There are various reasons why the mobile virtual network operators (MVNOs) have been adding many more subscribers than the mobile network owners over the past couple of years, including the cost-of-living crisis, and the expansion in their addressable market from the shift to online.

MVNOs' bargaining power to secure favourable rates has also improved sharply, with Lyca Mobile's move to the EE network indicative of their strengthened hand.

While some factors in their favour may wane over time, the prospective Vodafone/Three merger would be a marked positive, with the imperative on the operators to fill at least 25-50% additional capacity.

Vodafone’s Q3 results were slightly disappointing following the green shoots of Q2, with growth in Germany slipping back again, albeit some of it already flagged.

It is difficult to imagine the full year results event being a positive catalyst with the likelihood of a dividend cut, a recognition of the hard-currency reality of the financials, and a still challenging outlook for FY 2024/25.

Deal-making is a positive counter with a highly accretive deal still in the offing in Italy, and the prospect of execution in Spain and the UK. Various inorganic deals with 1&1, Microsoft and Accenture will also be helpful, although none of them as valuable as an improvement in the core operations.

BT’s Q3 was robust in financial terms, delivering revenue growth of 3% and EBITDA growth of 1%, both in-line/ahead of analyst expectations.

Strong broadband ARPU and accelerating FTTP performance at Openreach were the highlights, a weakening BT Business and continued Openreach broadband losses were the main concerns.

This year’s guidance should be easily met, next year’s will be trickier given lower price rises due in April, but the long-term plan of a massive cashflow turnaround when the FTTP build ends is still well on-track.

The CMA has announced the launch of its Phase 1 review of the proposed Vodafone/Three merger, with the timeline suggesting a Phase 1 conclusion in late March and a Phase 2 decision around September/October.

The main focus is likely to be whether the merger would lead to a substantial lessening in competition (SLC), with the companies' varied market positioning helpful in this regard.

The merger's prospective 'countervailing factors' are substantial, with an estimated 25-50% increase in sector capacity further strengthening the imperative for the operators to get customers signed up.

Ofcom’s final statement on net neutrality addresses most of our prior concerns, leading to opportunities for UK telcos to effectively address internet congestion, and monetise their network capabilities.

BT is looking to take advantage of its new freedoms with new TV distribution services, which could save network capacity, improve user experience and earn it a share of the content distribution value chain.

We think that there are many other attractive opportunities, but telcos will have to work hard to sell any of them given the need to work together and reverse the bad blood that has developed with many content providers.

Mobile service revenue growth dipped this quarter but this was likely entirely due to the predictable (and predicted) impact of the abolition of EU roaming surcharges.  On an underlying basis, growth improved

BT/EE extended its lead in both service revenue and contract subscriber growth terms. EE’s substantial investments in network quality and customer service have driven returns to scale, and its multi-brand approach is working well

Contrasting with the returns to scale seen at EE, TalkTalk’s MVNO has suffered the reverse of this, unable to break-even despite peaking at just shy of 1 million customers, and deciding to retreat to an agency model.  Sky Mobile is performing respectably well in context, but may be headed for scale issues itself

The Federal Communications Commission’s Privacy Order (FCC) was overturned by the Senate, clearing the way for ISPs to ramp up consumer data-driven advertising revenue.

While Google and Facebook dominate digital advertising in the US as in other markets, the US is alone in removing regulatory barriers to ISPs taking a piece of the pie.

US ISPs now have a self-regulatory regime for consumer rights on transparency, security and data breaches; but in the UK and EU, privacy advocates prefer enforceable rights.

Mobile service revenue growth continued to improve on a reported basis, but most of this improvement came from a significant dip in the MTR cut drag. EE remained the leader in terms of service revenue growth, with both the strongest ARPU growth and robust contract net adds

The quarter also benefited from the current round of in-contract price increases, which were more widespread and at a higher level than last year, and from a brief holiday in the impact of roaming cut regulation, the impact of which will strongly reverse in Q3 as ‘free roaming’ impacts the whole quarter at the same time as mobile users take their actual holidays

Recent spectrum announcements have far from clarified the auction outlook, with Ofcom deciding on a more restrictive spectrum cap than its initial views but both H3G and EE appealing its decision. It will likely be some time before all 5G spectrum auction rules are resolved, let alone actually holding the auctions or building the networks

Secretary of State (SoS) Karen Bradley has made an initial decision to refer 21CF’s bid for Sky to the Competition Markets Authority (CMA) for a detailed consideration of media plurality concerns, to be finalised in the near future

The issue at hand is the potential increase in the influence of the members of the Murdoch Family Trust (MFT) over the UK’s news agenda and political process. The SoS rejected the remedy for Sky News brokered by Ofcom

Ofcom’s non-negative decision on the fitness and propriety of 21CF to hold Sky’s broadcast licences cleared another hurdle in the event the merger is finally accepted

UK mobile service revenue growth continued to improve, with EE now the clear leader in service revenue growth terms. The rate of improvement has started to slow, but pricing remains solid and data traffic continues to grow healthily

EE’s performance was helped by robust subscriber growth but mainly driven by its very strong ARPU growth, which is in turn driven by ‘more-for-more’ pricing and a service/content tiered pricing model. Others are starting to follow this approach

The short/medium term outlook remains healthy, with the price increases made in Q2 likely to more than compensate for roaming cuts in the latter part of the year.  Looking further forward, the launch of 5G could be disruptive due to the introduction of copious extra spectral capacity, and therefore the results of the upcoming auction will be key for the sector post-2020