Telecom

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  • June 20, 2019

    Network Slicing – business transformation opportunities from me [...]

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    Network slicing is a key feature of 5G networks, allowing MNOs to allocate independent virtual networks to customers with specific capabilities and quality of service guarantees. In addition to improved performance, network slicing will create new business models that will bring new revenue streams for MNOs. There are a range of opportunities across media, gaming, emergency services, IoT, transport and MVNO market segments.  
  • June 18, 2019

    UK broadband, telephony and pay TV trends Q1 2019: Price wars dom [...]

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    Market revenue growth dipped to around zero in Q1, with fierce competition on new customer pricing the major factor. All four of the big operators now suffer from declining ARPU, with existing customer price rises increasingly hard to land given falling prices for new customers. The rapid move to superfast is not helping as much as it should; the operators will hope that they fare better with the move to ultrafast.
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  • June 17, 2019

    UK mobile market Q1 2019 – Pressure to mount after mixed bag in [...]

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    The UK mobile market posted its slowest growth in more than two years this quarter; just 0.5% service revenue growth although net adds were strong and churn was down. ARPU is under considerable pressure thanks to regulation limiting out-of-bundle spend which will exacerbate as the year progresses. Several other negative developments look set to be layered on the pressures this quarter, including a step-up in competitive intensity as 5G launches –  with H3G’s pricing of unlimited data a sign of a resurgence in its aggression
  • June 13, 2019

    O2 UK: holding its own in toughening conditions

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    After a period of significant outperformance, O2’s Q1 results reverted to sector average revenue growth with ARPU down by 3% and all of the growth coming from ‘other’ revenues. Regulation limiting out-of-bundle spending has been a significant drag which will continue to worsen. A more competitive market and a punishing regulatory outlook will make it very challenging to sustain 2018 growth trends as this year progresses
  • June 12, 2019

    Monetising user-generated video

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    ­­­­Video sharing platforms, like YouTube, Facebook Watch and Twitch, are vying to attract creators with monetisation options such as branded content and user payments. Advertising income, already limited for many small and medium-sized creators, has been undermined by YouTube’s response to brand safety concerns. The new tools come with their own obstacles, but are necessary to keep platforms attractive to video creators.
  • June 11, 2019

    Mobile Blackspot Programs: Telstra likely to be the future winner [...]

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    The Commonwealth Government and States have funded four rounds of blackspots resulting in 1,047 new base stations. In March 2019, the Government announced two more blackspots rounds with total federal government funding of $160 million. Similar to the previous rounds, we expect the majority of total state and federal funding to go to Telstra. However, there are still bidding concerns for the rounds.  
  • June 3, 2019

    TalkTalk UK: a welcome slowdown?

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    TalkTalk hit the bottom end of its (revised) 2018/19 EBITDA guidance, an achievement given fierce price competition and the margin-dilutive effect of high speed upgrades. This is however helped by one-off Openreach price cuts, and price rises for ancillary products (voice calls and pay-TV) and out-of-contract customers that look hard to sustain. Subscriber growth slowed dramatically in Q4, and continuing this more measured approach could help the company counter multiple market pressures, and perhaps even lead to a détente in the current price wars
  • May 29, 2019

    Vodafone – pressure is still on

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    Vodafone’s operating performance worsened again this quarter with revenues down 3.3% and an extension of its underperformance relative to peers. Vodafone was right to cut its dividend given the extremity of the cash constraint. With financials in Euro terms in negative territory and worsening, an elevated and progressive dividend was not sustainable. In spite of difficult market conditions, the lower end of guidance looks achievable as comparables will become easier and football rights costs decline. The transformation programme will need to pay off fast to deliver any meaningful growth
  • May 28, 2019

    Virgin Media UK: contemplating its strategic future as pressure m [...]

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    Q1 results evidenced the downturn that Virgin Media had flagged in February. Consumer cable weakened sharply to just 1% growth vs 3%+ historically, partly thanks to ‘increased promotions in response to market dynamics’. Monetising Virgin’s speed advantage is becoming more challenging. Competition is hotting up for high-speed broadband in particular, fuelled by Openreach targets for smaller players and BT’s full fibre and G.fast rollouts. The company faces two vital strategic decisions – whether to wholesale BT’s fibre products outside its footprint, and whether to allow wholesale access to its own network. The former is likely to have the most legs and offers an alternative to further Lightning extension
  • May 27, 2019

    BT UK: Promising future, but investment required

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    BT is accelerating its ‘full fibre’ rollout, likely due to a combination of a successful build to date, very promising regulatory developments, and (let’s not deny it) worrying competitor build plans. Full year results were a little weak versus consensus, with guidance a little soft as well, leading to questions of how this can be funded, particularly the roll-out acceleration from 2021/22 to cover half the country by the mid-2020. Whatever the funding mechanism, we regard the investment as sound, with BT’s planned operational transformation also promising but potentially requiring further upfront investment
  • May 23, 2019

    Monthly Australian TMT Wrap: April 2019

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    We have seen an uptick in M&A activity in April on the back of a relatively quiet period in March. Strong deal activity has been distributed throughout the telecommunications, media and technology industries.
  • May 22, 2019

    ‘Is Orange the new Bank?’ Telcos and Fintech

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    As OTT services grow in value, telco revenues are moderating and the lack of growth opportunities in the core business is driving telcos to look at adjacencies. Fintech is disrupting traditional financial services and offers a high value adjacency for telcos to play in where they can maximise their natural strengths.
  • May 15, 2019

