VMO2’s half-year results were something of a mixed bag with some decent revenue momentum but a big hit to EBITDA as COVID cost-savings unwound and company full year guidance suggests a further deterioration in Q4.

Volt, VMO2’s convergence product, is well-conceived and executed. With a following wind it should avoid the pitfall of revenue dilution whilst potentially offering some upsides.

The company remains in strategic limbo awaiting an outcome on its wholesale discussions with Sky. This will determine not just fibre expansion plans but also branding and co-marketing of its central products.

Press reports that Sky is in advanced talks to co-invest in Virgin Media O2’s upgrade of its cable network to full fibre are something of a surprise, with a host of issues for both parties to carefully consider

The muted deal would be somewhat negative for BT (although limited by Sky’s c.15% market share in VMO2 areas and regulatory protections/upsides). It is, however, a stark reminder of the precarious economics of alternative networks such as CityFibre

Whether this makes VMO2 more likely to extend its network further is a more critical issue, certainly for BT

VMO2’s inaugural results reinforced the company’s focus on profitability with EBITDA growth of 6% and record margins. Flat revenues year-on-year benefited from the annualisation of the COVID-19 hit but incorporated little by way of rebound.

Much remains to be seen in terms of strategy but indications thus far are reassuring with B2B a clear focus for revenue growth, and the benefits of direct distribution feeding through to profitability.

The company’s decision to build an overlay full fibre network is a bold, but smart, move—allaying justified obsolescence fears about its network, enhancing strategic flexibility, and reducing its cost base.

With the O2/Virgin Media merger now approved, VodafoneZiggo in the Netherlands may hold clues to their likely approach to the market although their starting point is not quite the same and some lessons may have been learned.

We remain sceptical of the merits of discount-led convergence strategies. The pandemic, however, has eased the route to cross-selling and strengthened the case for convergent technologies.

Virgin Media’s network strategy will be key with significant risks from wholesaling their cable network and from expanding their footprint.

With the European Commission’s decision to block the H3G/O2 merger annulled and with new H3G management sounding a very pro-consolidation tone, the prospect of mobile operators going from four to three in the UK seems to be back on the cards.

Both H3G/Vodafone and H3G/O2/Virgin Media combinations seem possible although each has its own complexity—existing network sharing arrangements being one of them.

With 5G delays and mounting costs following the decision to ban Huawei, consolidation is increasingly feeling like the most viable option for H3G whose returns are already too low and falling rapidly.

ByteDance is rushing to sell a 20% stake in TikTok Global to Oracle and Walmart at an enterprise value of $60 billion. TikTok otherwise faces a ban in the US on 12 November, subject to legal challenges.

The sale hinges on ByteDance obtaining approval from China to export TikTok’s core technologies. China updated its export control rules to include algorithms (and AI), entrenching a tech cold war with the West.

TikTok has confounded regulatory woes in India and the US, and renewed competition from US tech, to post dizzying user growth in every major internet region where it is available, casting off its image as a niche youth product and entering the mainstream.

Microsoft hopes to buy TikTok from Chinese owner ByteDance before President Trump’s Executive Order halts transactions with the company in mid-September. Twitter is now in the game, but is unlikely to prevail

Worth tens of billions, TikTok would be the biggest acquisition in Microsoft’s history. This hot new digital platform has hundreds of millions of users and an ad business that could overtake Snapchat’s. Extracting the technology from ByteDance may take years

Selling TikTok to shake off anti-Chinese scrutiny would signal ByteDance’s abrupt exit from the digital world stage with a fabulous return on its investment, while letting TikTok users continue to enjoy the service. However, losing TikTok sinks the global growth story that ByteDance was lining up for its anticipated IPO

Premium sports subscriptions are the primary sector weakness in the current crisis, and they look set to drive fixed operator revenues down 10% next quarter and Sky’s EBITDA down by 60%.

As lockdown eases, latent broadband demand can be more easily sated, and sports subscriptions will bounce back from the September quarter. A surge in working-from-home is likely to increase both the quantity and quality of home broadband demand, with ‘failover’ mobile backup also likely to be of greater interest.

Openreach will benefit from accelerated demand for full fibre, converged operators will be best-placed to offer mobile backup for broadband, and operators with a strong corporate presence will most easily target demand for home-working products.

The press has reported on an imminent merger of O2 and Virgin Media (UK). This is not likely to be driven by the pursuit of revenue synergies as dis-synergies are more likely if the brands are merged.

Cost synergies are real, albeit a bit tangential. However, in a mature market even modest synergies are worth pursuing.

A full regulatory review may be required but approval is likely. Market impact is somewhat nuanced, with the benefit of a distracted competitor short-term and a larger but still rational operator ultimately.

Demand for telecoms capacity is booming, and the networks can (broadly) cope, with the increase primarily in off-peak demand. However, as the crisis continues, maintaining resilience becomes more challenging.

In the short term, the demand for ample, reliable connectivity coupled with reduced churn will add resilience to operator financials, although there may be significant weak spots especially in business markets.

However, as the crisis goes on, the pressure on capacity and network maintenance may grow, and the impact of the dramatic economic slowdown on consumers and businesses will also put pressure on financials.