Service revenue growth was broadly flat this quarter as some unwinding of price increases was compensated by a pickup in roaming revenues.
Vodafone has made some progress on its turnaround plan: it has sold its ailing Spanish unit; is rumoured to be in talks about a deal in Italy; and its German business is (just) back to growth (for now).
We expect muted guidance for 2024 with lower prospective price increases for most, inflated cost bases, and continued consolidation uncertainty.
Service revenue growth dipped by 0.7ppts to 1.2% this quarter—a slightly disappointing performance given the price rises implemented in some markets.
The impact of price increases has been mixed, with little revenue benefit in France, somewhat better in Spain, and a shift to Iliad in Italy.
Q2 should be stronger, with the UK price rises kicking in, the promise of a turnaround from Vodafone Germany, but a waning of price rise benefits elsewhere.
Service revenue growth was flat at 1.9% this quarter—a reasonable performance considering waning boosts from roaming and UK price rises, and a challenging macroeconomic backdrop.
Looking ahead, operators in most markets are now implementing price rises, providing a welcome (albeit transitory) tailwind to revenue growth—although EBITDA momentum remains subdued.
We expect a consolidation deal to be announced between Vodafone UK and H3G in the coming weeks and a decision from the EC on the Orange/MásMóvil deal in August—crucial issues for the sector’s prospects.
European mobile revenues remain decidedly in decline this quarter at -2% – a slight worsening since Q2 as the full force of cuts to intra-EU calls hits
There are signs that dual-brand strategies may be reaching their useful limit as erstwhile premium customers shift to value
There is scope for some trends to slowly improve from here, although end-of-contract notifications will impact all markets before the end of 2020, with the UK first off the blocks in Q1
European mobile revenue trends are not yet improving. Italy is still flat-lining at almost -10%, Spain worsened again, and the UK deteriorated sharply. France is the only good news story
5G rollouts seem somewhat tentative. Indications from the UK that it is leading to a more competitive environment may discourage European operators from exacerbating already challenging markets
Prior year comparables for Southern Europe will be more flattering in the second half of this year although a doubling in the drag from intra EU calls will dampen any recovery
France Télécom’s Orange TV premium strategy presents an interesting example of diversification into low cost ‘light’ pay-TV offers by an incumbent telecoms operator. Orange Sport and Orange Cinéma Séries are offered exclusively to Orange's 2.55 million TV subscribers, and five quarters after launch, adoption is 20%. This report draws several lessons on this type of venture for other incumbent operators
Fixed line revenue growth continued to decline excluding the impact of Tiscali UK, but at a manageable rate, and profitability continued to improve strongly. TalkTalk Group is performing well in the run-up to demerger, and management is sounding very confident. But there are some clouds on the horizon, not least the relaunch of Tesco Telecom
Sky+ HD is now manifestly the centre point of a three-pronged operational strategy that focuses on driving customer growth, selling more products into the customer base and seeking efficiencies in fixed costs
Sky 3D, due for residential launch in H2 2010, fits in well with the core Sky+ HD proposition and the satellite operator looks well placed to combat growing retail competition from other platforms, assuming Ofcom implements its wholesale pay-TV proposals for Sky premium subscription films and sports some time in spring 2010
At TalkTalk Group (TTG) net broadband additions at TalkTalk/AOL UK were unexpectedly strong, with low cannibalisation of Tiscali subscribers particularly good news
At the newly acquired Tiscali UK, the inevitable skeletons are starting to emerge from their cupboards. Management appears well prepared for the challenges, although it is early days
Carphone Warehouse’s distribution business grew connections at 2.1% during the quarter, another very creditable performance in a declining market, and it remains well positioned for the market recovery
The distribution business experienced modest growth in connections and revenue, easily outpacing European market handset growth of -15%, as the company continues to build market share
At TalkTalk Group (TTG) net broadband additions for the quarter were relatively strong, given likely market growth, probably due at least in part to reduced subscriber loss at AOL UK
In our view cut-price business broadband, rather than IPTV, offers the best prospect of profitable revenue growth in fixed line
Carphone Warehouse’s distribution business had a slightly mixed year, with strong volumes and revenue mitigated by a sharp drop in margins and profit, with margin being sacrificed for market share
Given the very poor recession-hit market for handsets, Carphone Warehouse’s market share gains have been dramatic, so the sacrifice was at least not in vain
Although TalkTalk Group missed much of its guidance to March 2009, we now view new guidance as achievable, with the main risks related to the integration of Tiscali UK