Service revenue growth almost doubled this quarter to 2.4% aided by price rises in the UK, Spain, and France, but remains well below inflation-levels.
The revenue boost from in-contract price rises will ultimately disappear as customers recontract, dampening the EBITDA outlook as costs continue to rise.
Operators are looking to other strategies to strengthen their positions, including edging up new-customer pricing, M&A, and attracting wholesale MVNO business.
Vodafone's headline revenue growth of +3.7% is actually a small decline once Rest of World exchange depreciation is accounted for. Europe, however, delivered an improving revenue trend to +0.4%, as signalled at Vodafone's FY results announcement.
The mix and operating trends are less positive, with growth driven by low-margin B2B, and subscriber losses accelerating in German fixed. Investors will be weighing up whether these results are green shoots of a recovery or another false dawn.
Although the company may reach its guided EBITDA on assumed exchange rates, it looks set to fall short in euro terms, which has implications for FCF and dividend cover.
On 18 May 2023, Enders Analysis co-hosted the annual Media and Telecoms 2023 & Beyond Conference with Deloitte, sponsored by Barclays, Financial Times, and Salesforce.
With over 550 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 Four, covering: news publisher growth, the way forward for UK telecoms, regulation, and closing remarks. Videos of the presentations will be available on the conference website.
Providing home broadband connections via a mobile network (FWA) is gaining traction in certain markets where local conditions make it a viable alternative to fibre, such as New Zealand, Italy and the US.
FWA is a time-limited opportunity for most, with mobile traffic growth absorbing capacity for it and fixed traffic growth depleting the economic case. An ultimate shift to fibre is the best exit strategy.
In the UK, H3G's spare capacity could support up to 1 million FWA customers on a ten-year view—enough for a meaningful revenue fillip for H3G, but not enough to seriously disrupt the fixed market.
This report is free to access.
The Glasgow Climate Pact agreed at COP26 sets out national pledges to achieve net zero and contain global warming to 1.8°C above its pre-industrial levels— COP27 will buttress pledges, now at risk from the energy crisis, and advance some nations to 2030.
The TMT sector is a leader on net zero in the private sector. Companies that measure their end-to-end carbon footprint throughout their supply chain—as many do in the UK’s TMT sector—can target their GHG emissions.
The TMT sector underpins the UK’s vibrant digital economy that enables hybrid work-from-home (WFH), which reduces fossil fuel use thus heading off both the energy crisis and the climate crisis.
Whilst we remain sceptical of the churn reduction benefits of fixed/mobile convergence, the pandemic and a more astute approach from the operators is enhancing the case for it in the UK.
Creating the impression of a giveaway whilst minimizing the effective discount is key, as is extracting any loyalty and cost benefits.
Even if well executed, any upsides are likely to be modest. Operators are right to keep discounts to a minimum and to avoid M&A premia predicated on fixed/mobile convergence synergies.
The UK net neutrality rules are up for review; as usual, the operators are pressuring for relaxation, and there are strong arguments that the competitiveness of UK telecoms markets make such rules innovation-quashing with no consumer benefit.
The chances of mainstream video content providers producing a windfall for telcos are slim, but there are a host of more intensely commercial content providers which have far greater potential to pay extra money for higher quality content delivery.
Future services such as virtual and augmented reality will stretch even FTTP/5G networks; allowing the telcos to develop custom business models to facilitate their delivery may well speed up the development and implementation of the metaverse in the UK.
The Government appears set on reducing the scale and scope of the BBC by dismantling the licence fee, and in its place pushing for subscription or making payment voluntary, without any evidence of the likely impact.
DTT – the UK’s largest TV platform – has no conditional access capability, and so implementation would require another costly and long-term switchover.
A voluntary licence fee would inevitably lead to a huge reduction in income. If just those on income-related benefits were not to pay, the shortfall would be over £500 million – in addition to the £250 million the BBC will be funding for over-75s receiving Pension Credit.
New SVOD entrants are prioritising reach over revenue in the US with extensive ‘free’ offers, including Apple TV+ (to hardware buyers), Disney+ (to Verizon customers), HBO Max (to HBO subscribers) and Comcast’s Peacock (to basic cable homes)
This is the latest development in an unfolding global story of partnerships, continuing on from multiple Netflix and Amazon distribution deals with platforms, bringing benefits to both parties
In Europe, Sky faces price pressure, but it has secured its HBO partnership and can now talk to Disney from a position of strength
Many European telecoms operators are pursuing a fixed/mobile convergence strategy on the pretext that the addition of mobile reduces churn. We see no evidence of churn reduction from this strategy
Discounts required to encourage take-up of fixed/mobile services are often value-destructive, even before competitor reaction: a 10% bundle discount necessitates a 2ppt improvement in churn to wash its face economically. M&A premia on the basis of convergence synergies raise the hurdle even higher
Most UK operators offer very limited discounts on fixed/mobile bundles for now, sensibly focusing on enhanced services. Vodafone is the most aggressive, albeit less so than it is elsewhere. All UK players should hope that it stays this way