The UK mobile operators are increasingly vocal about their concerns regarding the tech giants, namely Apple and Google, encroaching on the mobile connectivity market.

eSIMs enhance the case for the tech giants launching their own MVNOs (such as Google Fi in the US) or, perhaps more realistically and concerningly, becoming gatekeepers to mobile airtime subscriptions.

Many things would need to line up for the tech giants to effect this and the MNOs need to stand as one to ensure that they are not successful. Policy makers should be equally reticent.

Sky’s performance across 2021 significantly improved, driven in Q4 by a nice c.5% growth rate in UK consumer revenues and the advertising rebound, but effects of the pandemic are still being felt with EBITDA down 30% on 2019.

The decline in Group revenue accelerated in Q4 due to the severe shock to the Italian operation from its loss of most premium football coverage, although we see upsides in a possible rights reshuffle.

In 2022, Sky can leverage growth vectors including bigger content bundles, Glass, advertising innovations and broadband. Consolidating SVOD and telecoms markets may be more favourable to price increases.

The recent shareholder pressure on Vodafone seems to focus on consolidation (where we see approval prospects as only slightly improved), Vantage (where a sell-down may create more value than an industrial merger), and improving operational performance (which continues to struggle).

The zero-growth German fixed business took another step down this quarter and looks set to worsen.  This will be central to growth prospects next year and a write-down of the investment looks inevitable.

A culture necessitated by a sprawling asset base may be holding back performance but any break-up would be costly and protracted, with real premium valuations achievable only with consolidation.

Higher overall inflation, together with a bigger mark-up than in previous years for some, is implying significant in-contract price increases for the UK telecoms operators—an average of 7.7% for the mobile operators.

Although we may see a 5-6% short-term boost to mobile service revenue growth from these price increases, new-customer pricing remains crucial and could erode the boost from these in-contract rises entirely.

We have been surprised by Ofcom’s interventions to discourage these price increases. The industry needs all the help it can get to fund next generation 5G and full fibre networks, and these in-contract price increases are no guarantee that prices and revenues overall will start to rise.

The UK net neutrality rules are up for review; as usual, the operators are pressuring for relaxation, and there are strong arguments that the competitiveness of UK telecoms markets make such rules innovation-quashing with no consumer benefit.

The chances of mainstream video content providers producing a windfall for telcos are slim, but there are a host of more intensely commercial content providers which have far greater potential to pay extra money for higher quality content delivery.

Future services such as virtual and augmented reality will stretch even FTTP/5G networks; allowing the telcos to develop custom business models to facilitate their delivery may well speed up the development and implementation of the metaverse in the UK.

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

Vodafone Europe’s revenue growth was very similar to the previous quarter at just under 1%, but this was impressive given the considerable drag of roaming cuts, with ‘more-for-more’ tariffs coupled with data volume growth driving underlying improvement

Flat-ish revenue was enough to send EBITDA surging 13%, or around 9% excluding some one-off distortions, driven by good cost control and falling handset costs, with this trend previously disguised by profitability issues in the UK

Looking forward, the question is whether Vodafone is doing enough to cope with future competitive threats. Competitive indicators (churn, NPS) have not improved; its new initiatives are quite mixed; and competitive intensity is likely to increase across a number of markets

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

For the second consecutive year, the global recorded music industry body IFPI reported rising trade revenues, growing 5.9% to reach $15.6 billion in 2016

Our forecasts supplement IFPI’s trade revenue data with richer national-level consumer expenditure data from local bodies in core markets, and project CAGR of 2.3% to 2021, tapering off as streaming approaches maturity

This fairly modest topline growth for global recorded music streaming trade revenues is the product of our judgement that the marketplace remains awash with free music. Streaming trade revenue growth could be higher still if the industry finds a solution to piracy through technological or regulatory means, obviating the need for the ad-funded compromise

Vodafone Europe’s revenue growth bounced back from a weak previous quarter, but its top 4 markets combined were broadly flat in underlying terms. There are nonetheless promising underlying signs, including reduced churn, (slowly) improving subscriber growth and steady NPS

Vodafone has launched all-you-can-eat social/music/video bundles under the ‘Vodafone Pass’ moniker in several markets, which appear both popular and ARPU-enhancing, and being early to market with such an innovation is laudable

Next quarter Vodafone will be hit by the full force of the EU roaming regulation, but excluding this factor the performance is likely to be steady at least, helped in part by the UK business recovering from its recent weaknesses