Service revenue growth was broadly flat at 1.7% as improvements in Germany offset weaknesses in Italy.

The impact of price increases has been mixed, with subscriber losses dulling their upside, and the mixed picture looks set to continue into Q2.

The market continues to be challenging with elevated competition at the low end, pressure from some regulators to increase network coverage, and a somewhat soft EBITDA outlook.

On 4 June 2024, Enders Analysis co-hosted the annual Media and Telecoms 2024 & Beyond Conference with Deloitte, sponsored by Barclays, Salesforce, Financial Times, and Adobe.

With over 580 attendees and over 40 speakers from the TMT sector, including leading executives and industry experts, the conference focused on how new technologies, regulation, and infrastructure will impact the future of the industry.

This is the edited transcript of Session Two, covering: Sky’s strategy; audience engagement with sport; the role of AI in journalism; and Amazon’s UK business and philanthropy. Videos of the presentations are available on the conference website.

Service revenue took a dip in Q4 to 1.5% as a waning price rise impact in the UK combined with the loss of positive one-offs in Germany.

We expect growth to slow further through 2024 as many operators implement lower index-linked price rises which are also coming under increasing regulatory scrutiny.

Vodafone has made progress on its turnaround plan—striking deals for its Italian and Spanish units—but it is not yet out of the woods, with ongoing challenges in Germany and approval still uncertain in the UK.

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.

Many telcos are surprisingly advanced in exploring GenAI opportunities, mainly in gleaning cost efficiencies in managing their complex systems, but it may also provide a revenue boost.

European telco CEOs made a heartfelt—if not entirely convincing—plea for regulatory/policy help via a ‘new deal’ to help support future investment, highlighting a genuine lack of price/investment balance in European telecoms.

The most convincing specific regulatory/policy solution is in-market consolidation, with other steps either less effective, or unlikely to happen, but a general shift in regulatory attitude could prove helpful in many small ways.

Vodafone’s Q3 results were slightly disappointing following the green shoots of Q2, with growth in Germany slipping back again, albeit some of it already flagged.

It is difficult to imagine the full year results event being a positive catalyst with the likelihood of a dividend cut, a recognition of the hard-currency reality of the financials, and a still challenging outlook for FY 2024/25.

Deal-making is a positive counter with a highly accretive deal still in the offing in Italy, and the prospect of execution in Spain and the UK. Various inorganic deals with 1&1, Microsoft and Accenture will also be helpful, although none of them as valuable as an improvement in the core operations.

Service revenue growth was broadly flat this quarter as some unwinding of price increases was compensated by a pickup in roaming revenues.

Vodafone has made some progress on its turnaround plan: it has sold its ailing Spanish unit; is rumoured to be in talks about a deal in Italy; and its German business is (just) back to growth (for now).

We expect muted guidance for 2024 with lower prospective price increases for most, inflated cost bases, and continued consolidation uncertainty.

Vodafone's headline revenue growth of +3.7% is actually a small decline once Rest of World exchange depreciation is accounted for. Europe, however, delivered an improving revenue trend to +0.4%, as signalled at Vodafone's FY results announcement.

The mix and operating trends are less positive, with growth driven by low-margin B2B, and subscriber losses accelerating in German fixed. Investors will be weighing up whether these results are green shoots of a recovery or another false dawn.

Although the company may reach its guided EBITDA on assumed exchange rates, it looks set to fall short in euro terms, which has implications for FCF and dividend cover.

Social tariffs have provided relief for some at a time of household income squeeze and otherwise unavoidable high inflation-driven telco price increases.

Adoption has risen but remains very low, limiting their effectiveness, and more widespread adoption would expose their shortcomings, with the risk of penalizing low cost operators and significantly increasing prices for non-adopters (by up to 20%).

A better approach might be to recognize that affordability issues are narrower but deeper than current social tariffs can address, with fuller, centrally funded subsidies targeted more narrowly at those most in need.

A new era is starting for the big consumer tech companies, as they venture outside of their traditional comfort zones to bet on future growth—most obviously in AI, and then cloud, gaming, headsets and video.

Competition in the tech space is intensifying as incumbents go head-to-head in new revenue growth areas also populated by insurgent startups—their M&A watched closely by competition regulators.

Fat profit margins have ensured vast financial resources are available to pour into competition, but hitting the right targets for consumer engagement is key to success.