After the most challenging period in its history since 2012, Facebook has been able to stabilise its fundamental metrics and announce a major product overhaul

Despite talk of a business model pivot, Facebook’s focus remains on advertising, whose growth will remain concentrated in developed markets

News publishers wishing to stay relevant on the upgraded product set need to target exclusive layers of social interaction, with groups particularly important

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
 

Apple is strengthening its household model by doubling down on family-friendly content subscriptions and payments

The model is reliant on hard bargains with mainly US partners, which risks sacrificing potential scale for a short-term boost in margin dollars

The new services offer glimpses of novel concepts, but stop short of taking risks to truly differentiate—a problem in TV, where Apple’s distribution advantage is slimmer than Oprah would have it

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

O2’s Q4 results delivered market-leading service revenue growth of 3%, double-digit EBITDA growth, sustained strong net adds and low churn. 

With ARPU service revenue growth flat, all of the growth came from other service revenue including M2M (machine-to-machine) and MVNO; a lumpy category up by more than 40%. 

Following a period of strong outperformance, O2 will face some challenges in 2019: some cost inflation to mitigate and the risk of a churn increase following December’s outage although experience suggests this is likely to be short-lived.
 

Vodafone’s revenue trends took another step backwards this quarter (down almost 3% on our estimates) with its strongest markets (UK and Germany) weakening unexpectedly

The reiteration of their financial guidance and commitment to cost-reduction provides some reassurance although nothing in the results provides grounds for optimism; churn is not really falling and is not correlated to convergence

With the UK mobile market delivering its strongest growth in 7 years last quarter, these results may be a precursor for a more challenging outlook with Vodafone citing pressure from business pricing and out-of-bundle limits, and the outlook for RPI-linked price increases diminishing

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Amazon’s recent deals with Apple in TV, music and device sales mark a turning point after a decade of frosty relations

The context for this involves shifting priorities at both firms, growing pressure on Apple’s iPhone business, and rivals in common — first and foremost Google, but also the likes of Netflix and Spotify

The uneasy alliance helps both companies consolidate their strengths in the platform competition over media and the connected home — but trouble already brews

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

Google has beaten Facebook in mobile revenue growth, and competes successfully in retail search with Amazon

Intelligent user interfaces based on machine learning have become a core competitive strength, with social and messaging the main remaining weak points

Rising political pressure due to Google’s growing scale and influence is now a bigger concern than commercial risk, as the threat of regulatory intervention limits strategic options in partnerships, M&A and integration