UK mobile market revenue growth improved in Q2, rising to -3.6% from -5.0% in the previous quarter, but we see this as driven entirely by an easing in the regulated MTR impact, with underlying growth actually dropping. O2’s revenue growth has continued to improve, Vodafone and EE’s revenue growth both improved roughly in line with the market, and H3G’s growth declined but remained much above the other three Both Vodafone and O2 announced plans to launch 4G on 29 August but both also have modest roll-out plans, with only 13 cities due to be covered by the end of the year, leaving both with less than half the coverage of EE, and H3G is not planning to launch until Q4. There is some debate over how much consumers are likely to value 4G, with a number of consumer surveys putting interest at a low level. Our own survey is consistent with this, but reveals that interest among high-end smartphone owners – who tend to spend more on handsets and airtime – is very much higher O2 is now selling all its upper end contract plans under the ‘O2 Refresh’ structure, which splits handset and airtime fees but in such a way as to allow it to make good margins on handset sales, a clever way to take advantage of smartphone popularity as opposed to working against it as many operators do. The other operators may well follow suit

UK residential communications revenue growth was again strong in Q2 2013 at 4% supported by strong unit volume growth (despite seasonal factors in the quarter) and firming ARPU, helped by firm pricing and high speed broadband take up

High speed broadband adoption continued apace at BT and Virgin Media, but much more slowly at the other operators. This may start to change in the second half of the year, as Sky and TalkTalk market the product more aggressively, and a wires-only self-install version becomes available

Overall the market outlook remains very healthy, with two potential areas of market disruption – BT Sport and regulated pricing – looking like they will resolve without prompting a damaging price war

TalkTalk’s broadband net adds held up well in the June quarter despite weak seasonality and an aggressive competitive push by BT

ARPU growth was steady, which allowed rising subscriber growth to drive consumer revenue growth up to just over 2%, and growth at the group level rose to just under 2%

With the BT Sport impact appearing slight, and regulatory outcomes looking reasonably benign, the outlook is much less uncertain than before

Vodafone Europe’s reported organic service revenue growth improved in the June quarter for the first time in over a year, albeit to the still-somewhat-unimpressive figure of -7.2%

This was however helped by slightly improving MTR cuts and the previous quarter being hit by the leap year effect; on an underlying basis growth declined again

Contract net adds continue to be weak, ARPU continues to suffer from the dilutive Vodafone Red tariffs, and the company continues to invest heavily in fixed line and lightly in mobile, the wrong way around in our view

Germany’s fixed line market is in state of flux as Liberty Global and Vodafone, the third and fourth largest players respectively, are reportedly engaged in a bidding war for Kabel Deutschland (currently number two).

The Vodafone bid would offer the most direct cost synergies, but this would be at greater execution risk. The Liberty bid would finally reunify most of the German cable sector, but would consequently need stronger undertakings to get anti-trust clearance.

Either merger would create a strong number two triple play operator, increasing competitive pressure on Deutsche Telekom and Sky Deutschland.

In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on reques

UK residential communications revenue growth was very strong in Q1 2013, rising to 4.6% from 2.1% in the previous quarter with most of the improvement driven by improved unit ARPU growth, which turned positive for the first time since early 2011

We expect unit volume growth to remain strong for the rest of the year, although ARPU growth is likely to moderate as overlapping price increases drop out, but it is still likely to be firmer than 2012 given the continued growth of high speed broadband (at least at BT and Virgin Media) and firm pricing in general

The outlook for market shares is less certain, with a number of difficult-to-predict factors coming into play, and while we do not expect dramatic changes in market share to result from any of these factors, they do create a risk of pushing operators to adopt more aggressive pricing strategies, which would disrupt an otherwise very healthy outlook

Overall UK mobile revenue growth slipped slightly in Q1, dropping 0.4ppts to -4.3%, although, taking into account the leap year effect, underlying growth likely improved a touch, marking the second quarter of growth being at least stable

EE announced 4G subscriber figures for the first time, reporting 318k subscribers at the end of the quarter, a very respectable figure given coverage, handset and price tier limitations. We expect this figure to grow strongly as coverage rolls out and 4G handset availability spreads, but the 4G revenue premium is still unlikely to be significant in 2013

The outlook for revenue growth in the rest of 2013 is fairly positive – the MTR impact will partly drop out from Q2 onwards, boosting reported revenue by over 2ppts, some mid-contract price increases will take effect, and pricing (so far) has remained reasonably stable

Vodafone’s European revenue slowed again, with declining underlying growth compounded by increased MTR cuts, and Vodafone Red tariffs seemingly driving both reduced customer acquisition and ARPU

Vodafone is investing in 4G on a leisurely timetable, planning to upgrade only 40% of sites to 4G by March 2015, and is seemingly more concerned about securing fixed fibre access than driving mobile

The March quarter growth may mark a nadir of sorts, but we believe a return to positive growth can only come when Vodafone apes its US associate and invests substantially in its network to truly differentiate

Following a return to broadband subscriber growth last quarter, TalkTalk has now returned to overall revenue growth for the first time since acquiring Tiscali in 2009

Pay TV net adds nearly doubled to 150k; the associated SACs weighed on EBITDA, but TV did support the upper tier ‘Plus’ base returning to solid growth

TTG’s outlook is positive, save for uncertainties over regulation, and the unpredictable impact of BT Sport on broadband market shares