May 19, 2015 Reports
BT had a somewhat mixed March quarter, with growth in consumer still strong but weaker than before, growth in UK corporate weak and even weaker than before, but fibre growth re-accelerating and cost-cutting very strong. The company is still well on track, with 2015/16 revenue guidance reflecting fibre-driven consumer growth countered by UK corporate weakness, and EBITDA guidance reflecting strong cost-cutting partially mitigated by extra football rights costs. Operationally the next few months will likely be dominated by the launch of BT’s Champions League coverage and associated marketing, with various regulatory processes keeping the company busy at the strategic level
BT had a somewhat mixed March quarter, with growth in consumer still strong but weaker than before, growth in UK corporate weak and [...]
May 6, 2015 Reports
EE reported improved mobile service revenue growth in Q1 but it is still shrinking at -1.7%; a disappointing performance now that all of its competitors have moved back into growth. The main causes of its underperformance appear to be the impact of the gradual retirement of the Orange and T-Mobile brands, and the loss of sales from Phones 4U which closed last year, with differentiation through superior 4G not (yet) able to make up for these factors. EE’s fixed line business was the star of the quarter with 50k customers added and 15% revenue growth. It seems to have cracked the formula of cross-selling broadband into its mobile base, a useful skill in the current market context.
EE reported improved mobile service revenue growth in Q1 but it is still shrinking at -1.7%; a disappointing performance now that a [...]
April 30, 2015 Reports
The UK’s three main Westminster parties converge on sustaining the dynamic growth of the digital economy and the vibrant creative industries. The biggest area of divergence is on the EU. The Conservatives plan to hold an “in-out” referendum by 2017, while Labour and the Lib Dems are pro-EU and plan to engage with the Digital Single Market. Other important areas of disagreement include the future of the BBC and the Licence Fee, press regulation and reform of media plurality policy.
The UK’s three main Westminster parties converge on sustaining the dynamic growth of the digital economy and the vibrant creative [...]
April 27, 2015 Reports
Enders Analysis co-hosted its annual conference, in conjunction with BNP Paribas and Deloitte, in London on 17 March 2015. The event featured talks from 13 of the most influential figures in media and telecoms, and was chaired by Sir Peter Bazalgette. This report provides the accompanying slides for some of the presentations.
Enders Analysis co-hosted its annual conference, in conjunction with BNP Paribas and Deloitte, in London on 17 March 2015. The even [...]
April 24, 2015 Reports
Sky plc has produced a strong first quarter across its three markets in terms of subscriber growth, record low churn and continuing firm control over costs, which has contributed to a 5% increase in revenues and 20% increase in operating profit over the first nine months of fiscal 2015. As expected, practically all the retail customer growth in Q3 occurred in the UK & Ireland and in Germany & Austria. Nevertheless, the results were also positive in Italy, as it registered the highest net customer increase in 3 years and record low churn. It is still too early to judge the success of the Sky plc strategy in terms of synergies, innovation and content origination. Whilst the potential appears great, the imminence of the next Bundesliga auction is a reminder that the issue of sports rights inflation is unlikely to disappear even after the latest PL auction.
Sky plc has produced a strong first quarter across its three markets in terms of subscriber growth, record low churn and continuing [...]
April 20, 2015 Reports
There are still two and a half weeks of the campaign to go before polling day, but postal votes are already being sent out to voters and many have already made up their minds. We believe there is now a small range of likely seat outcomes, and therefore possible governments. Our central case sees the two main parties almost level on seats, resulting in a Labour minority government dependent on the support of the SNP and its allies (the Greens and Plaid Cymru). Slightly different outcomes are also possible, depending on the final size of the swing from the Conservatives to Labour in England and Wales, over which there is still considerable uncertainty. If Labour does worse than we expect, it could require the votes of the Lib Dems as well as the SNP; if it does better, it could require only Lib Dem votes. The upside case for the Conservatives is now that they win enough seats to make a minority government dependent on the support of the Lib Dems, DUP and UKIP possible. We think that scenario is now unlikely, but even if it were to occur, we think it would be very challenging to both knit those parties together and persuade the parliamentary Conservative party that its interests are best served by doing so. For these reasons, we think a government led by the Conservatives can now be all but ruled out.
There are still two and a half weeks of the campaign to go before polling day, but postal votes are already being sent out to voter [...]
