December 2, 2015 Reports
Millennials are not the multimedia generation, as is often asserted, but the first entirely digital generation, and this is best reflected in their obsessive use of smartphones. The importance of mobile is not just as a communication device, because the smartphone has become an all-important tool, which this generation relies on for a much wider range of activities than older demographics. The implications for traditional consumer media are that smartphone distribution and discovery are the key strategic issues for the foreseeable future.
Millennials are not the multimedia generation, as is often asserted, but the first entirely digital generation, [...]November 30, 2015 Reports
UK residential communications revenue growth bounced up in Q3 as we had predicted, on the back of continuing solid volume growth and improved ARPU growth driven by a series of price increases impacting in the quarter. The overall revenue growth of 6% was supported by some one-off factors, such as overlapping price increases and the launch of BT Sport Europe, but we believe that growth at this level will be sustained for the next two quarters at least. Looking forward, the impact of TalkTalk’s cyber-attack is uncertain in the detail, but it will clearly slow TalkTalk, benefit some of the others and may temporarily impact market volumes. Another area of competitive uncertainty is the impact of Virgin Media’s network extension as it gathers momentum into 2016, with all of the others likely to lose significant share in Virgin’s expanded areas.
UK residential communications revenue growth bounced up in Q3 as we had predicted, on the back of continuing solid volume growth an [...]November 25, 2015 Reports
TalkTalk’s results revealed a challenging market environment, with it struggling to maintain its broadband subscriber base given the onslaught from larger and more differentiated competitors. Revenue growth was still a healthy 6%, but this was helped by acquisitions, price adjustments and low margin mobile, with its EBITDA falling despite the drop in broadband customer growth and associated costs. Its cost savings programme and marked price increases are likely to allow it to grow EBITDA this year and next, with the impact of the cyber-attack being significant but short-lived, but its declining retail customer base is a longer term concern.
TalkTalk’s results revealed a challenging market environment, with it struggling to maintain its broadband subscriber base given [...]November 13, 2015 ReportsVodafone Europe’s revenue growth trend continued to improve, and the improved operating leverage allowed it to return to EBITDA growth after years of decline. Its mobile business was however more mixed, with improved contract net adds but worsening ARPU and revenue still firmly in decline, with growth from its recently acquired cable businesses partially disguising this. The benefits of its Project Spring investment are not yet clear, and the current wave of in-market mobile consolidation may leave Vodafone a weaker player across much of its footprint.Vodafone Europe’s revenue growth trend continued to improve, and the improved operating leverage allowed it to return to EBITDA growth after years of decline. [...]November 12, 2015 Reports
Virgin Media had its strongest quarter for three years in broadband net adds market share – a robust performance in a competitive environment and very much in line with recent strong performances at both Sky and BT. Group revenue growth improved 1ppt, or 3ppts adjusting for distortions, driven by accelerating growth in all operating divisions although higher content and hardware input costs offset the benefit to margins. The Project Lightning network expansion program continues, targeting 250k new premises by the end of 2015, with a discernible impact to subscriber and revenue growth likely to be apparent from the start of 2016.
Virgin Media had its strongest quarter for three years in broadband net adds market share – a robust performance in a competitive [...]November 9, 2015 Reports
Apple’s results underlined its status as the tech industry’s biggest and most profitable company due to the iPhone, accounting for two thirds of the company’s revenue and capturing three quarters of all smartphone profits. While the iPhone dominates the $500+ handset market, the question is how will this segment develop as smartphone penetration approaches maturity in developed markets and mobile operators restructure handset subsidies. The shift to separate airtime and device plans could increase consumer price sensitivity, but leasing plans with annual replacement, supported by the iPhone’s strong second hand value, bring the opportunity of faster replacement cycles, with upside and downside risks matched.
Apple’s results underlined its status as the tech industry’s biggest and most profitable company due to the iPhone, accounting [...]November 6, 2015 Reports
At launch, Google’s new subscription service YouTube Red competes most directly with premium music streaming services, also offering ad-free videos. YouTube’s augmented revenue model re-boots incentives for native talent to produce content for the platform, and will also widen its appeal for established content producers. Although consumers are likely to find paid subscription for ad-free videos a weak proposition, Red holds much potential for YouTube as it competes for attention across device ecosystems, and presents little risk to its existing advertising model.
