Streaming profitability beckons, but owes much to the profitable services folded into companies’ DTC segments alongside the headline streamers.

There is a broader move towards bundling and price rises. The former bolsters subscriber additions and lifetime value but is ARPU-dilutive, while price rises will bump up both ARPU and churn.

2024 marks the first year with multiple players at scale in the ad space, as Prime Video entered the market. Other streamers with high CPMs and lower scale may be forced to re-examine their offerings.

With the returns of the mobile industry at the forefront of a range of policy issues including in the EC White Paper and the prospective Vodafone/Three merger, we take a fresh look at its economics.

Higher network costs due to government and subscriber demands are hitting the sub-scale operators disproportionately, limiting their ability to tailor their network to their market position.

Our analysis of the UK market suggests that H3G would need a market share of 23% at today’s price levels to earn even the most basic return on capital—an unrealistic prospect. With the fixed market likely to evolve to a patchwork of one/two/three-player areas, three nationwide mobile networks could still be a strong result.

Direct greenhouse gas emissions from the UK telecoms sector equate to around 0.1-0.3% of the UK total. Most operators have set targets to reach net zero across their direct emissions in the next 10-20 years, with the move to electric vehicles an obvious win.

Network upgrades to 5G and fibre have the potential to cut emissions from electricity by a factor of 10, and consolidation offers further decarbonisation upside.

The industry could enable emissions savings in other sectors equivalent up to 30x its own by averting the need to travel and through IoT applications, with the latter requiring careful commercial assessment given the financial constraints in the industry.

VMO2 ended 2023 with strong ARPU and EBITDA growth, meeting its (revised) guidance for the full year, but saw receding subscriber momentum across both fixed and mobile.

2024 will be much tougher across the industry and for VMO2 in particular, with its revenue expected to be flat at best, and waning boosts from price rises and synergies coupled with a series of technical factors shrinking EBITDA.

The company has promised new commercial initiatives in 2024, and thereafter we see strong potential in it maximizing the use of its network and retail arms via breaking the long-standing lock between them, although the formation of NetCo is neither a necessary nor sufficient step for this.

Reports of the "death of the metaverse" are greatly exaggerated. The scope of investment across metaverse-friendly technologies and experiences remains robust, although aggressive global competition in the AI sector could cause speed bumps.

VR, XR, and spatial computing will see a renaissance in 2024, renewing interest from developers as well as major media and entertainment. Gaming continues to be a major driver of the metaverse, with clear opportunity for new major services to compete against Fortnite and Roblox.

The building blocks are therefore all in place for the next consumer growth phase. Scaling the metaverse will be dependent on consistent and sustained trials, and more engagement from media and entertainment beyond games.

Prepared for The Metaverse Society by Enders Analysis.  

BT’s Q3 was robust in financial terms, delivering revenue growth of 3% and EBITDA growth of 1%, both in-line/ahead of analyst expectations.

Strong broadband ARPU and accelerating FTTP performance at Openreach were the highlights, a weakening BT Business and continued Openreach broadband losses were the main concerns.

This year’s guidance should be easily met, next year’s will be trickier given lower price rises due in April, but the long-term plan of a massive cashflow turnaround when the FTTP build ends is still well on-track.

Mobile service revenue growth dipped to 5.6% this quarter as the impact of Q2’s price rises began to wane, and the prospective lower price rises look set to slow growth to 2% by the end of 2024.

Bargain-hunting in the sector continues with the MVNOs still taking the lion’s share of net adds, to the detriment of the MNOs.

EE is offering keenly priced convergence and family plans with its new platform—another challenge for the other MNOs who don’t share the same incentives.

BT continued to perform well financially in Q2, with revenue and EBITDA growth remaining robust, and full year cashflow guidance nudged up.

ARPU growth remained robust across fixed, mobile and Openreach, but subscriber growth was weaker, especially in mobile and Openreach, and this will become more of a concern if it persists.

Maintaining growth across retail divisions will be a challenge as the price rise effect wanes, especially in weak economic conditions, and while Openreach’s FTTP roll-out is going well, full success is still not assured.

With a difficult price rise adjustment now behind it, VMO2’s subscriber momentum is much improved, in part aided by accelerated network expansion.

Backbook pricing remains under pressure on the fixed network with revenues down 1.2% in spite of sizeable price rises and footprint expansion—upcoming OTS may exacerbate this issue.

VMO2 has thus far only countered the downside of the UK’s fibre revolution. A new approach to branding and expansion of its addressable market are upside opportunities—with the ultimate potential to even deliver improvements on its previous position.

A cooler consumer market sees Sky now facing the same pressures as its SVOD competitors, with a loss of pay-TV subscribers in the UK.

However, Sky is performing better in telecoms in both the UK and Italy. These markets are less susceptible to recession with Sky also benefitting from its position as more of a challenger than an incumbent.

Uncertainty continues to loom over both the sale of its German platform and the upcoming allocation of Serie A rights in Italy.