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
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
The Information Commissioner’s Office reported on the UK online advertising sector, finding common industry practices unlawful under a strict interpretation of the GDPR and UK privacy law
The ICO focused on problems around transparency, consent and data sharing in the Real-Time-Bidding ecosystem, which comprises 16% of UK online ad spend, but most of publisher online ad revenue. The ICO is giving the industry six months to shape up, with the next steps still unclear
The Competition and Markets Authority has had under consideration an investigation into the entire online advertising sector, but is hampered by Brexit-related considerations
We expect total TV ad revenues to decline 3.3% in H1 2019, partly due to a return to Earth following the idyllic conditions of the World Cup in June 2018.
Bad omens for advertising for H2 include the sagging economy since April and the Government’s impetus to achieve Brexit on 31 October, with or without a deal.
Our forecast remains a 3% decline for total TV ad revenues for 2019 as a whole, with the risk of a more serious downturn in 2020 in the wake of Brexit.
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
Disney announced that it would acquire Comcast’s 33% share of Hulu in a put/call agreement that can be enacted by either party from January 2024, while taking full operational control of the vehicle immediately.
Under the agreement Disney will pay Comcast a minimum of $9 billion for its current stake, provided Comcast fulfils agreed capital calls, which going forward would be just over $500 million/year.
Disney secured the continued licensing of NBCUniversal content for Hulu, contributing about 30% of Hulu’s library, but Comcast can loosen obligations to Hulu for the launch of its own SVOD service in 2020.
After the most challenging period in its history since 2012, Facebook has been able to stabilise its fundamental metrics and announce a major product overhaul
Despite talk of a business model pivot, Facebook’s focus remains on advertising, whose growth will remain concentrated in developed markets
News publishers wishing to stay relevant on the upgraded product set need to target exclusive layers of social interaction, with groups particularly important
Sky made a surprisingly weak start to 2019, with revenue growth decelerating to 1.9% (the first time below 4% since the European businesses merged in 2015), due to weaker ARPU trends.
However, Sky expects improvement to follow, blaming one-off factors in the quarter. The ARPU weakness drove EBITDA down 11.3%, but this should bounce back across the rest of 2019 as football rights costs turn from a drag to a positive.
Comcast highlighted collaborations with Sky across tech, advertising, content distribution and even news, stating it is on track to achieve the anticipated $500 million in annual synergies over the next couple of years.
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