    An alternative model to the proposed TPG-Vodafone merger

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    The ACCC has blocked the $15bn merger between TPG and Vodafone, citing its belief that a merged entity would reduce competition given TPG’s ability to become a fourth mobile operator. TPG and Vodafone intend to appeal the decision and have extended their merger agreement to 31 August 2020. Venture Insights believes there is an alternative model which would enable infrastructure efficiencies and benefit competition.
  • May 13, 2019

    Sky UK Q1 2019 results: weak ARPU hits bottom line

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    Sky made a surprisingly weak start to 2019, with revenue growth decelerating to 1.9% (the first time below 4% since the European businesses merged in 2015), due to weaker ARPU trends. However, Sky expects improvement to follow, blaming one-off factors in the quarter. The ARPU weakness drove EBITDA down 11.3%, but this should bounce back across the rest of 2019 as football rights costs turn from a drag to a positive. Comcast highlighted collaborations with Sky across tech, advertising, content distribution and even news, stating it is on track to achieve the anticipated $500 million in annual synergies over the next couple of years
  • May 1, 2019

    Say goodbye to SIM cards – the rise of eSIMs

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    The conventional SIM card has been integral for device connectivity for almost three decades. The arrival of eSIMs will remove space constraints greatly benefiting IoT devices and wearables. Although eSIMs can be seen as a threat to telcos - as they enable a more efficient churn process - we believe the benefits of eSIMs outweigh the risks.
  • April 23, 2019

    5G to change the shape of UK mobile

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    The capacity boost with 5G will be more important than any speed or latency uplift. We estimate a 7-fold increase in mobile capacity in the UK and 13x+ for O2 and H3G. We view fixed mobile substitution products as quite niche although the number of mobile-only households is likely to creep up. mmWave would have the capacity to substitute for fixed but has many hurdles to overcome. Capacity-constraints have tempered competition of late and their removal risks an increase in intensity, especially as H3G views itself as sub-scale – good for policy makers but another challenge to add to the industry’s woes.
  • April 12, 2019

    Monthly Australian TMT Wrap: March 2019

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    The number of announced transactions in March is low relative to February. A number of companies raised capital for a range of purposes, which were well received by the market. The volatility in Lyft’s share price post listing has shown that the market has struggled to price Lyft due to a lack of comparable listed companies in similar sector.
  • April 10, 2019

    Mobile Sports Streaming, Gaming and E-sports: A revenue opportuni [...]

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    There’s been a lot of speculation in the market about the revenue upside for 5G operators. Our latest Australian consumer survey shows there is good 5G market awareness and that 18% of subscribers would consider paying a price premium for a better 5G network experience. Venture Insights believes a 5G product which allows subscribers to move to a separate 5G slice which provides enhanced data throughput would clearly work with the gaming and sports consumer segments and benefit the network provider if offered as a (for example) $5 - $10 monthly option. The risk is that if Telcos stick with AYCE and unlimited plans, then the platform operators (such as Google Stadia) will benefit from the cloud based gaming subscriptions and take advantage of a better 5G network
  • April 8, 2019

    The North heads south: European mobile in Q4 2018

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    European mobile service revenue growth dropped to -1.3% – its lowest level in three years – particularly disappointing as growth should be bouncing back post-EU roaming tariff cuts. Having enjoyed relatively favourable dynamics in 2018, the UK and Germany are facing marked changes in momentum from here. Regulation limiting intra-EU call prices could hit hard – up to 6% of revenues and 20% of EBITDA in the UK, although other EU countries may be less exposed due to lower tariffs currently.
  • April 2, 2019

    UK broadband, telephony and pay TV trends Q4 2018

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    Market revenue growth accelerated to 3% in Q4, but it might never reach this level again, being helped by a never-to-be-repeated BT overlapping price rise. With price rises becoming more challenging in general, and superfast pricing under pressure in particular, maintaining/increasing ARPUs is becoming more difficult despite superfast volumes surging. Openreach’s ultrafast roll-out has accelerated, challenging Virgin Media and bringing the prospect of further price premia, but perhaps too late to be of significant benefit in 2019.
  • March 28, 2019

    UK mobile market Q4 2018: Headwinds gathering for 2019

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    Following record growth last quarter, the UK mobile market took a step down to just 0.9% growth in the quarter to December on the back of increasing pressure in the business market and the impact of out-of-bundle limits. 2019 looks set to be a tough year for the sector with: a series of potentially painful regulatory hits; markedly lower price rises than last year; and early signs of a degree of creeping competitive intensity. We view 5G as a much-needed means of expanding capacity in the sector with upsides from M2M and IoT likely to remain relatively small.
  • March 27, 2019

    NBN update plus our views on sale options and timing

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    Key NBN 1H19 financials were roughly in line with expectations, but the growing number of Service Class 0 premises may be a threat to NBN’s activation targets, and an opportunity for bypass options such as fixed wireless. Given the upcoming federal election, what sale options and strategies could the Government consider in 2019?.
  • March 22, 2019

    Monthly Australian TMT Wrap: February 2019

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    February saw an increased level of market activity in comparison to January. The uncertainty around the TPG-VHA merger continues, with TPG is likely to write down the value of its spectrum licenses and mobile network assets in event the merger doesn’t get ACCC approval.
  • March 22, 2019

    BritBox’s muted arrival in the UK: ITV FY 2018 results

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    After the heights that Love Island and the World Cup took ITV to in H1, the broadcaster held on over the tougher last few months of 2018 to see growth in ad revenue (0.8%) and total viewing (linear and VOD, 3%). However, it was the announcement of the subscription video service BritBox—with the discussions around the “strategic partnership” with the BBC in its concluding phase—that garnered most interest. ITV’s investment in the service is modest when compared to its global competitors—up to £25 million in 2019, £40 million in 2020 and declining thereafter—but it is a prudent low-risk entry into what is an expanding but difficult market.