Telecom

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  • February 19, 2020

    Telstra and Optus: Falling ARPUs, increase in price sensitive mar [...]

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    Telstra and Optus reported earnings on 13th February 2020. While Telstra reported its 1HFY20 earnings, Optus reported its 3QFY20 earnings. In this report, we have analysed some of the key trends observed across the two major telcos and compared these with Venture’s Australian telco market outlook and forecasts.
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  • February 17, 2020

    Vodafone plods on

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    Vodafone’s revenue performance remains decidedly lacklustre. Italy and Spain are struggling to bounce back, Germany is still languishing, and the UK’s 0.6% service revenue growth is the highlight of the quarter. Liberty Global’s assets are disappointing both in terms of opening financials (revenues and EBITDA 8% and 12% lower than expected respectively) and outlook (now growing at half the rate at the time of deal announcement and guidance for Germany as a whole to be ‘flattish’). Vodafone’s guidance for a pickup in revenue growth to more than 1% in Q4 is encouraging but these are very tentative steps forward in challenging times
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  • February 14, 2020

    TalkTalk UK: FibreNation sorted but challenges remain

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    TalkTalk’s subscriber base and revenue fell again in Q3, and ARPU continued to decline despite good growth in its higher ARPU (but even higher wholesale cost) high speed base. The sale of FibreNation to CityFibre and the accompanying wholesale deal provides much needed cash and de-risking, although the migration to full fibre still brings challenges to TalkTalk given its low price focus. TalkTalk’s shorter term operational outlook is also still very challenging, with growing EBITDA in 2020/21 particularly difficult given stable/declining ARPU and the rising wholesale costs of migrating to high speed broadband
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  • February 13, 2020

    New Zealand 5G update: Still waiting on spectrum auctions with 2d [...]

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    As New Zealand moves towards mass-scale 5G rollout, competition among telcos is forming and the debate around the spectrum sharing is intensifying. Limited 5G services are now being offered by Spark and Vodafone to select customers and they are counting on being able to provide mobile, fixed wireless and IoT services using the same network in the near future to increase their revenues. In this report, we look at the readiness of NZ consumers to move to 5G, the current state of critical spectrum holdings and the key 5G developments in NZ in 2019.
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  • February 12, 2020

    Sky UK FY 2019 results: a solid first full year under Comcast

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    Despite operating in a challenging market, Sky has continued to increase revenues, with the resilient performance of its direct-to-consumer and content businesses offsetting the disappointing drop in advertising income. Across FY 2019, EBITDA was up 12.2%; profit growth driven by a significant reduction in “other” costs as large one-off effects disappear and cost-cutting continues. Extended distribution deals with Netflix and WarnerMedia will protect Sky’s content proposition for the coming future, as would the mooted integration of Disney+
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  • February 12, 2020

    BT: Searching for the nadir

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    BT had a weak December quarter, with revenue falling 3% and EBITDA 4%, despite a recovery at Openreach, mainly driven by tough competition and regulatory hits, with operating metrics solid but not noticeably improving. These hits look set to continue, so the company’s hopes of a return to EBITDA growth in 2020/21 probably hinge on brand and service improvements actually becoming visible in operating performance. A successful full fibre roll-out would be a boon for BT in the longer term, and regulatory developments are headed in the right direction, if not quite there yet. However, its affordability without a dividend cut remains questionable in the current challenging environment
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  • February 11, 2020

    Subscription BBC?

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    The Government appears set on reducing the scale and scope of the BBC by dismantling the licence fee, and in its place pushing for subscription or making payment voluntary, without any evidence of the likely impact. DTT – the UK’s largest TV platform – has no conditional access capability, and so implementation would require another costly and long-term switchover. A voluntary licence fee would inevitably lead to a huge reduction in income. If just those on income-related benefits were not to pay, the shortfall would be over £500 million – in addition to the £250 million the BBC will be funding for over-75s receiving Pension Credit
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  • February 5, 2020

    Australian 5G update: Telstra and Optus build continues, VHA entr [...]