April 13, 2015 Reports
European mobile service revenue growth improved for a fourth consecutive quarter jumping 1.7ppts to -2.7%, the slowest rate of decline in over three years. Easing declines in France, Italy and Spain largely drove the improvement but a full recovery in these markets is still some way away given that all of their growth rates remain below -5%. The UK, and now Germany, are experiencing positive mobile service revenue growth although their improvements in the quarter were more modest. Three announced consolidation transactions have yet to be approved by the regulators although none of these deals are likely to offer much market repair, being either of the wrong kind of deal or being in markets that are growing. Consolidation targets remain in France, Italy and Spain which offer clearer routes to market recovery as seen in Germany where the consolidation of O2/E-Plus has already led to positive rhetoric on medium term market growth prospects. Network investment continues with 4G roll-outs at or over 70% population coverage in all markets and targets being accelerated, supporting long term optimism in the sector. Strong data traffic growth coupled with the growing importance of data to service revenue give a clear focus for operators on value-adding network quality investment, although the impact of pricing competition in some markets could weigh on the ability to capitalise on these trends in the medium term.
European mobile service revenue growth improved for a fourth consecutive quarter jumping 1.7ppts to -2.7%, the slowest rate of decl [...]
March 26, 2015 ReportsBT announced this week its fourth launch of consumer mobile, following three failures since it split from O2 in 2001. The product is SIM-only, low-end priced and lacks any ‘convergent’ features as yet, but is well structured to target those likely to take a BT mobile service in our view. While its ambitions may be modest, take-up may well be higher than its over-ambitious over-complicated predecessors, as well as giving BT experience in cross-selling mobile prior to its EE acquisition.BT announced this week its fourth launch of consumer mobile, following three failures since it split from O2 in 2001. The product is SIM-only, low-end priced a [...]
March 16, 2015 Reports
Apple has provided more details on its smartwatch range, on sale from April, priced between $350-$17,000 to appeal to a wide range of would-be buyers and initially focusing on enhancing the iPhone through added convenience. The Watch is likely to develop quickly in the next few years, and has the potential to become an indispensable tool for managing payments, health data and identity, as well as controlling other connected devices. The company is laying the foundations for Watch to become a must-have device, but the case is still to be made and ultimately its success depends on a number of key groups and factors outside Apple’s control.
Apple has provided more details on its smartwatch range, on sale from April, priced between $350-$17,000 to appeal to a wide range [...]
March 12, 2015 Reports
Scotland could produce up to 57 SNP MPs (of a total of 59 seats in Scotland), up from 6 in 2010: from “How many seats to the SNP?”, the question now is “Which Scottish seats won’t the SNP win?”. Labour’s losses in Scotland could be more than offset by Con-to-Lab and Lib-to-Lab swings in England, leading to our estimate that Labour and the Conservatives will each garner ~270 seats, well short of the practical majority of 322 seats, producing a hung Parliament as the initial outcome of GE2015. A possible scenario for the emergence of a working government is a Labour minority government sustained by the SNP votes through a ‘confidence and supply’ agreement for major votes and issue-by-issue on other votes, a weak form of government.
Scotland could produce up to 57 SNP MPs (of a total of 59 seats in Scotland), up from 6 in 2010: from “How many seats to the SNP? [...]
March 10, 2015 ReportsYouTube remains the dominant online video site globally, although competition for the viewer is growing from OTT video and other popular apps. Reach and consumption appear to be slowing in the US and the UK, but YouTube reports strong growth in global watch time as smartphone adoption proceeds. The number and variety of Multi-Channel Networks (MCNs) on YouTube continues to grow. Music video MCN Vevo has so far been the largest single presence on YouTube, but it is being overtaken by the combined Disney/Maker Studios MCN. In contrast to the aggregator MCNs with tens of thousands of channels, studio MCNs have much smaller network sizes and a higher share of owned channels. Their focus on content curation and creation has allowed some to build global audiences of repeat viewers, a unique strength and of significant appeal for advertisers.YouTube remains the dominant online video site globally, although competition for the viewer is growing from OTT video and other popular apps. Reach and consump [...]
February 27, 2015 Reports
The UK residential communications sector continues to be in rude health, with revenue growth in Q4 accelerating by 1ppt to 5.7%, the strongest it has been for years, with all of the operators enjoying an improvement. Volumes were strong, and ARPU even stronger, with the latter driving most of the revenue growth progress, driven by firm pricing and high speed broadband adoption. Growing revenues and profits in an industry tends to encourage both investment and competition, and this is certainly the case in the fixed telecoms market, as BT announced plans for higher speed services using G.fast and Virgin Media announced a 4 million premises network expansion. The timings suggest that Virgin Media will keep its edge; given historic trends and its network capabilities we expect it to be offering superior speeds to G.fast by the time G.fast hits the mass market. In competitive terms the biggest short term threat is EE, which is growing its broadband base at 15%, and may accelerate further in 2015. Its success appear to stem not so much from the raw appeal of ‘quad play’ bundling as improved performance in the mechanics of cross-selling from physical shops. EE itself may be less of a threat if its planned merger with BT is completed, but Vodafone is launching broadband services in the spring, and H3G/O2 may yet be encouraged into the market.
