Service revenue growth was up just 0.1ppts to 2.0% this quarter, as price rises in the UK and the peak of the roaming boost offset weakness elsewhere.
Price increases to combat inflationary cost pressures are gathering momentum—a potential revenue cushion as roaming tailwinds diminish and challenging economic conditions weigh.
Vodafone is battling strategic issues in most of its main markets—significant change in strategy will be required from the new leadership.
Vodafone’s downgraded guidance is due to its woes in Germany rather than the economy. There is some limited reassurance that this will turnaround soon.
It remains challenging for Vodafone to achieve its revised FY guidance with a 7ppt improvement in underlying EBITDA growth required to get there.
Leverage and cash-calls are much improved, and the dividend looks assured, but the Vantage and German deals mean escalating pressures on EBITDA.
With viewing to traditional broadcast TV continuing to shrink rapidly, especially among under-45s, our latest forecasts revise a new low for broadcasters’ audiences: falling to just half of all video viewing in 2027, down from 63% today
Long-form, broadcast-quality content will increasingly be viewed on SVOD-first services (e.g. Netflix, Amazon, Disney+) as online habits solidify, especially among older audiences. Platforms offering different content (e.g. YouTube, Twitch, TikTok) will continue to grow their share and will also expand total watch-time
We forecast that under-35s will spend just a tenth to a fifth of their video time with broadcasters’ traditional long-form content five years from now, versus a third to a half for 35-54s and 85% for over-65s
Vodafone is in the midst of a flurry of M&A, likely driven by its share price, which is at a 30-year-low, and stubbornly high leverage as an economic crisis looms.
While the mooted Vodafone/Three merger has the potential to add meaningful shareholder value, the German and Vantage deals are designed to ease Vodafone’s ongoing leverage issue—with debt relief up front paid for with future EBITDA.
Getting leverage under control will be helpful, but the focus should continue to be Vodafone’s operational performance, particularly in Germany, and its ability to deliver EBITDA promises in challenging circumstances.
With major studios arguably over-indexed on SVOD, the stickier experiences of interactive entertainment and the metaverse will eventually form a critical pillar of studio D2C strategy, boosting subscription services and tying in closely with consumer products and theme parks.
Disney’s appointment of a Chief Metaverse Officer is good first step, demonstrating a strategic interest in the space. But other major studios remain cautious and distracted, with limited capability beyond licensing to engage in the metaverse for the next 24 months and possibly longer.
Meta will need to provide a strong guiding hand creatively and technically to ensure its new partnership with NBCUniversal is a success, and to evangelise the metaverse and its revenue model across the Hollywood studio content space.
European mobile service revenue growth increased by 1ppt to +1.6% this quarter, with this improvement largely driven by higher-than-inflation price increases in the UK.
The outlook for Q3 is mixed with an increased roaming boost expected, but the B2B sector will remain challenging and the impact of the rollout of out-of-contract notifications in EU countries will mount.
There are signs of some upward pricing movement beyond the UK, particularly in Spain as the operators seek to cushion the blow of rising costs and inevitable economic pressure.
Apple's announcement that the iPhone 14 will be eSIM-only in the US paves the way for it to ultimately enter the market for mobile services there, although that will require the co-operation of at least one mobile operator.
This should be a red flag for UK operators who have been obliged to facilitate a form of eSIMs already and are likely to be obliged to go a few steps further in the coming years.
Policymakers need to think very carefully about the pros and cons of such a move by Apple—the industry cannot afford to give Apple a slice of its much-called-upon pie.
Global SVOD operators are expanding their sports content offerings. Amazon just bought UK Champions League rights, Apple signed US baseball and global football (soccer) deals, Paramount and partners won the Indian Premier League cricket auction, while Netflix unsuccessfully bid on the US Formula One licence.
In the US, streamers feed an already very competitive market, while in Europe they could potentially relaunch inflation for rights after a period of stagnation. Next moves by Warner Bros. Discovery (BT Sport and Eurosport) and Disney will be critical. Sky and Canal+ could be facing upward cost pressures.
If rights fragmentation were to increase, deeper aggregation and bundling may be necessary to avoid shrinking the consumer pool while the pressure to consolidate may intensify. Intriguingly, global rights deals may become more likely.
European mobile service revenue growth was positive for the first time in five years this quarter as a resurgent mobility boost combined with the return of roaming revenues.
Q2 is set to be a mixed bag, with inflation-plus price increases expected in the UK, an elevated boost from the roaming recovery, but also some weakness in the B2B market.
We are also seeing the early impact from end-of-contract notification rules, particularly in Germany, and we expect ARPU pressure and churn to pick up elsewhere as the impact becomes more widespread.