The capacity boost with 5G will be more important than any speed or latency uplift. We estimate a 7-fold increase in mobile capacity in the UK and 13x+ for O2 and H3G

We view fixed mobile substitution products as quite niche although the number of mobile-only households is likely to creep up. mmWave would have the capacity to substitute for fixed but has many hurdles to overcome

Capacity-constraints have tempered competition of late and their removal risks an increase in intensity, especially as H3G views itself as sub-scale – good for policy makers but another challenge to add to the industry’s woes
 

European mobile service revenue growth dropped to -1.3% – its lowest level in three years – particularly disappointing as growth should be bouncing back post-EU roaming tariff cuts

Having enjoyed relatively favourable dynamics in 2018, the UK and Germany are facing marked changes in momentum from here

Regulation limiting intra-EU call prices could hit hard – up to 6% of revenues and 20% of EBITDA in the UK, although other EU countries may be less exposed due to lower tariffs currently

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

Linear TV is still a mass market medium, watched by 90% of the UK population each week. However, our latest viewing forecasts predict broadcasters will account for two-thirds of all video viewing in 2028, down from c. 80% today, due to the relentless rise of online video services.

Total viewing will continue to increase as more short-form content is squeezed into people’s days, particularly on portable devices, but the key battleground for eyeballs will remain the TV screen.

The online shift has already had a huge impact among younger age groups, with only 55% of under-35s’ current viewing to broadcasters. Older audiences are slowly starting to follow suit, but have a long way to go.

Launched to the world in September 2017, TikTok is the first Chinese app to pose a serious threat to Western social media companies as it attracts hundreds of millions of Generation Z users around the globe

Privately-owned parent company Bytedance earned $7 billion in online advertising revenues in 2018 and is valued at $75 billion, placing it ahead of Uber as the world’s most valuable internet start-up, with an IPO likely this year

Bytedance’s goal of earning half its revenue outside China by 2022 is far from certain. In order to hit the target, TikTok will need to attain super scale with best-in-class revenue per user, an unlikely combination

H3G’s X-Series is not quite as innovative as it was presented to be, given that T-Mobile’s Web ‘n’ Walk is very similar in concept (flat rate data tariffs, 3rd party Internet services) and has been available since June 2005

H3G has extended its deadline for hitting EBITDA breakeven, with this now around 12 months later than its previous forecast, we believe due to management failing to understand the extent of its churn problem 

The Zune Marketplace is no match for the iTunes Store, with a smaller repertory of music and no video to supply the Zune, since Microsoft has announced it will soon sell video for the top-end Xbox 360, around which its ‘home-entertainment’ strategy is based

We figure the costs of switching to the Zune are low, but Microsoft will be lucky to sell 1 million Zunes in the Christmas quarter – if it does, revenue will rise by less than 1%, so the Zune is of limited interest, whether successful or not

H3G’s 2005 results underperformed in 3 key areas: net subscriber additions were lower than promised, unit SACs were higher than promised and the group failed to reach EBITDA breakeven as promised 

2006 promises to be much worse due to a markedly bigger drop of about 11.5% in weighted share of commercial impacts in 2005, due to a number of factors (not just multichannel platform growth), and an anticipated decline of between 2% and 5% in total TV NAR in 2006. Taking a mid-value of -3.5% yields a drop in ITV plc NAR of around £180 million in 2006 

H3G’s new UK prepay tariff ‘WePay’, launched this week, offers the appealing gimmick of paying customers to receive phone calls. Less appealing is the 32% outbound calling price rise accompanying this change, and the estimated net impact of a 10-20% price rise.

However, we do not share NTL management’s optimism concerning the power of the ‘quadruple play’ – to date triple play has proved attractive to less than one third of cable households