Recently issued regulator rulings on Google, ad tech companies and Facebook challenge prevailing online advertising practices of obtaining user consent under the EU’s General Data Protection Regulation (GDPR)

Rulings from France on Google and ad tech partners of media owners called them out for inadequate disclosure to users, and excessive merging and processing of data

In a landmark precedent for Germany, the Federal Cartel Office found that Facebook lacked “freely given” consent from users, calling its terms “exploitative” and an abuse of its dominant position, also harming competitors

BTGS’s strategic plan seems like a sensible move in a very challenging market but it heralds its transition to a new operating model where its competitive advantage is largely eroded, its addressable market squeezed and it is arguably sub-scale

Although hybrid infrastructure and revenues from transition to cloud-based IT will provide something of a cushion, guidance and consensus forecasts are too optimistic in our view – cost-cutting plans are therefore likely deficient

Longer term, with IT services increasingly easy for corporates to manage themselves, diminished appetite for hybrid networks and global giants such as Amazon, Microsoft and Google squeezing out the middle-man, the space that BTGS occupies is likely to be considerably smaller

BT’s Q3 results were a little mixed, with mobile particularly weak, but the company remains on track to meet/exceed its (fairly conservative) guidance for the current year, and hit (modest) consensus expectations for 2019/20

Openreach was very weak at the headline level (-9%), but stripping out an accounting effect and internal revenue the division grew by 2% by our estimates despite significant price cuts, and full fibre roll-out is progressing well

While Openreach should accelerate this year, Consumer will be hit by a price rise holiday and slowing mobile, with investors likely having to wait for existing sports rights contracts to play out to see significant profitability improvement

TalkTalk is delivering on its subscriber and revenue growth targets but is straining to get there. Price rises such as a £4 ‘TV access fee’ look increasingly risky

Whilst migrating to discounted high-speed helps to deliver top-line growth, margins are c. 40% lower; an unwelcome dent to already negative cashflow and stressed leverage

Both TalkTalk’s focus on revenue growth in a tight market and fibre rollout plans look increasingly unaffordable; a more modest ambition of stable revenues might allow a healthier business model to unfold
 

Smart speakers like the Amazon Echo and Google Home accelerated their prodigious rate of adoption in Q4 2018, and we expect they will soon be in 20% of UK homes

Amazon and Google price devices low to drive adoption to mass-market levels and win the race to own the home, in contrast to Apple’s profit-making strategy for its speaker

Echo’s main strategic benefits to Amazon are the scope for data collection and the intelligence it supports, and gatekeeping partners’ access to customers

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Amazon’s recent deals with Apple in TV, music and device sales mark a turning point after a decade of frosty relations

The context for this involves shifting priorities at both firms, growing pressure on Apple’s iPhone business, and rivals in common — first and foremost Google, but also the likes of Netflix and Spotify

The uneasy alliance helps both companies consolidate their strengths in the platform competition over media and the connected home — but trouble already brews

Broadband market volume growth resumed its downward trend in the September quarter after a blip in the previous quarter that was likely caused by a wholesale transfer distorting the figures. Revenue growth, however, perked up to 1.9% from 1.7% in the previous quarter, an encouraging recovery especially given that it was not primarily driven by the timing of a price increase

ARPU growth improved across all four of the major operators, countering recent trends, with a focus on higher value offerings a common theme. High speed broadband adoption accelerated in the quarter across most operators, encouraged by Openreach’s volume discount offer, although this was partially driven by keener high speed pricing

Revenue growth at Virgin Media, Sky and TalkTalk converged at around 3%, with BT Consumer lagging at -1%. However, excluding the effect of BT’s shrinking telephony-only base and smoothing the sporadic boost of its 9-monthly price rise, BT Consumer’s revenue is in the middle of the pack at 3.0% 

TalkTalk had very solid Q2 and H1 results, with broadband net adds staying positive, high speed net adds accelerating, revenue growth above 3% and EBITDA rebounding back to growth

This was helped at the revenue line by a price increase in the quarter and in EBITDA terms by steep Openreach price reductions, with strong revenue growth and any EBITDA growth hard to replicate once these effects have annualised out

The company has nonetheless stabilised its subscriber base, revenue and profitability after some erratic years, with cost-cutting providing some potential for growth going forward

BT’s Q2 results were well ahead of both its full year guidance run-rate and financial market expectations, with revenue flat and EBITDA up 3% versus guidance and consensus at -2% for both metrics 

Operating metrics were more mixed, with broadband churn high and (our estimate of) net adds low, but fixed ARPU was solid, backed up by rapid adoption of BT Plus, fibre adoption re-accelerated and mobile was strong across all metrics

While part of the outperformance was likely due to H1/H2 phasing, it also reflects fairly conservative expectations and a solid operating performance, and hence full year guidance still looks very beatable, with a positive outlook beyond this

With a carefully priced, strong line-up of iPhones, Apple will consolidate its main revenue line and core user base in the near term

The latter feeds into a services business showing impressive growth, but which is also marked by missed opportunities and mounting negative consequences on the rest of the online ecosystem

For media businesses, Apple’s impact is larger than ever, inevitably leading to new kinds of friction around commercial terms, App store policies and browser features