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.

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

After strong underlying 2018 results, the more subdued outlook for 2019 is an important shift, driven by regulatory pressure on mobile, higher programming costs, one-offs and softening demand

Lightning is continuing to drive market share gains in new build areas, and should provide a 2ppt tailwind to revenue growth in 2019, but enhanced visibility on the economics of rollout suggests that its conservative approach is a wise one

In existing build areas, Virgin Media is facing-off pricing pressure from TalkTalk on high speed, and potentially from BT on even higher ultrafast speeds, with it moderating pricing and launching a market-beating 500Mbps product in Spring 2019 in response

TalkTalk is delivering on its subscriber and revenue growth targets but is straining to get there. Price rises such as a £4 ‘TV access fee’ look increasingly risky

Whilst migrating to discounted high-speed helps to deliver top-line growth, margins are c. 40% lower; an unwelcome dent to already negative cashflow and stressed leverage

Both TalkTalk’s focus on revenue growth in a tight market and fibre rollout plans look increasingly unaffordable; a more modest ambition of stable revenues might allow a healthier business model to unfold
 

Sky’s revenue growth under Comcast appears to have accelerated since it last reported as an independent company, largely driven by sports rights expansion in Italy, which also drove bumper subscriber growth in Q3 2018 

Sky UK likely enjoyed a steadier performance, helped by accelerating high speed adoption, a price rise in April, increased international sales, and improving premium channel adoption on third-party platforms

Comcast expects continued acceleration into 2019, with profitability taking a hit from increased sports rights in Italy in H1, but this is more than compensated for by reduced English Premier League rights costs in H2
 

Broadband market volume growth resumed its downward trend in the September quarter after a blip in the previous quarter that was likely caused by a wholesale transfer distorting the figures. Revenue growth, however, perked up to 1.9% from 1.7% in the previous quarter, an encouraging recovery especially given that it was not primarily driven by the timing of a price increase

ARPU growth improved across all four of the major operators, countering recent trends, with a focus on higher value offerings a common theme. High speed broadband adoption accelerated in the quarter across most operators, encouraged by Openreach’s volume discount offer, although this was partially driven by keener high speed pricing

Revenue growth at Virgin Media, Sky and TalkTalk converged at around 3%, with BT Consumer lagging at -1%. However, excluding the effect of BT’s shrinking telephony-only base and smoothing the sporadic boost of its 9-monthly price rise, BT Consumer’s revenue is in the middle of the pack at 3.0% 

TalkTalk had very solid Q2 and H1 results, with broadband net adds staying positive, high speed net adds accelerating, revenue growth above 3% and EBITDA rebounding back to growth

This was helped at the revenue line by a price increase in the quarter and in EBITDA terms by steep Openreach price reductions, with strong revenue growth and any EBITDA growth hard to replicate once these effects have annualised out

The company has nonetheless stabilised its subscriber base, revenue and profitability after some erratic years, with cost-cutting providing some potential for growth going forward

UK broadband subscriptions re-accelerated in Q2, bucking a three-year downward trend, but market revenue growth still fell as BT’s overlapping price increase dropped out and all of the operators continued to struggle to meaningfully grow ARPU

Regular existing customer price increases and continued (but slowing) migration to high speed are being cancelled out by flat-to-down new customer pricing, and the frequent need to discount existing customers down to these levels to retain them

High speed net adds disappointed despite Openreach’s price cut, with many consumers unwilling to pay even a modest price premium for extra speed, a sobering thought as aggressive full fibre network roll-outs are being considered

Sky maintained strong revenue growth of 5% in 2017/18, with EBITDA and operating profit both bouncing back into strong positive territory after the UK Premier League rights hit of 2016/17

The UK grew revenue well and profits better; Italy performed well and should improve much further given the retreat of its principal competitor; Germany is more challenged, but extra content investment may aid sustained growth

Sky is proving adept at managing content costs and revenue in a changing environment, with investment, cost control and monetisation all being put to effective use as the content type demands it

TalkTalk had another strong quarter for broadband net adds, adding 80k versus its full year target of 150k+. All of this was due to strong wholesale, with retail net adds slightly negative, although in the market and seasonal context even this retail performance is quite respectable

On-net revenue growth improved strongly to around 4%, with its ARPU decline moderating to 2%, and ARPU should be helped further by price increases for existing and new customers alike in July

TalkTalk therefore looks well placed to hit full year targets, albeit with considerable help from its wholesale customers and some aggressive price increases. The focus back onto ARPU and away from (expensively) chasing retail subscriber growth is nonetheless to be applauded