The UK residential communications sector continues to be in rude health, with revenue growth in Q4 accelerating by 1ppt to 5.7%, th [...]
February 20, 2015 Reports
Virgin Media’s Q4 results were strong across all measures, with household, RGU and all product net adds accelerating, revenue accelerating, and OCF growth. As demand for high speed broadband grows, Virgin Media is benefiting by offering the fastest top speeds and by being the cheapest provider for speeds over 30Mbps. The company has announced a £3bn investment to extend its network by 4m premises, which may win it an extra 6% share of the broadband market at the expense of BT, Sky and TalkTalk.
Virgin Media’s Q4 results were strong across all measures, with household, RGU and all product net adds accelerating, revenue acc [...]
February 9, 2015 Reports
The iPhone 6 and 6 Plus drove Apple’s most extraordinary quarter ever, with the company’s position in the smartphone market improving on all fronts: explosive growth in China, rising market share in the US and a rising average sales price. By contrast, iPad sales continued to decline in spite of the iPad Air 2’s release, suffering from cannibalisation by the phablet-sized 6 Plus and saturation in developed markets. Apple has a strategy to revive sales, which may bear fruit later in the year. A slate of new products is coming this year, led in the spring by Apple Watch. The question is, will Watch be a significant new source of profit or just a way to protect the iPhone’s dominant position in the smartphone market.
The iPhone 6 and 6 Plus drove Apple’s most extraordinary quarter ever, with the company’s position in the smartphone market imp [...]
February 9, 2015 Reports
Sky plc, the coming together of BSkyB, Sky Deutschland and Sky Italia, has enjoyed an excellent start, as adjusted H1 2015 figures delivered a 5% increase in revenues versus a 3% increase in costs, resulting in EBITDA growth of 7% and with free cash flow up by 25%. The strong financial results were accompanied by strong subscriber growth figures, especially in the operations covering Austria, Germany, Ireland and the UK, while all markets showed large reductions in churn, reinforcing confidence in the strategic approach of Sky plc. It is too early to assess Sky’s delivery of its target group synergies. Individually, the former BSkyB and Sky Deutschland markets may be showing much stronger subscriber and product growth, but they also look to be more exposed to risk over football rights, while Sky Italia has more going for it than may appear at first sight.
Sky plc, the coming together of BSkyB, Sky Deutschland and Sky Italia, has enjoyed an excellent start, as adjusted H1 2015 figures [...]
February 6, 2015 Reports
TalkTalk’s revenue growth accelerated to over 4% in Q3, despite a tough comparative, with a price increase towards the end of the quarter and robust corporate revenue growth helping, giving it good momentum into 2015. Broadband net adds of 15k were unchanged on the previous quarter, disappointing given a broader market bounce, but the company expects acceleration next quarter. The company warned of lower than expected EBITDA margin in H2 2014/15, making its medium term 25% target look more challenging, but margins are still likely to improve going forward.
TalkTalk’s revenue growth accelerated to over 4% in Q3, despite a tough comparative, with a price increase towards the end of the [...]
February 6, 2015 Reports
Vodafone Europe’s service revenue growth continued to recover into its Q3, with the growth of -2.7% a further improvement of over 2ppts. This was largely driven by improved subscriber numbers, with contract ARPU in general still falling, although in the UK it notably returned to growth, with the pending consolidation bringing both threats and opportunities. Vodafone’s Project Spring investment appears to be bringing benefits before it is even halfway complete, boding well for its future impact.
Vodafone Europe’s service revenue growth continued to recover into its Q3, with the growth of -2.7% a further improvement of over [...]
February 3, 2015 Reports
BT Group revenue growth dropped to -1%, but entirely due to one-off factors, with its consumer division accelerating underlying growth and roughly maintaining broadband net adds share. Fibre net adds had a record quarter, driven by growth at Sky/TalkTalk et al, and BT is trialing the next generation of high speed broadband which could sustain profitable wholesale revenue growth for years to come. Upcoming developments over consolidation, quad play and sport rights are likely to continue to dominate the headlines, but it is growing capacity demand and BT’s ability to meet this that will drive BT’s long term value.
BT Group revenue growth dropped to -1%, but entirely due to one-off factors, with its consumer division accelerating underlying gro [...]
