The UK mobile market was steady this quarter at around -2% ahead of out-of-contract notifications hitting from February.

The mobile sector is playing an important role in tackling COVID-19 and is likely to be relatively resilient in the short term with a broadly-neutral financial impact. Longer term it will be exposed to the fortunes of the economy.

Elsewhere, there have been green shoots of positivity in the outlook: some good regulatory news; a degree of price inflation; Carphone Warehouse’s retreat is a positive for the operators, and some financial drags will drop out as the year progresses.

At the Enders/Deloitte Media & Telecoms 2020 and Beyond conference the economic and policy importance of telecoms infrastructure was a major theme, particularly in the current climate.

Operators envisage a pricing environment that will continue to be very challenging.

Help is required to secure infrastructure investment, deliver the economic upside from 5G, and level the playing field between sub-sectors.

Market revenue growth dipped to below zero in Q4 2019, as pricing pressures bite and smaller players gather share.

2020 is off to a challenging start, with new customer pricing dipping down again, and existing customer pricing under regulatory assault.

With expensive full fibre networks being built, persuading consumers to pay more for the higher speeds they enable will be key.

O2’s performance in the quarter to December 2019 is likely broadly in line with that of the previous couple of quarters, save for the impact of the annualisation of the launch of Custom Plans.

Sustaining service revenue and OIBDA growth at -2% in these challenging times is a good performance particularly as the shift to direct distribution continues to drag on service revenue trends.

The industry outlook remains very challenging particularly from heightened competition from Vodafone and H3G. O2 looks set to fare better than most on the issue of out-of-contract notifications but the likely loss of 36-month contracts by year end will be a blow. Customer focus and innovation will remain key to their success.

Despite operating in a challenging market, Sky has continued to increase revenues, with the resilient performance of its direct-to-consumer and content businesses offsetting the disappointing drop in advertising income.

Across FY 2019, EBITDA was up 12.2%; profit growth driven by a significant reduction in “other” costs as large one-off effects disappear and cost-cutting continues.

Extended distribution deals with Netflix and WarnerMedia will protect Sky’s content proposition for the coming future, as would the mooted integration of Disney+.

The speeds made possible by full fibre build are unnecessary for most users in the short term, giving limited commercial advantage to those that can offer them, but are likely to prove essential in the medium/long term.

The economics of full-scale, independent alternative networks look very challenging in our view – especially without the support of Sky – although there are some limited arbitrage/cherry-picking opportunities.

The Openreach full fibre model makes economic sense under Ofcom’s proposed regulatory framework, provided it retains the lion’s share of the market, although considerable risks remain.

Comcast’s new, on-demand service, launching in April, is an attempt to break NBCU’s unsustainable dependence on sales to Netflix and other SVODs. Peacock provides a path of digital transition for advertising-funded TV with a revamped low-load, high cost-per-thousand model.

Reach will be built with a free online tier and distribution to Comcast subscribers. Peacock seeks carriage from other pay-TV operators, with which reciprocal deals would make sense (i.e. HBO Max on Comcast alongside Peacock on AT&T’s platforms).

In Europe, where Comcast has no existing major free-TV offering to transition, launching Peacock will be challenging but could present Sky with ideas to counterweigh Netflix on its own service.

UK mobile market service revenue growth improved on a reported basis in Q3 to -3%, but was unchanged on an underlying basis, still not a bad result after six consecutive quarters of underlying growth declining, albeit in the context of rapidly improving macroeconomic conditions

All four operators now offer 4G services, with O2 and Vodafone launching within the quarter and H3G in December. EE will nonetheless maintain its coverage and speed advantage for 2014, but others (most likely Vodafone) may challenge thereafter. H3G is offering 4G at no extra cost, reflecting its focus on unlimited data and meeting the capacity requirements for this, and O2 has recently cut its 4G tariffs to match those of 3G (but with a high minimum entry point), leaving EE the only operator with an explicit 4G premium

The overall outlook is mixed – we would expect some improvement to revenue growth into 2014 as the MTR impact wears off and the dilutive effect of unlimited tariffs wane, but this may be countered by a lack of mid-contract price increases, and while 4G is likely to benefit all as it drives data volumes and encourages package upgrades, the impact will be gradual

In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request

In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request