TalkTalk started its new financial year with revenue growth declining to -8% in Q1, although this is partly lockdown-related, and costs have also declined as churn plummeted.

While backbook pricing continues to be a challenge, new customer pricing continues to firm, which makes its expectation of stable/growing EBITDA for FY2020/21 possible albeit still difficult.

The company expects to launch full fibre products from Openreach imminently, and from CityFibre before the end of the year, with the adoption and eventual economics of these crucial to its medium and long-term future.

Premium sports subscriptions are the primary sector weakness in the current crisis, and they look set to drive fixed operator revenues down 10% next quarter and Sky’s EBITDA down by 60%.

As lockdown eases, latent broadband demand can be more easily sated, and sports subscriptions will bounce back from the September quarter. A surge in working-from-home is likely to increase both the quantity and quality of home broadband demand, with ‘failover’ mobile backup also likely to be of greater interest.

Openreach will benefit from accelerated demand for full fibre, converged operators will be best-placed to offer mobile backup for broadband, and operators with a strong corporate presence will most easily target demand for home-working products.

Following deadly border clashes between the 15th and 16th June, the Indian government has taken down 59 Chinese apps including TikTok, accusing them of illegally mining user data

India is TikTok's biggest international market, accounting for half of all users outside China. Chinese apps made up 38% of all app installs in India last year, second only to domestic apps

The India-China rivalry may spill over into more sectors as reports suggest India is reconsidering Huawei’s role in its 5G infrastructure plans. A ban would provide a fillip to US influence in the country

Market revenue growth plummeted to -2% in Q1 2020, with a lack of premium sports pay TV revenue the biggest factor.

The lockdown is also reducing churn and firming up pricing, but it is unclear how long this will last post-lockdown.

Pay TV revenue trends will continue to dominate next quarter; thereafter the battleground will move to ultrafast.

TalkTalk grew EBITDA by 10% in 2019/20, an impressive cost cutting driven result, with revenue and gross margin falling as the company struggles with the move to high speed.

The company is cautious on 2020/21, indicating only stable EBITDA citing CV-19 related pressures, although the lockdown has also brought much lower churn and an improving price environment.

The move to full fibre could prove challenging in the longer term, but it also brings an opportunity to rebrand away from a pure price focus, the source of much of TalkTalk’s challenges.

European mobile service revenue growth strengthened very slightly to -0.3% this quarter but, with many positive and negative factors at play, it would be wrong to conclude that we evidenced a convincing improvement in momentum.

Most operators have reiterated their financial guidance in spite of COVID-19 but there is caution from Vodafone and those exposed to sports rights (BT and Telefonica).

The outlook benefits from continued lockdown measures (reducing churn and spin-down) and the annualisation of some financial drags from the middle of next quarter. However, competition in Spain remains intense and the sector is exposed to any economic downturn.

The slow recovery in UK mobile continued this quarter with a 1ppt improvement in service revenue trends.

In spite of operator guidance to the negative, the sector is likely to remain relatively resilient in the face of COVID-19 in the short term, with its various impacts affecting operators differently depending on their business mix.

The outlook is relatively robust with the impact of some regulatory initiatives muted by lockdown measures and the annualization of some financial drags from the middle of next quarter.

 

Virgin Media’s Q1 financial performance was in line with its subdued outlook, with its key problem being a lack of demand (yet) for the ultrafast services that only it can widely provide.

CV-19 has delayed the marketing of ultrafast services from competitors, likely suppressing demand more generally; in the longer term however, the working-from-home experience will likely help drive adoption.

Virgin Media still has to solve the problem of alleviating the long-term threat of full fibre builds negating its network advantage; we believe that the best answer is to expand to a nationwide service via wholesale, and the merger with the nationwide O2 reinforces this.

Journalism is on the precipice with more than £1 billion likely to fall off the industry’s topline. Several years of projected structural revenue decline in advertising and circulation have occurred in just the past few weeks of the coronavirus pandemic, with no letup in sight.

The UK’s rich heritage of independent journalism is at risk, with responses by Government and ‘big tech’ multinationals welcomed but ultimately inadequate. We make two further recommendations for engagement in this report.

Journalism enterprises from the small, local and specialist outfits through to national household brands will either fail or remain on a path to future failure.

O2’s merger with Virgin Media seems more of a marriage of convenience than a determined pursuit of synergy benefits. With the owners effectively selling their stakes, the combination will be well-advised to exercise caution in any convergence strategy that they pursue.

O2’s results this quarter appear to be fairly decent with all metrics ticking up slightly, although caution is advised in interpretation and pressure on ARPU has not eased.

With the mobile sector reasonably well insulated from COVID-19 and O2 likely to fare better than most in out-of-contract discounts, the short-term outlook is relatively robust, but competitive and macroeconomic vulnerabilities remain on the horizon.