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    2019 was the year 5G launched in Australia making it one of the first countries in the world to launch 5G services. Whilst Telstra and Optus both launched in 2019, Telstra’s focus was centered on 5G mobile services whereas Optus’ 5G launch centered on 5G fixed wireless broadband services. 2020 will see further competition from the MNOs through continued rollout, VHA entry and potential pricing changes. We expect Telstra to continue its rapid 5G footprint expansion in Australia, including to the regional areas. In this report, we look at the readiness of consumers to move to 5G and the key Australian 5G developments in 2019.
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  • February 4, 2020

    Winners and losers as the UK fibres up

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    The speeds made possible by full fibre build are unnecessary for most users in the short term, giving limited commercial advantage to those that can offer them, but are likely to prove essential in the medium/long term. The economics of full-scale, independent alternative networks look very challenging in our view – especially without the support of Sky – although there are some limited arbitrage/cherry-picking opportunities. The Openreach full fibre model makes economic sense under Ofcom’s proposed regulatory framework, provided it retains the lion’s share of the market, although considerable risks remain
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  • January 22, 2020

    Subscription game services: moving beyond core gamers

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    Subscription game services will finally allow platform owners and developers to deliver truly accessible gaming experiences for all, across devices, at a lower entry price point, and curated to ensure consumer safety—both in terms of cost transparency and content types. Consumer comfort with subscriptions should be embraced by the games industry and has already started in mobile. Apple’s Arcade subscription is the test case, providing focused all you can eat games that minimise exposure to violent gameplay, and the ‘free to play’ wild west. Core gamers remain the most vital and profitable games customer segment, but they have been overserved and are an obstacle to broadening the reach of games. Now is the time to move beyond this group, to restructure, expand, and normalise the games market in the next decade.
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  • January 9, 2020

    Bopping along the bottom: European mobile in Q3 2019

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    European mobile revenues remain decidedly in decline this quarter at -2% – a slight worsening since Q2 as the full force of cuts to intra EU calls hits. There are signs that dual brand strategies may be reaching their useful limit as erstwhile premium customers shift to value. There is scope for some trends to slowly improve from here, although end of contract notifications will impact all markets before the end of 2020, with the UK first off the blocks in Q1.
  • Smart Home
    Smart Home
    December 17, 2019

    The rise of smart homes in Australia – we are only getting star [...]

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    In the past few years, there’s been a rapid increase in the use of home automation devices and technologies across the world. The mass adoption of connected devices and the rise of Internet of Things (IoT) has led to the rise of the Smart Home market which offers consumers interconnected and improved access to a range of services. In August 2019, Venture Insights conducted a consumer survey focussing on electricity, solar energy, batteries, smart homes, electric vehicles and climate change in the Australian market. In this report, we present the key insights drawn from the smart home section of the survey and discuss the current state of the smart home market in Australia, key drivers for future growth, the ideal ecosystem provider and the scope for bundled services.

  • December 13, 2019

    UK broadband, telephony and pay TV trends Q3 2019: Darkest before [...]

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    Market revenue growth fell in Q3 to below 1%, and may drop below zero next quarter as existing customer pricing comes under more pressure. New customer pricing is however rising, and average pricing should rise much further as ultrafast increases in availability and popularity. Political enthusiasm for full fibre should be welcomed, although some specific plans are likely to do more harm than good if implemented literally
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  • December 12, 2019

    Australia fixed broadband pricing trends – price differentials [...]

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    Broadband services are critical enablers for access to information, employment, markets and key services. Consumer demand for broadband services has grown rapidly in the last decade with household penetration increasing to 85% in 2017 compared to 64% in 2009. This report analyses the competitive environment in the fixed broadband market and focuses on consumer price trends in the fixed broadband market for the NBN. In particular, we analyse the major RSPs – Telstra, Optus, TPG and Aussie Broadband to evaluate their broadband offerings in the retail market.

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  • December 11, 2019

    UK mobile market Q3 2019: Weathering the storm

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    The UK mobile market suffered its worst performance in six years this quarter as competition heated up and regulation continued to bite. Vodafone’s unlimited tariffs have proven popular, reaching 5% of its contract base in one quarter, helping to drive its outperformance. Some reprieve is in prospect next quarter, before the impact of out-of-contract notifications and automatic discounts from February, although there is the possibility of pre-emptive moves bringing some of the effects forward
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  • December 4, 2019

    Virgin Media UK: challenging quarter, but opportunities ahead

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    Virgin Media had a challenging quarter, with its early price rise driving weak subscriber figures and product spin-down, resulting in reduced revenue growth and an accelerated OCF decline. The market environment remains challenging with very competitive pricing on superfast and little push for ultrafast, but superfast pricing is easing and competitors’ ultrafast pushes should accelerate in 2020. Full fibre roll-outs remain a threat and an opportunity in almost equal measure, with Virgin Media’s positioning likely to be clarified as the regulatory mist clears over the next year

