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Rigorous Fearless Independent

Along with the rest of the mobile market, O2’s results were harder-hit by COVID than expected, with service and total revenues down by 9% and 4% respectively.

O2 estimates an 8ppt drag on revenues from COVID—much higher than the 1.6ppt Vodafone figure—a question of definition and business mix. The overall COVID impact on the market looks to be tentatively easing from next quarter and O2 should fare relatively well in that bounce-back.

The decision to terminate the Carphone Warehouse relationship will cause some short-term technical drags on performance but creates an opportunity to improve profitability. Reopening of O2 stores post lockdown will help to compensate for forfeiting Carphone as a route to market.

Sanchit said “TikTok will be one of the first dominos to fall in what will be a lengthy process where lots of other apps get banned. It is not unique in the Chinese app sphere.”

He added, "With many Chinese apps, the US government or the Indian government aren’t aware of how that data is being mined."

“Governments are increasingly turning these grey data practices into hot topics, whereby they are able to garner a lot of political capital with their voter base. They’re almost weaponising these issues."

Joseph said "Part of the issue with Google Play Music was branding. The messaging was very confused. They changed the name several times. There was Google Play All Access, YouTube Music Key, and it speaks to the underlying issue that this has not been an area of focus for Google."

He added that Google's track record with branding did not "fill me with hope that the messaging is going to be super clear. Spotify does one thing well, which is music streaming. There is a risk if you dilute the proposition with a product like YouTube, with user-generation videos. But YouTube already has tens of millions of paying subscribers. It's going in the right direction to be a big player."

James said "I think ideally, you would want three global suppliers. It would be good if there was a way we could work globally to aid their survival. But it is a global question; it's very hard for an individual country to solve that problem, because you need global scale."

Meanwhile, insofar as the China market is concerned, stated James, "the volume in China is such that, if you're not doing well in China, it's very difficult to be doing well globally. The problem is, the more Huawei gets attacked in the US and Europe, the better it seems to do in China. Huawei grew its revenue in the first half of the year!"

Facebook grew revenues by 11% in Q2. This rate is higher than investors expected, but still driven to record lows by the pandemic slowdown. It forecasts 10% growth in Q3.

The company is under very public pressure over its moderation of hateful content, with upwards of 1,000 advertisers joining a month-long boycott, while other online platforms institute tougher policies on hate.

Facebook’s world-beating ad product and 9 million-strong bench of active advertisers means an organised boycott can’t hope to dent its growth. A coalition of advertisers, users, staff and regulators could make it take notice.

 

Joseph said that there are “legitimate questions” to be asked about Dorsey’s role, “when you get specific failings around security or the product pipeline. Big tech has always promoted the idea of culture flowing from one or two people at the top. The idea of boy-genius messiahs helped them raise money on the way up, and I think there has to be accountability on the way down.”

He added “Twitter needs to focus on the basics. Make sure the platform is secure and the product works. Build compelling ad products for direct response advertisers, with targeting and attribution that works. Try not to get anyone murdered by someone radicalised by tweets. They don’t need that PR.”

Vodafone’s performance this quarter was hit both by COVID and an underlying deterioration in its operational momentum—disappointing given regulatory easing and easier comparables.

Vodafone’s guidance has been more prudent than most going into this pandemic and these results support that cautious stance. Whether it’s a case of Vodafone underperforming or the sector being less resilient than expected will emerge over the coming weeks.

The IPO of Vodafone’s towers business is imperative to maintaining its leverage targets and dividend. It will need to sell a chunky slice of equity and realise a hefty multiple in challenging market conditions.  The profile of the asset for sale will help but it all remains very finely balanced.