Market revenue growth was maintained at 1.6% in Q4, helped by strong underlying ARPU, mitigated by weak volume growth.
Lower price rises will likely slow market revenue growth by c.1-2ppts next quarter, with BT being slowed the most at c.5ppts.
The market is being hit by lacklustre demand, growing altnets and persistent price competition, with these factors likely to persist in the short term.
Market revenue growth was solid at 1.6% in Q4, but subscriber volumes were weak, and ARPU was supported by price rises.
Price rises will be much lower in 2024, with no ease in sight for volume growth, which will likely lead to much lower or even negative revenue growth.
The altnets are adding significantly to incumbent pressure, and their consolidation may ease or worsen this depending on its form.
Direct greenhouse gas emissions from the UK telecoms sector equate to around 0.1-0.3% of the UK total. Most operators have set targets to reach net zero across their direct emissions in the next 10-20 years, with the move to electric vehicles an obvious win.
Network upgrades to 5G and fibre have the potential to cut emissions from electricity by a factor of 10, and consolidation offers further decarbonisation upside.
The industry could enable emissions savings in other sectors equivalent up to 30x its own by averting the need to travel and through IoT applications, with the latter requiring careful commercial assessment given the financial constraints in the industry.
As viewing moves online, broadcasters’ on-demand players make up a growing proportion of viewing, becoming central to their future strategies.
However, even though SVOD viewing might have begun to plateau, BVOD growth cannot yet balance the decline of linear broadcast.
Of this shrinking pie, 2023 saw most of the major broadcast players increase their viewing shares.
While altnets continued their strong expansion in 2023, a slowdown in 2024 is looking very likely, with financing drying up due to tougher financial conditions and disappointing operating performances from some.
Consolidation is the obvious answer, and the altnets could consolidate into a pure wholesaler (via CityFibre), a retail/wholesale player, or could be absorbed into VMO2/nexfibre.
Which of these routes is taken, and how quickly, will have a profound impact on the structure of the industry, and all players should be careful what they wish for, with long-term outcomes hard to reliably predict in such a complex marketplace.
Sky H1 results were very solid, maintaining 5% revenue growth and 10% EBITDA growth, with Sky continuing to support a widening product portfolio and more expensive core products with strong cost control and execution
Subscriber volume growth was a little weak at the margin, but this will be helped by all-IP products expanding the economically addressable base in new, and existing, markets
There remain questions on content, with the outlook for premium football rights uncertain in the UK and Italy, and investment in Originals questionable given a mixed track record, but certainly with upside
21st Century Fox’s (21CF) second attempt to acquire Sky comes at a time when the TV world faces mounting online pressure, accompanied by erosion of territorial boundaries in an increasingly global marketplace
Despite some investor concerns about Sky’s ability to deliver its operating targets over the next five years, we consider the underlying business to be sound and starting to show benefits that derive from its international scale
21CF’s bid has a strong strategic logic in terms of growing international scale further and evolving a global platform that integrates shared content strengths in sports and entertainment with Sky’s top of class expertise in customer relationships