Device makers regained their mojo at this year’s MWC, with phones a crucial route to generative AI becoming a daily habit.
AI software has improved and proliferated, but limited differentiation leaves room for consolidation as a competitive funding crunch looms.
Unanswered questions loom large, but won't dim AI's potential.
While altnets continued their strong expansion in 2023, a slowdown in 2024 is looking very likely, with financing drying up due to tougher financial conditions and disappointing operating performances from some.
Consolidation is the obvious answer, and the altnets could consolidate into a pure wholesaler (via CityFibre), a retail/wholesale player, or could be absorbed into VMO2/nexfibre.
Which of these routes is taken, and how quickly, will have a profound impact on the structure of the industry, and all players should be careful what they wish for, with long-term outcomes hard to reliably predict in such a complex marketplace.
VMO2 ended 2023 with strong ARPU and EBITDA growth, meeting its (revised) guidance for the full year, but saw receding subscriber momentum across both fixed and mobile.
2024 will be much tougher across the industry and for VMO2 in particular, with its revenue expected to be flat at best, and waning boosts from price rises and synergies coupled with a series of technical factors shrinking EBITDA.
The company has promised new commercial initiatives in 2024, and thereafter we see strong potential in it maximizing the use of its network and retail arms via breaking the long-standing lock between them, although the formation of NetCo is neither a necessary nor sufficient step for this.
The quest for sustainability in the UK national news industry is gaining ground, thanks to digital growth offsetting relentless print decline. The challenge of the print-to-digital transition has not faded, however, amidst the oncoming cliff-edge for print.
Nationals choosing the path of the walled garden on digital have out-performed those in pursuit of the ad-supported mass-market audience, whose ad yield per user is being compressed by more efficient scale platforms and the end of tracking technology.
Despite the challenges facing the news industry, the beacon of light shone by professional journalism has never been more important to humanity, to combat disinformation and misinformation on the internet, which Gen AI tools will only exacerbate.
Service revenue growth was broadly flat this quarter as some unwinding of price increases was compensated by a pickup in roaming revenues.
Vodafone has made some progress on its turnaround plan: it has sold its ailing Spanish unit; is rumoured to be in talks about a deal in Italy; and its German business is (just) back to growth (for now).
We expect muted guidance for 2024 with lower prospective price increases for most, inflated cost bases, and continued consolidation uncertainty.
Market revenue growth was robust in Q3 at 1.4%, but heavily supported by price rises whose effect will wane over the next year.
Broadband net adds remained negative, with pay TV and telephony more negative still, mainly thanks to strained consumer finances.
Declining volumes and waning price rise boosts are likely to lead the market into decline next year, with a recovering economy needed to reverse this.
With a difficult price rise adjustment now behind it, VMO2’s subscriber momentum is much improved, in part aided by accelerated network expansion.
Backbook pricing remains under pressure on the fixed network with revenues down 1.2% in spite of sizeable price rises and footprint expansion—upcoming OTS may exacerbate this issue.
VMO2 has thus far only countered the downside of the UK’s fibre revolution. A new approach to branding and expansion of its addressable market are upside opportunities—with the ultimate potential to even deliver improvements on its previous position.
Mobile service revenue growth finally got close to the rate of inflation this quarter, doubling to 7.5% as the operators benefitted from mid-teen price rises.
Growth will wane from here with expected revenue growth of 6% this calendar year and 3% next, with ongoing cost-inflation pressures.
H3G looks set to fare better than others on the top-line in 2024 but its profitability is looking somewhat irredeemable, with negative cashflow even with more normalised capex.
Market revenue growth surged to 2% in Q2, but entirely-and-more driven by price rises, with underlying trends negative across volumes and ARPU.
Broadband volumes in particular turned sharply negative, largely due to a post-lockdown hangover combining with weak economic conditions.
The outlook is bleak: price rise benefits are set to wane and then reverse, and weak volumes will feed through, with economic recovery needed for a return to sustainable growth.
In a reform of the competition regime for digital markets, by 2025 the UK will have conduct regimes for platforms including Google, Meta and Apple, overseen by the Digital Markets Unit.
Nested within could be a ‘fair bargaining’ regime for platforms and news groups, following Australia and Canada, whose lessons could be valuable to preserve platforms’ incentives to serve news. In Canada, platforms are refusing to pay to serve news links to their users, and plan to exit this form of content.
Financial transfers to UK news groups by platforms is among the new UK regime’s aims, but is unlikely to make up for the declining revenue trend of local news provision whose sustainability is most at risk.