At launch, Google’s new subscription service YouTube Red competes most directly with premium music streaming services, also offer [...]November 5, 2015 Reports
The launch of BT Sport Europe pushed up BT’s revenue and pushed down EBITDA in its Q2 results, but underlying revenue growth was strong across all divisions and cost control continued, with the company well on track for its full year guidance. BT Sport itself is being executed well, both in terms of viewers and direct revenue earned, but is not having a discernable impact on broadband figures, nor a game-changing impact on BT’s modest pay TV base, despite its very considerable net cost. On the regulatory side, BT has secured a strong result with the EE merger being provisionally approved without remedies, but debates over the future of Openreach continue, with the related issue of ultrafast roll-out regulation of particular import.
The launch of BT Sport Europe pushed up BT’s revenue and pushed down EBITDA in its Q2 results, but underlying revenue growth was [...]October 30, 2015 Reports
We attended the Telstra Digital Summit and came away with the following key takeaways: 1) we finally have a Government that will promote technology as an enabler; 2) can the Internet of Things replace the mobile as our primary computing device? 3) technology companies will disrupt telcos; 4) mobile is driving the disruption in customer experience; and 5) the pace of disruption is accelerating.
We attended the Telstra Digital Summit and came away with the following key takeaways: 1) we finally have a Government that will pr [...]October 29, 2015 Reports
EE reported strong mobile contract net adds in Q3, after a string of weaker performances earlier in the year following the closure of Phones 4U and retirement of the Orange and T-Mobile brands. Contract ARPU growth remained at -3.1%, keeping mobile service revenue in modest decline (-1.4%), a disappointing result in comparison to modest positive growth at its rivals in recent quarters, although improving subscriber numbers should start to bridge this gap. Fixed broadband subscriber growth suffered in a competitive quarter, with EE unable to maintain momentum when faced with the launch of BT Sport Europe and corresponding increased marketing spend from Sky.
EE reported strong mobile contract net adds in Q3, after a string of weaker performances earlier in the year following the closure [...]October 29, 2015 Reports
BARB viewing figures provide an encouraging start to BT in its first season showing Champions League and European televised rights; numbers are on a par with those achieved by Sky over the previous few seasons. The investment in rights is not just about achieving good viewing figures - BT’s entry into televised sports is as much about supporting its broadband and pay-TV business in the face of increasing competition from Sky and others. BT has reported results for the September quarter with record-setting TV net adds and steady broadband net adds, confirming that while Sky arguably won the broadband battle, BT won TV, and neither really lost in either category.
BARB viewing figures provide an encouraging start to BT in its first season showing Champions League and European televised rights; [...]October 27, 2015 Reports
Sky has got off to a good start in 2016, as Q1 group revenues grew by 6% and operating profits by 10% year-on-year, while churn stayed low across all three operations, and product net additions of close to one million pointed to continuing strong underlying growth. The Q1 results have softened concerns about the impact of loss of Champions League live televised rights in the UK and Italy, which have so far shown very little effect in spite of intense competitive pressures from BT and Mediaset. Although Sky UK & Ireland has accounted for the entire year-on-year increase in Q1 operating profits, strong subscriber growth in Germany & Austria over the last two years, and signs that economic conditions in Italy are on the mend, provide a positive outlook for the year ahead.
Sky has got off to a good start in 2016, as Q1 group revenues grew by 6% and operating profits by 10% year-on-year, while churn sta [...]October 23, 2015 Reports
While we expect the NBN rollout to be delayed by 2-3 years, we forecast NBN revenues to grow at a 65% CAGR to reach A$2.0b by 2020. We believe revenues will be driven by subs growth (56% CAGR) with ARPU remaining flat, as we expect CVC charges to decrease in spite of internet traffic growth of 24% CAGR through to 2020. This report provides a deep dive into our NBN forecasts and assesses the key trends and drivers that are emerging as the NBN rollout gathers momentum.
