population is over 50 (over 23.6 million people) and this cohort is projected to keep growing. They account for substantial wealth, assets and expenditure. Over 50 consumers are more urban, educated, and tech-­‐savvy than the over 50s of previous generations. Given their outsize impact on the economy, influence on social trends and opportunity for brands, we believe the marketing industry underappreciates the diversity of over 50s, and their differentiated requirements. The key group in terms of potential in growth, wealth, expenditure and digital adoption are the 50-­‐65s: they are neither their children nor their parents.
  • September 8, 2016

    Telecommunications Market Outlook

    The scale and pace of consolidation has been a major theme within the telecommunications market over the past few years. Consolidation is now coming to the end of an era and the market is entering into a new phase of competition. We discuss these changes along with the current and future market trends, key market players, and ways in which businesses remain dominant in the ever-changing market place.

  • September 5, 2016

    UK mobile market Q2 2016: Revenue growth slows, profitability res [...]

    UK mobile service revenue growth dipped in Q2 to -1.7%, a 1.5ppt drop from the previous quarter. About 0.2ppts of this drop was accounted for by a (temporary) jump in the MTR cut impact, but the rest was due to underlying factors. These factors were various and differed in their impact on the different operators, and they include the EC-mandated roaming cuts, the leap year effect and the continued growth of SIM-only, as well as pricing changes that appear to have been reversed since the quarter’s end. Macroeconomic weakness does not appear to have played a part so far, mainly because there has not been any consumer-led macroeconomic weakness, and although some indicators have worsened since the quarter’s end, the change is still quite slight so far.

  • August 23, 2016

    UK broadband, telephony and pay TV trends Q2 2016

    UK residential communications market revenue growth was broadly unchanged at 5% in Q2, despite volume growth continuing to slow across all products, with pricing and fibre adoption helping to boost ARPU. Virgin Media continued to gain momentum on the back of its Project Lightning network extension, and this impact is likely to continue to grow as the roll-out continues. Its ARPU was quite weak, hit by promotional discounting and other temporary factors, and this should recover in time, helped by its early price increase schedules for November.

     
  • August 15, 2016

    A third digital ad force: Verizon and Yahoo

    To diversify revenue in a saturated US mobile market, telecoms giant Verizon Communications followed an earlier merger with AOL by acquiring Yahoo for $4.8 billion. The combined online ad platforms are likely to become the most viable contender for third place in the US, after Google and Facebook. Verizon’s mobile subscriber data could narrow the market leaders’ targeting and measurement advantage, but regulation and customer reception pose risks.

  • August 12, 2016

    Channelling strength: Virgin Media Q2 2016 results

    Virgin Media had its strongest June quarter since 2008 with 43k broadband net adds (31% of market net adds), of which Project Lightning contributed less than half. Current momentum remains largely dual play with continuing, though stable, net losses in the TV base. Content investments, and an upgraded UI and STB will be at the centre of TV promotions as refreshed triple play bundles are launched towards the end of the year in a bid to reinvigorate premium pay TV competition. In a saturated premium pay TV market, base stabilisation should be the near term target.

  • Amazon Prime Air pilots in the UK
    Amazon Prime Air pilots in the UK
    August 11, 2016

    Amazon Prime Air pilots in the UK

    Amazon will test three possible features of their drone delivery system in the UK, which could make this novel shipping solution for small packages viable. When it launches, Prime Air will be limited to a catchment area of 2.3 million homes in the UK, with further exclusions for no-go areas for drones like airports and urban areas. Prime Air’s UK pilot will help the Civil Aviation Authority (CAA) craft the rules for future drone delivery by retailers.

  • August 5, 2016

    NBN plans — Jockeying for position

    With the NBN now available to one sixth of Australian households, telecommunication carriers are battling aggressively for market share in the post-NBN world.  Venture Insights has reviewed the NBN plans being offered by a cross-section of the five largest carriers to see what they tell us about the competitive landscape.

  • August 4, 2016

    Openreach: The Seventh Degree of Separation

    Ofcom’s latest proposal for the structure of BT’s Openreach sits neatly between BT’s offer and its competitors’ demands, and is broadly sensible if the Pension Fund and cost issues can be resolved. Ofcom has been under pressure from MPs, consumer groups, BT’s competitors and others to ‘sort out’ BT given its perceived under-investment, despite UK broadband consumer outcomes being the best among European peers on nearly all objective measures. Ofcom’s focus on separation is therefore understandable, but we believe misplaced; while technical governance details are debated, BT’s share price (and hence ability to invest) languishes, and more concrete steps to give investment certainty get put on the back burner. Ofcom might be encouraging investment in theory, but not in practice.

  • August 4, 2016

    BT Q1 2016/17 results: Not shabby

    BT Group’s revenue growth was roughly unchanged in the quarter at 0.4%, with continued strong consumer growth mitigated by regulated and structural challenges in the rest of the Group.

    Both broadband and superfast broadband adoption is slowing, but BT is compensating with improving market share for the former, and the prospect of further uplifts from ultrafast for the latter.

    Regulatory uncertainties are likely to continue to weigh, with the current Openreach debate to be closely followed by the not-exactly-unimportant issue of copper and fibre pricing/regulation from April 2017.