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The Glasgow Climate Pact agreed at COP26 sets out national pledges to achieve net zero and contain global warming to 1.8°C above its pre-industrial levels— COP27 will buttress pledges, now at risk from the energy crisis, and advance some nations to 2030.

The TMT sector is a leader on net zero in the private sector. Companies that measure their end-to-end carbon footprint throughout their supply chain—as many do in the UK’s TMT sector—can target their GHG emissions.

The TMT sector underpins the UK’s vibrant digital economy that enables hybrid work-from-home (WFH), which reduces fossil fuel use thus heading off both the energy crisis and the climate crisis.

Whilst we remain sceptical of the churn reduction benefits of fixed/mobile convergence, the pandemic and a more astute approach from the operators is enhancing the case for it in the UK.

Creating the impression of a giveaway whilst minimizing the effective discount is key, as is extracting any loyalty and cost benefits.

Even if well executed, any upsides are likely to be modest. Operators are right to keep discounts to a minimum and to avoid M&A premia predicated on fixed/mobile convergence synergies.

Sky’s performance across 2021 significantly improved, driven in Q4 by a nice c.5% growth rate in UK consumer revenues and the advertising rebound, but effects of the pandemic are still being felt with EBITDA down 30% on 2019.

The decline in Group revenue accelerated in Q4 due to the severe shock to the Italian operation from its loss of most premium football coverage, although we see upsides in a possible rights reshuffle.

In 2022, Sky can leverage growth vectors including bigger content bundles, Glass, advertising innovations and broadband. Consolidating SVOD and telecoms markets may be more favourable to price increases.

Higher overall inflation, together with a bigger mark-up than in previous years for some, is implying significant in-contract price increases for the UK telecoms operators—an average of 7.7% for the mobile operators.

Although we may see a 5-6% short-term boost to mobile service revenue growth from these price increases, new-customer pricing remains crucial and could erode the boost from these in-contract rises entirely.

We have been surprised by Ofcom’s interventions to discourage these price increases. The industry needs all the help it can get to fund next generation 5G and full fibre networks, and these in-contract price increases are no guarantee that prices and revenues overall will start to rise.

The UK net neutrality rules are up for review; as usual, the operators are pressuring for relaxation, and there are strong arguments that the competitiveness of UK telecoms markets make such rules innovation-quashing with no consumer benefit.

The chances of mainstream video content providers producing a windfall for telcos are slim, but there are a host of more intensely commercial content providers which have far greater potential to pay extra money for higher quality content delivery.

Future services such as virtual and augmented reality will stretch even FTTP/5G networks; allowing the telcos to develop custom business models to facilitate their delivery may well speed up the development and implementation of the metaverse in the UK.

Sky has started to reap benefits from its substantial reduction in sports rights costs in Italy and Germany, helping to grow group EBITDA by 76% in Q3, despite a slight drop in revenue

With this change in strategy, the business model in Italy is undergoing an upheaval. Meanwhile, the UK continues to perform well, with further promise on the horizon thanks to the bold launch of Sky Glass

This streaming TV is a future-proofing leap forwards in Sky’s ever-more-central aggregation strategy, starting the business down the long path to retiring satellite, though this is probably still over a decade away

Sky’s revenue was up 15% in Q2, back to pre-COVID levels despite some lingering pandemic effects such as most pubs and clubs remaining closed. EBITDA fell by a third, driven by higher costs from sports rights, since very few live sports events took place in Q2 2020

The impact of “resetting” football rights is already evident in Germany and Italy, with 248k net customer losses across the group despite growth in the UK. However, Sky will make substantial savings, and we expect this will more than offset lost revenues

Meanwhile, Sky continues to strike deals with other content providers, solidifying its position as the leading household entertainment gatekeeper. In time, apps for NBCU’s Peacock, ViacomCBS’ Paramount+, ITV Hub, and, in Germany, RTL TV Now and DAZN, will all be aggregated within Sky Q

After a strong post-pandemic rebound, Sky has the opportunity to leverage its strong reputation with consumers to meet the challenge posed by new competitors and the studios’ direct-to-consumer transition, establishing Sky Q as the ultimate gatekeeper of video subscription homes.

Sports rights costs in Germany and Italy have been cut significantly, while Sky’s spend on UK Premier League rights will decrease in real terms. Savings will ease the financing of the shift to original content, which, associated with owner Comcast’s NBCU output, anchors the aggregation strategy.

Fibre deployment in the UK and Italy presents a subscriber and revenue growth opportunity, and underpins the gradual shift away from satellite to online content distribution.

Advertising income has been the lifeblood of commercial TV for decades, but declining linear audiences—combined with digital video alternatives—mean the TV advertising model must evolve to ensure it remains as potent a medium for brands as ever.

Lack of effective audience measurement and somewhat opaque advertiser/agency/sales house relationships are hampering linear TV advertising revenues. Both issues need resolving to underpin a healthier ecosystem overall.

Flexibility is key to this evolution. A move to audience buys across most linear and BVOD inventory would provide greater flexibility and targeting for advertisers, and would sit alongside some premium context buys. A greater onus on volume deals would give broadcasters more certainty to invest in content and their advertising propositions.

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The Creative Industries accounted for 6% of UK GVA in 2019, more than the automotive, aerospace, life sciences and oil and gas industries combined. The UK’s Creative Industries are the largest in Europe and are central to promoting the UK’s soft power globally.

At the core of the creative economy is the AV sector, which, in turn, is driven by the UK’s PSBs. In 2019, the PSBs were responsible for 61% of primary commissions outside London and are the pillar upon which much additional regional economic activity depends.

Going forward, only the PSBs are likely to have the willingness and scale to invest in production centres outside London with sufficient gravitational pull to reorientate the wider creative economy towards the nations and regions.