TalkTalk’s subscriber base and revenue fell again in Q3, and ARPU continued to decline despite good growth in its higher ARPU (but even higher wholesale cost) high speed base.

The sale of FibreNation to CityFibre and the accompanying wholesale deal provides much needed cash and de-risking, although the migration to full fibre still brings challenges to TalkTalk given its low price focus.

TalkTalk’s shorter term operational outlook is also still very challenging, with growing EBITDA in 2020/21 particularly difficult given stable/declining ARPU and the rising wholesale costs of migrating to high speed broadband.

BT had a weak December quarter, with revenue falling 3% and EBITDA 4%, despite a recovery at Openreach, mainly driven by tough competition and regulatory hits, with operating metrics solid but not noticeably improving.

These hits look set to continue, so the company’s hopes of a return to EBITDA growth in 2020/21 probably hinge on brand and service improvements actually becoming visible in operating performance.

A successful full fibre roll-out would be a boon for BT in the longer term, and regulatory developments are headed in the right direction, if not quite there yet. However, its affordability without a dividend cut remains questionable in the current challenging environment.

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.

The speeds made possible by full fibre build are unnecessary for most users in the short term, giving limited commercial advantage to those that can offer them, but are likely to prove essential in the medium/long term.

The economics of full-scale, independent alternative networks look very challenging in our view – especially without the support of Sky – although there are some limited arbitrage/cherry-picking opportunities.

The Openreach full fibre model makes economic sense under Ofcom’s proposed regulatory framework, provided it retains the lion’s share of the market, although considerable risks remain.

European mobile service revenue growth recovered to nearly reach positive growth in Q3, improving a whole percentage point over the previous quarter to -0.2%

The main driver of the improvement was continued ‘more for more’ price increases combined with a lack of price wars at the lower end, although the current detente does not feel very stable. Furthermore, the pressure on growth from the general trend towards SIM-only and the consequent lower contract revenue looks unlikely to alter

Revenue growth of around zero as almost achieved this quarter is sufficient for the operators to grow the bottom line, but not to transform their network coverage in the style envisaged by 5G enthusiasts – more substantial growth is needed to cover the costs of such a step-change

UK mobile service revenue growth improved in Q3 to -0.8% from -1.7% in the previous quarter, a welcome turnaround after three quarters of declining growth. Pricing remains firm, data volume growth remains robust, and some of the one-off factors affecting the previous quarter have dropped out

Sky Mobile soft-launched at the end of 2016, and it is taking an aggressive approach with a very deep MVNO technical model with substantial fixed costs, a high advertising budget and ambitious internal subscriber targets. To date the fixed MVNOs have not had a substantial impact on the MNOs, targeting a customer base that is non-core, but with SIM-only on the rise this may change

Looking at recently released network performance statistics, the impact of spectrum disparities is clear, with EE both able to offer faster speeds nationwide due to its large blocks of 4G spectrum, and offer much faster speeds in London. EE also has a lead in geographic coverage, and is planning to push its coverage much further, creating a challenge for the other operators to keep up

TalkTalk’s broadband subscriber decline has re-accelerated, with retail weaker than wholesale, and its consumer revenue is declining at 6%. This is partly due to price change timings, partly due to last year’s cyber-attack, but also partly due to underlying weak retail broadband subscriber growth

EBITDA did grow strongly, although this was in part due to less subscriber growth. The new pricing plans will likely drive more short term revenue weakness, but could potentially drive lower churn in the medium term, and they have renewed TalkTalk’s price competitiveness, particularly on high speed products

Longer term, we still think that the company will find it challenging to stabilise its retail broadband base in the face of a slowing market and Virgin Media’s network extension, at least without significantly upping its marketing spend and sacrificing some margin

UK residential communications market revenue growth accelerated to 5.8% in Q3, from 5.0% in the previous quarter, helped by an overlapping price rise at BT, and supported by firm pricing and accelerating high speed adoption elsewhere

In contrast, volume growth in the core three products continues to slow, with little sign that this will ever re-accelerate. In the longer term we cannot see ARPU growth acceleration continuing to fully compensate, and market revenue growth might also have peaked

With Virgin Media’s continuing network extension and improving pay TV service putting pressure on the other operators, Sky and TalkTalk are protecting themselves by aggressively marketing high speed broadband. Correspondingly, this quarter marks the first time that Openreach’s high speed net adds were mostly derived outside of BT’s retail divisions

France’s number two telecoms operator has suffered extensive damage since the 2014 takeover by Altice, which engaged in a slash-and-burn leveraged buy-out. Market share loss has triggered a revenue decline, with uncertainty of when this might stabilise

Increased investments will barely allow SFR to stand still in the competitive race for 4G and fibre deployment. Cash flow, while in decline, is sufficient to meet high debt payments – but rising bond yields could pressure P&L

SFR aims to appeal to subscribers through enlarged bundles of content sourced mainly from Altice investments in media, but execution seems geared to achieve VAT optimisation and augment the group’s political influence – which may be needed as massive job cuts are planned

BT had a strong quarter for revenue growth, improving to over 1%. This was helped by some temporary factors, but underlying trends look nonetheless strong across the board

Network development looks strong, with G.fast pilot pricing announced and development on track, selective FTTP builds gaining momentum, and mobile coverage and speed capabilities accelerating

Despite this, or perhaps because of it, the regulatory outlook is as murky as ever, with Openreach’s future structure still not resolved, spectrum auction rules still to-be-decided, and rulings on copper and fibre pricing from April 2017 heavily delayed