Following record growth last quarter, the UK mobile market took a step down to just 0.9% growth in the quarter to December on the back of increasing pressure in the business market and the impact of out-of-bundle limits

2019 looks set to be a tough year for the sector with: a series of potentially painful regulatory hits; markedly lower price rises than last year; and early signs of a degree of creeping competitive intensity

We view 5G as a much-needed means of expanding capacity in the sector with upsides from M2M and IoT likely to remain relatively small

Governments and operators have come under increasing pressure to exclude Huawei’s 5G equipment from national networks, with justifications usually kept vague and wide-ranging rather than specific, and no evidence provided.

Given the role of Huawei’s 5G equipment in the network and the extent of existing testing and checking, realistic security risks that apply to Huawei and not to all other equipment suppliers are hard to conceive.

The risks of any ban are however very real; with Huawei one of only three global-scale telecoms equipment suppliers, and the preferred early choice for 5G radio equipment in the UK, removing this choice will massively increase costs and delay roll-outs of cutting-edge connectivity.

The combination of 5G, AI, IoT and big data were evangelised at MWC as generating massive scope for the transformation of multiple industries. 

That much is probably true, but it is the tech and consultancy companies who will likely receive the benefits, with connectivity revenue likely to be modest.

For the operators, 5G brings more capacity much needed for hungry smartphone users, and perhaps the opportunity to transform themselves into a leaner operating model.
 

O2’s Q4 results delivered market-leading service revenue growth of 3%, double-digit EBITDA growth, sustained strong net adds and low churn. 

With ARPU service revenue growth flat, all of the growth came from other service revenue including M2M (machine-to-machine) and MVNO; a lumpy category up by more than 40%. 

Following a period of strong outperformance, O2 will face some challenges in 2019: some cost inflation to mitigate and the risk of a churn increase following December’s outage although experience suggests this is likely to be short-lived.
 

BT’s Q3 results were a little mixed, with mobile particularly weak, but the company remains on track to meet/exceed its (fairly conservative) guidance for the current year, and hit (modest) consensus expectations for 2019/20

Openreach was very weak at the headline level (-9%), but stripping out an accounting effect and internal revenue the division grew by 2% by our estimates despite significant price cuts, and full fibre roll-out is progressing well

While Openreach should accelerate this year, Consumer will be hit by a price rise holiday and slowing mobile, with investors likely having to wait for existing sports rights contracts to play out to see significant profitability improvement

This report contains the 2009 edition of our annual review of UK mobile user trends, based on a survey of 1,000 adults

We look at handset ownership, replacement trends, handset manufacturer choice, network operator choice, 3G handset ownership, usage of existing services such as photo-messaging and the mobile internet and, finally, interest in new services such as mobile TV, datacardsand femtocells

Ofcom’s statement on Next Generation Access (NGA) gives BT the maximum possible incentive to invest by allowing a high degree of pricing freedom and some short cuts to reduce implementation costs

But Ofcom cannot guarantee that BT will make a return from NGA, only the existence of an opportunity to make one

Ofcom’s statement is certainly positive for BT, but we remain sceptical of the business case for BT NGA, particularly given the low price of all-copper based offers and Virgin Media’s roll-out of 50 Mbit/s broadband

Ofcom has come up with a new 900MHz spectrum refarming/redistribution proposal, in which only 5MHz of spectrum is taken from Vodafone and O2, as opposed to the 15MHz it previously proposed

We still think that disrupting the voice and text services of existing customers in order to extend the availability of little-used 3G data services makes little sense, and that rearranging a small amount of intensively used spectrum when a far larger amount of unused spectrum is about to become available makes even less sense

Should Vodafone and O2 continue to oppose having their spectrum taken away, as appears likely, the delays to new spectrum auctions are likely to continue