VMO2 survived the hammer blow of lower inflation-linked mobile price increases in Q2 with substantially unchanged revenue and EBITDA growth, helped by improving broadband ARPU

However, both mobile contract and broadband subs suffered declines, likely driven by issues with serving existing customers as well as attracting new ones, and these trends have to improve for the company to return to top and bottom line growth

Guidance implies that EBITDA growth will worsen in H2, but this would be good news in our view if it is driven by expenditure to support improved subscriber growth across broadband and mobile 

Meta led the pack of tech results in Q2 with 22% growth and championing a suite of generative AI products; should these falter, Meta can recalibrate by devoting more of its AI infrastructure to core user and ad products. 

AI and the metaverse give Meta an uncertain shot at a new platform play, leveraging its enormous user base and bringing developers back into the fold. 

Reality Labs is still burning cash, but a collaboration with Ray-Ban offers a path to usable head-mounted displays, and could get Meta there faster than Apple’s cutting-edge approach. 

BT’s revenue growth in Q1 was hit by lower price increases, but positive EBITDA growth was achieved thanks to strong cost control as inflationary pressures abate.

Subscriber figures were decidedly mixed, with mobile much improved, retail broadband much the same in a difficult market, and Openreach broadband much worse (but still manageable in context).

The bigger picture is that BT is successfully keeping all metrics roughly stable as it completes its fibre roll-out and waits for the inevitable cashflow turnaround as a result.

On 4 June 2024, Enders Analysis co-hosted the annual Media and Telecoms 2024 & Beyond Conference with Deloitte, sponsored by Barclays, Salesforce, the Financial Times, and Adobe. 

With over 580 attendees and over 40 speakers from the TMT sector, including leading executives and industry experts, the conference focused on how new technologies, regulation and infrastructure will impact the future of the industry. 

This is the edited transcript of Session Four, covering: artificial intelligence, the new phase of online advertising, and closing remarks. Videos of the presentations are available on the conference website.

On 4 June 2024, Enders Analysis co-hosted the annual Media and Telecoms 2024 & Beyond Conference with Deloitte, sponsored by Barclays, Financial Times, Salesforce and Adobe. 

With over 580 attendees and over 40 speakers from the TMT sector, including leading executives, policy leaders, and industry experts, the conference focused on how new technologies, regulation and infrastructure will impact the future of the industry. 

This is the edited transcript of Session Three, covering: consolidation in the telecoms sector; fixed-mobile convergence; and the future of the fibre industry. Videos of the presentations are available on the conference website.

BT’s underlying performance was solid in Q4 FY24, with one-offs turning firm underlying growth into flat/negative reported revenue and EBITDA.

FY25 will be hit by much lower inflation-linked price increases driving a 3ppt revenue drag, but BT may still be able to grow revenue and EBITDA, helped by the unwinding of Q4 one-offs and lower inflationary cost pressures.

Investors were cheered by BT’s confidence in its longer-term outlook, which we share, with FTTP build, take-up and monetisation all going strong, and barely any improvement in underlying performance required in its retail divisions for it to double its cash flow by 2030.

Reddit, a unique and valuable online space, has reported its first quarterly results as a public company, following a very successful IPO.

In the longer term, Reddit is doomed to scratch out an unprofitable existence as a wannabe scale ad platform, echoing peers in the public markets.

Advertising is probably the least-bad business strategy, as user payments, ecommerce and licensing revenues are even less proven. Dialling back growth ambitions to improve the bottom line is the most sustainable path.

Starlink’s compelling consumer broadband proposition has become the clear front runner in the satellite space, with an attractive cost to serve the 100k UK homes in very hard to reach areas relative to fibre alternatives

The latest developments allow full mobile coverage via satellite with existing handsets, a service the mobile operators could charge a premium for, and which might ultimately take pressure off mobile network coverage

The threat of full substitution is extremely limited given the 50-100x cost differential involved, but Starlink could still launch a retail product as a part-MVNO, putting pressure on the mobile operators to launch satellite-assisted retail services first

In-contract price increases have been the worst of all worlds—reputationally damaging for telecoms operators but contributing (temporary) revenue growth of just half the rate of inflation. We expect the revenue boost from in-contract price increases of 5% last year to become a 2% drag from Q2 2024.

Cost inflation is, however, cumulative with an acceleration in the gulf between costs and revenues forecast from here. We expect muted financial guidance for 2024/25 from BT Consumer and Vodafone UK over the coming weeks.

Rising new-customer pricing is a necessity if margins are not to be significantly squeezed, but competitive intensity and scale economics continue to thwart such efforts, with no real resolution in sight.

Direct greenhouse gas emissions from the UK telecoms sector equate to around 0.1-0.3% of the UK total. Most operators have set targets to reach net zero across their direct emissions in the next 10-20 years, with the move to electric vehicles an obvious win.

Network upgrades to 5G and fibre have the potential to cut emissions from electricity by a factor of 10, and consolidation offers further decarbonisation upside.

The industry could enable emissions savings in other sectors equivalent up to 30x its own by averting the need to travel and through IoT applications, with the latter requiring careful commercial assessment given the financial constraints in the industry.