Market revenue growth continued to accelerate in Q2 to reach 3%, but broadband growth worryingly dipped as the lockdown boost waned.
Differing pricing dynamics (among other factors) led to very different outcomes for the main players, with BT’s growth surging to 7% while VMO2’s revenue stayed in decline.
Underlying trends of weakening broadband growth, keener pricing and customer bargain seeking point to slower growth ahead … until the next price increase.
Revenue decline accelerated in Q2 as the cost-of-living crisis appears to be impacting UK sales, but profits remained strong thanks to last summer’s Continental sports rights reset
In Italy, DAZN will return on Sky’s platform just in time for the new Serie A football season, filling a key gap in its aggregation strategy
Looking forward, thanks to its enhanced profitability, Sky has the flexibility to respond to the economic downturn using pricing and content
BT Group’s revenue growth surged in Q1 to 1%, the first time it has been positive in five years, with a stronger than expected boost from the April price rises partially offset by the Virgin Mobile MVNO loss.
EBITDA growth, however, actually dipped to 2%, with little operating leverage due to cost pressures, although the company is still very confident in its full year EBITDA guidance (which implies 4% growth).
BT is far from immune to macroeconomic pressures, with pressure on costs, corporate revenue and signs of a sharp dip in broadband market growth, but it is well placed to deal with them given strong growth at Consumer and Openreach.
YouTube’s tepid quarter signals a two-track online ad economy with advertisers protecting search spend as an essential cost of sales while cutting online display.
YouTube faces a challenge to strengthen its brand and direct response ad products while sacrificing some income to Shorts, its answer to competition from TikTok, which we estimate added three times as much ad revenue as YouTube in H1.
Beyond the short term, brands need to generate new demand, and that cannot be accomplished at the bottom of the funnel.
UK altnet full fibre rollouts are accelerating, with an aggregate build pace close to that of Openreach, but customer acquisition is not growing at the same pace, and overbuild in the most attractive areas is becoming a significant issue.
Altnet business models remain challenging and are getting worse as Openreach builds out, and (although there are some notable exceptions) most will need to rapidly achieve scale and turn around their performance to survive.
Consolidation is very likely, along with business failures, and while some market share loss for Openreach looks likely as serious scale players emerge, the downside is limited, and even more so for retail ISPs.
With the publication of the Media Bill (expected to include details of the sale of Channel 4) seemingly delayed to at least after the recess (September), privatisation appears to now be on ice.
2021 was another demonstration of Channel 4’s resilience—showing record-breaking revenues, high content spend and encouraging rates of digital transition—setting a credible platform upon which the broadcaster's PSB credentials can be placed.
Some queries remain: Channel 4’s main viewing drivers are ageing, with fewer new shows being commissioned to replace them. Online engagement isn’t a substitute for declining linear viewing, while digital advertising growth may get harder with more players, such as ITV and the streamers, entering the space in earnest.
The 'enterprise metaverse' is best described as the next generation of communications, productivity, and collaboration tools—with VR/AR the centerpiece of the experience. Big tech is investing billions to bring it to market quickly
Quest 2 VR headsets by Meta have changed the cost equation for VR deployment in enterprise—low-cost headsets already have enterprise demand outstripping supply globally
Microsoft and Meta are closely aligned and co-operating, but Meta has its sights on its own high-value commercial customers and can expect incumbents to fight to retain them
The market looked superficially healthy in Q1, with revenue and broadband volume growth both maintained at 2%.
However, net adds trends suggest that consumers are becoming more bargain seeking, and prices have become more competitive into Q2.
The April price increases will support growth in the short term, but this boost may not last long if the cost-of-living crisis persists.
BT’s Q4 was mixed in the detail, with consumer broadband volumes weakening but FTTP roll-out and adoption surging, with performance at the Group level solid enough.
The April price increase has reportedly landed well, strongly supporting BT’s guidance for revenue and EBITDA growth in 2022/23 with no other improvements required.
The macroeconomic environment continues to weaken, affecting BT and its premium brands in a number of ways, but it appears to have enough room in its guidance to weather this storm.