While we expect the NBN rollout to be delayed by 2-3 years, we forecast NBN revenues to grow at a 65% CAGR to reach A$2.0b by 2020. [...]October 14, 2015 Reports
European mobile service revenue growth improved to the highest in over four years driven by improvements in the three slowest growing markets of late. Out-of-bundle revenues are still declining at a rate of over 10% but data revenue growth trends point to underlying strengths in the revenue profile. Looking at the longer term picture begs the question as to whether the quarter’s improvement can be repeated over the next 18 months, transforming the industry into one with extremely healthy revenue growth of 5%-10%; on balance we are not very optimistic. Two major in-mobile transactions are yet to be approved by the EC, namely H3G/O2 in the UK and an H3G/Wind JV in Italy. The recent precedent from Denmark is somewhat discouraging, although the Danish consolidation was unusual in some respects. Nonetheless comments from the new competition commissioner Margrethe Vestager suggest that regulatory caution towards 4-to-3 mergers is still high. Progress towards convergence is continuing with few operators in a post-consolidation world being either 100% fixed or 100% mobile. Convergence has to date been discount-led and damaging to market revenues, but post-consolidation, operator rhetoric has been reassuringly more focused on intentions for increased investment in both LTE mobile networks and high speed fixed networks.
European mobile service revenue growth improved to the highest in over four years driven by improvements in the three slowest growi [...]September 24, 2015 Reports
While we don’t expect the overall size of the Telco market to change materially, we do expect product share to change over the next five years. We expect Fixed Voice to decline to 7% of the overall market from 15% currently driven by challengers offering VOIP style plans to take share from Telstra. We are in the midst of a material change in how Telco products are delivered and consumed, this report assesses these changes and provides our market outlook.
While we don’t expect the overall size of the Telco market to change materially, we do expect product share to change over the ne [...]September 16, 2015 Reports
New ‘s’ versions of the iPhone 6 and 6Plus will help to maintain Apple’s grip on the high-end smartphone market. A notebook-sized iPad Pro and revamped Apple TV round out this year’s iOS device upgrade. iPhone sales may be further boosted by a new leasing plan, initially US-only, allowing users to upgrade handsets each year more easily, which also should enable the company to take a share of the used iPhone market, and could even be a precursor to an Apple MVNO. While the new iPad and Apple TV are unlikely to have a material impact on profits in the near term, they should be seen in the context of the wider battle for control of the connected office and home.
New ‘s’ versions of the iPhone 6 and 6Plus will help to maintain Apple’s grip on the high-end smartphone market. A notebook-s [...]September 3, 2015 Reports
The UK’s love affair with the smartphone continued in Q2: 85% of adults under 55 and a third of over-55s now have smartphones, which are becoming the primary method of accessing the internet, accounting for over 40% of time online. Among teens and younger adults internet usage is now higher than TV viewing, though this is still offset overall by the massed ranks of older viewers who remain glued to their TV sets. Commercial revenues derived from mobile devices still trail their share of internet usage but the gap is closing fast: in Q2, smartphones and tablets generated nearly half of consumer e-commerce transactions, while mobile ads represented 34% of internet search and display advertising.
The UK’s love affair with the smartphone continued in Q2: 85% of adults under 55 and a third of over-55s now have smartphones, wh [...]September 2, 2015 Reports
Ten months after the acquisition of France’s SFR by Numericable, cost cutting targets appear likely to be exceeded, but the promised resumption of revenue growth may still take time to materialise as downward price pressures persist and the subscriber base has yet to stabilise. Profitability has increased faster than expected, while debt ratios look sustainable and set to decline. The challenge is to relaunch marketing while achieving the guided ambitious EBITDA margin growth. Investments, even if lower than planned, may be enough to sustain network competitiveness. The rationale for consolidation between Numericable, Bouygues and/or Iliad remains strong. But Numericable’s model looks sustainable without this. Side investments in media may at best bring political clout. The main risk stands with parent company’s Altice’s debt-finance expansion.
