O2’s service revenue growth slipped decisively into negative territory at -1.8% this quarter as the punishing regulatory regime took its toll

Underlying EBITDA growth of 4% was particularly impressive in the circumstances; likely aided by more direct distribution as well as tight cost control

The coming week will unveil how this compares to peers; we anticipate results which reflect a tough environment with little let-up on the horizon

In the BBC’s 2015 funding settlement commencing 2017, the Government assumed the BBC would fully fund the subsidy for over-75s to the tune of £750 million from 2020/21

Although the BBC’s settlement contained measures of “mitigation” worth c.£290 million, the BBC would still have faced a gap of c.£460 million to be funded by programme cuts and efficiencies (the BBC has pledged £250 million)

Including c.£300 million from the annual adjustment of the licence fee for inflation from 2017 would help. However, this was always required to offset normal salary and cost increases to prevent a real decline in the BBC’s resources

Ofcom’s recommendations to Government suggest updating EPG prominence legislation to cover connected TVs, and were warmly welcomed by the PSBs

Balancing various commercial, PSB and consumer interests will be key; determining what content qualifies for prominence will be a particularly thorny issue to resolve

Extending prominence to smart TVs and streaming sticks is critical, but implementation will be challenging

With c.22m accounts across 44m devices, Roku has a US footprint which exceeds the largest pay-TV platforms

Limited competitive advantages highlight the scale of this achievement, but also leave the pioneering firm vulnerable to activities from bigger, wealthier rivals Apple, Amazon, and Google as well as pay-TV providers

The odds are stacked against Roku, but continuing the innovation in production and product that built its lead may secure future success

The UK mobile market posted its slowest growth in more than two years this quarter; just 0.5% service revenue growth although net adds were strong and churn was down

ARPU is under considerable pressure thanks to regulation limiting out-of-bundle spend which will exacerbate as the year progresses

Several other negative developments look set to be layered on the pressures this quarter, including a step-up in competitive intensity as 5G launches –  with H3G’s pricing of unlimited data a sign of a resurgence in its aggression

After a period of significant outperformance, O2’s Q1 results reverted to sector average revenue growth with ARPU down by 3% and all of the growth coming from ‘other’ revenues

Regulation limiting out-of-bundle spending has been a significant drag which will continue to worsen

A more competitive market and a punishing regulatory outlook will make it very challenging to sustain 2018 growth trends as this year progresses

The UK government is now consulting on a wider TV advertising ban until 9pm for food and drink high in fat, salt and sugar (HFSS), to combat childhood obesity

TV and TV advertising are not the cause of children being overweight or obese (O+O). Policy change in this area should inform and educate parents and young children, as they have in Leeds and Amsterdam

With 64% of the UK population being O+O, obesity is a complex societal issue requiring a multifaceted approach. The evidence from existing rules, and plummeting TV viewing amongst children, says that further restrictions on TV advertising will be ineffective in curbing the rise of obesity in the UK

The capacity boost with 5G will be more important than any speed or latency uplift. We estimate a 7-fold increase in mobile capacity in the UK and 13x+ for O2 and H3G

We view fixed mobile substitution products as quite niche although the number of mobile-only households is likely to creep up. mmWave would have the capacity to substitute for fixed but has many hurdles to overcome

Capacity-constraints have tempered competition of late and their removal risks an increase in intensity, especially as H3G views itself as sub-scale – good for policy makers but another challenge to add to the industry’s woes
 

The split of UKTV has been announced with the lifestyle channels going to Discovery, while the balance, along with the UKTV brand and VOD service, retained by the BBC, costing BBC Studios £173 million

In the same release, a new, global Discovery SVOD “powered” by BBC natural history and factual programming was announced, backed by a ten-year content partnership

The deal is a positive step for the BBC, which safeguards against flaky brand attribution internationally and the potential loss of revenues from Netflix, which is becoming more choosy when acquiring content

Following record growth last quarter, the UK mobile market took a step down to just 0.9% growth in the quarter to December on the back of increasing pressure in the business market and the impact of out-of-bundle limits

2019 looks set to be a tough year for the sector with: a series of potentially painful regulatory hits; markedly lower price rises than last year; and early signs of a degree of creeping competitive intensity

We view 5G as a much-needed means of expanding capacity in the sector with upsides from M2M and IoT likely to remain relatively small