February 3, 2015 Reports
This Digital UK 2015 report is a collaborative effort by research partners Enders Analysis and EY. Encapsulating materials in the public domain and proprietary to the partners, it sets out to demonstrate the vibrancy of the UK’s digital economy and its potential for growth. Key UK strengths include: Rapid expansion of Next Generation Access (NGA) network coverage and 98% population coverage of 4G by the end of 2015 thanks to private and public investment. 45 million adult consumers on fixed line broadband and 45 million forecast to be using mobile broadband by 2020, thanks to the embrace of smartphones and tablets. Business e-commerce sales to consumers and other businesses of £556 billion in 2013, or 20% of non-financial business turnover, on a par with the US. The UK’s world-class digital infrastructure and its vast pool of smart connected consumers are unique strengths, and could be converted to leadership on the digital business models of the future. However, as important as the tech industry is to the future of the UK, the UK’s many existing businesses in other sectors could also aspire to be ‘fit for the digital age’. This will not only drive value for UK businesses, but if pursued energetically, it will help resolve the UK’s productivity puzzle.
This Digital UK 2015 report is a collaborative effort by research partners Enders Analysis and EY. Encapsulating materials in the p [...]
January 29, 2015 Reports
Ofcom anticipates opposing the use of core DTT spectrum for mobile broadband at WRC-15 in November in recognition of the importance of broadcasting. Assuming the aligned UK and wider European position prevails at WRC-15, DTT spectrum will be exclusive to broadcast until 2030, providing certainty for broadcasters and programme makers to enable ongoing investment in the platform. However, there will be continued pushback from the mobile network operators to expand the spectrum made available to mobile broadband earlier, and broadcast will need to remain as vibrant and competitive as it is today.
Ofcom anticipates opposing the use of core DTT spectrum for mobile broadband at WRC-15 in November in recognition of the importance [...]
January 28, 2015 Reports
Customer movement between operators shows susceptibility to dynamism in branding; O2 are picking up the majority of EE churners as customers move to the new “cool brand” while EE pull in Vodafone churners tempted by the new “best network”. O2 have the lowest churn though the lion’s share move to Vodafone and H3G churners are more evenly picked up by the other three. Customer perceptions of own operator network quality are high among the big 3 with no less than 75% of customers reporting theirs is the best network. O2 is the best regarded while H3G is the least best regarded highlighting a stark contrast between the (prospective) merging parties. Consumers report little interest in quad play and indeed operators in the both fixed and mobile markets have publicly confirmed the same from other market research. However the arrival of converged players in the form of a merged BT/EE or Vodafone re-entering the fixed space will see operators seeking to change this.
Customer movement between operators shows susceptibility to dynamism in branding; O2 are picking up the majority of EE churners as [...]
January 27, 2015 Reports
The posited deal merging H3G and O2 would create a new largest UK mobile operator with 40% market share, with massive synergy benefits available from cutting overlapping network and operations costs. Regulatory hurdles would be very significant, and the remedies required may well counteract the benefits of reduced network operator competition, as they will be designed to do. For Vodafone and EE, the impact will be mixed; a potentially aggressive competitor is removed, but their preferred positioning as being the best mobile networks is under threat.
The posited deal merging H3G and O2 would create a new largest UK mobile operator with 40% market share, with massive synergy benef [...]
January 26, 2015 Reports
In marked contrast to its Q3 2014 results release, Netflix reported a strong Q4 with respect to paid subscriptions that was ahead of company guidance and consensus expectations. The positive news about subscriber numbers, which saw a sharp jump in share price immediately after the results, was heavily reinforced by Netflix’s announcement of its aim to expand its global base from 50 to 200 countries over the next two years and generate a material profit from 2017. As usual Netflix provided no international details other than to say that LatAm had passed the 5 million milestone in Q4. Elsewhere, BARB data suggest that Netflix passed the 4 million milestone in the UK, while it is still too early to assess the longer term potential of its September launches in France and Germany.
In marked contrast to its Q3 2014 results release, Netflix reported a strong Q4 with respect to paid subscriptions that was ahead o [...]
January 16, 2015 Reports
Ofcom has decided to implement a fibre margin squeeze test on BT, starting in March, which will include the costs of BT Sport as part of the calculation. Ofcom has stated that on its preliminary figures, BT does currently pass the test, but given earlier statements we conclude that it does not have a lot of headroom. This will make it challenging for BT to absorb the extra costs for its Champions League rights hitting from July without breaching the test, and even harder to absorb an increased cost for Premier League rights, reducing its incentive to bid aggressively in the upcoming auction.
Ofcom has decided to implement a fibre margin squeeze test on BT, starting in March, which will include the costs of BT Sport as pa [...]