Ten months after the acquisition of France’s SFR by Numericable, cost cutting targets appear likely to be exceeded, but the promi [...]August 27, 2015 Reports
The UK is now a smartphone society: by the end of this year smartphone users will exceed the PC internet audience and by 2020 we project penetration will reach 83%. The average smartphone user now spends an hour and three quarters a day online, significantly more than the equivalent for PC and tablet, and phones already account for nearly half of all time online. We are positive on tablet user numbers, and think PCs will be resilient, especially for work users. All in all we expect connected time in 2020 to be 21 billion hours higher than in 2015, up over 35%. Commercial revenues via smartphones and tablets still lag their share of internet usage, but the monetisation gap versus the PC is closing fast: the newer devices accounted for 27% of internet search and display advertising last year, up 8ppts versus 2013, and 36% of e-commerce transactions, up from a quarter a year earlier. Consumers are already thinking mobile-first; businesses will have to follow.
The UK is now a smartphone society: by the end of this year smartphone users will exceed the PC internet audien [...]August 26, 2015 Reports
UK mobile service revenue growth dipped a touch in Q2, falling to 0.9% from 1.0% in the previous quarter, although all of the dip and more was due to the reintroduction of mobile termination rate cuts in the quarter, with underlying growth rising to 1.3%. O2 is now the fastest growing operator in both contract net adds and service revenue growth terms, exceeding even the much smaller H3G, and its revenue growth lead over EE and Vodafone expanded during the quarter. BT’s consumer mobile launch was relatively successful from BT’s perspective, with it garnering 100k subscribers in the first three months, but this appeared to have no impact at all on the mobile operators, which had a relatively strong quarter for contract net adds in spite of this. We conclude that much of the fixed line MVNO base growth is coming from impulsively upgrading prepay users, consumers wanting a spare SIM and other MVNO customer bases – sources that do not threaten the MNOs.
UK mobile service revenue growth dipped a touch in Q2, falling to 0.9% from 1.0% in the previous quarter, altho [...]August 21, 2015 Reports
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. In contrast, volume growth in the core three products 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. With Virgin Media’s continuing network extension and improving pay TV service putting pressure on the other operators, Sky and TalkTalk are protecting themselves by aggressively marketing high speed broadband. Correspondingly, this quarter marks the first time that Openreach’s high speed net adds were mostly derived outside of BT’s retail divisions.
UK residential communications market revenue growth accelerated to 5.8% in Q3, from 5.0% in the previous quarter, helped by an over [...]August 11, 2015 Reports
Virgin Media’s subscriber figures bounced back in Q2 after a weak Q1, and consumer revenue growth also improved to a respectable 3% despite continued headwinds from VAT changes. The UK broadband market remains tough, and BT Sport Europe’s launch in Q3 will not make it any easier, but Virgin Media’s access to this and all other sports channels means that it should be able to remain above the fray. The network extension program is likely to give further growth impetus from 2016, and the company is laying the groundwork for network speed upgrades which will maintain its speed advantage for at least the medium term.
Virgin Media’s subscriber figures bounced back in Q2 after a weak Q1, and consumer revenue growth also improved to a respectable [...]August 6, 2015 Reports
The first set of annual results to include all three Sky pay-TV operations in Europe shows Sky plc to be off to a very good start: subscriber growth up by 5%, churn everywhere below 10%, adjusted group revenues up 5% and operating profit up 18%. Excellent though the start has been, each of the pay-TV operations faces its own specific challenges – be they to do with ARPU growth in Germany & Austria, subscriber growth in Italy, or football in some shape or form across all three markets and nowhere more so than in UK & Ireland. Most importantly for the Sky European merger, the latest results indicate that Sky is well on course with its target annual run-rate of £200 million in synergies by 2017; but with the UK model to act as a template, it is the fast-growing connected space that catches the eye.
The first set of annual results to include all three Sky pay-TV operations in Europe shows Sky plc to be off to a very good start: [...]August 6, 2015 Reports
EE remains the slowest growing of the ‘big 4’ UK MNOs or the only one in decline with service revenue growth at -1.8%, a touch lower in reported terms despite a slight underlying improvement. Adjusted EBITDA margin improved to a record 26.6%, a somewhat fortunate compromise on the loss of gross adds share since the demise of Phones 4U – and associated reduction in (expensive) third-party gross adds. In a seasonally low broadband quarter, EE actually gained net adds share, showing resilience to heightened marketing from Sky and underscoring the merits of EE’s in-store cross-selling strategy.
EE remains the slowest growing of the ‘big 4’ UK MNOs or the only one in decline with service revenue growth at -1.8%, a touch [...]