  • December 3, 2019

    TalkTalk UK: A discount brand pushing a premium product

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    TalkTalk enjoyed impressive EBITDA growth of 14% in H1 19/20, despite revenue growth pitching down sharply in Q2, and gross margin falling due to the rapid adoption of high speed broadband. The fall in costs was driven by a combination of good expense control and lower subscriber acquisition costs, in part due to improved efficiency, but in part due to a falling subscriber base, which is not a sustainable route to earnings growth. While the current dynamics are challenging, market prices have been firming recently, and should firm further as ultrafast becomes more popular, but TalkTalk needs to move to a more premium pricing position to take full advantage

  • December 2, 2019

    Champions League senses end of growth cycle

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    With pay-TV competition faltering, UEFA is aiming to stimulate demand for 2021-24 TV rights with early auctions, a possible relaunch of FTA broadcasts, and even, unrealistically, by considering an online service of its own. In the recently completed UK auction, facing no major threat from Sky, BT kept the rights at an almost flat price – probably missing a cost saving opportunity. In the upcoming auctions on the Continent, with former buyers such as SFR, Mediaset and Vodafone having cut back on premium sports, the major platforms’ bids will probably be unchallenged

  • 5G Cover
    5G Cover
    December 2, 2019

    Telstra FY19 Investor Day – InfraCo, Enterprise and 5G to remai [...]

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    Telstra held is annual Investor Day event on 27th November 2019. Telstra CEO Andy Penn and senior management covered off progress on its T22 strategy, financial and earnings outlook, changing dynamics in the Enterprise market, progress on the 5G rollout, entry into gaming and changes to InfraCo. In this report, we have analysed some of the key announcements from the event and provided our take on the same.
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  • Placeholder
    Placeholder
    November 26, 2019

    Turnaround still elusive at Vodafone Europe

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    Vodafone continues to strike a very shareholder-friendly focus and tone but its operating performance remains decidedly muted, with revenue growth up just a touch but EBITDA growth halved. Vodafone’s drive for convergence is still costing it dearly. German mobile ARPU is down 7% and Liberty Global’s assets disappointed on their first consolidation with cashflow enhancement less than half that expected. Apart from its ill-advised convergence strategy, Vodafone is making many sensible moves and there are indications that its unlimited plans are gaining traction. With leverage tight, pressure is mounting for demonstrable improvements in the financials some time very soon.

  • November 25, 2019

    Sky UK Q3 2019 results: balanced, but more to come?

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    While Sky’s overall revenues continue to rise, Q3’s growth was hampered by a significant fall in advertising revenue and to a lesser extent a slowdown in content sales. Underlying EBITDA growth was in the mid-teens. Next quarter, Sky will continue to benefit from lower Premier League rights costs versus last season, and profit appears on track to meet full year guidance. Q3 saw a rare decline in Sky’s total number of customers due to the conclusion of Game of Thrones. Sky clearly understands the value of unique content—recently extending its HBO deal. In our view, this was essential, since without a distribution deal for Disney+ (launching in the UK in March) Sky would lose Disney’s alluring content.

  • November 18, 2019

    O2 UK doing better than appears in tough times

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    In spite of total revenue growth of 4%, O2’s service revenue growth took another step down to -3% this quarter, consistent with the worsening environment and EE’s results. Its true performance is likely better than reported as IFRS15 has an artificially dampening effect on its service revenue as a consequence of O2’s Custom Plans, and is something of a boost to its impressive 6% EBITDA growth. O2 needs to continue to pedal hard to keep ahead of this challenging environment – with little let-up on the regulatory front, more aggression from Vodafone and H3G, and a potential regulatory hit to its Custom Plans
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  • November 13, 2019

    NEXTDC FY19 update: growing fast with the market

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    On 30th October 2019, NEXTDC had its 9th Annual General Meeting. The Australian DC market remains competitive and given the demand most of the DC providers are expected to grow fast. NEXTDC is counting on high growth rate of demand for hyperscale data centres and is clear about its trajectory
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    Placeholder
    November 11, 2019

    UK’s BT: Bumps on the road to recovery

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    BT suffered a weak Q2 with revenue and (particularly) EBITDA declines accelerating, but this was mainly down to timing (particularly at Openreach, which will likely recover in Q3), with the company confident in maintaining full year expectations. BT’s fixed broadband business enjoyed some recovery as the pricing environment improves, but will suffer another price timing bump next quarter, and its mobile business is suffering from a tough market environment that is unlikely to improve in the short term. The company is busy re-branding, re-positioning and transforming, but the outlook for football rights costs and fibre roll-out regulation will dominate in the short term, and further bumps (such as the Virgin MVNO contract loss) may emerge.
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