European mobile revenue trends are not yet improving. Italy is still flat-lining at almost -10%, Spain worsened again, and the UK deteriorated sharply. France is the only good news story

5G rollouts seem somewhat tentative. Indications from the UK that it is leading to a more competitive environment may discourage European operators from exacerbating already challenging markets

Prior year comparables for Southern Europe will be more flattering in the second half of this year although a doubling in the drag from intra EU calls will dampen any recovery

Spotify is investing heavily in podcasting through acquisitions, original content and product innovation

It is under pressure to reduce dependence on record labels, whose power makes generating large profit margins difficult. Podcasts promise a non-music content genre where Spotify can capture more value

Secondary benefits abound: Spotify can take an active and lucrative role in modernising online audio advertising, it can solve the podcast discovery problem, and engagement across more forms of audio will improve retention

The UK mobile market suffered its worst performance in five years this quarter with Vodafone alone, somewhat inexplicably, bucking the trend

5G capacity is impacting pricing trends with SIM only packages flattening and unlimited packages increasing in popularity and complexity

As the operators invest in solving rural coverage and rolling out 5G, they will continue to be hit by regulation. Out of contract notifications and discounts are next in a long series of assaults

BT’s divisions had contrasting fortunes in Q1 2019/20, with Consumer revenue growth sharply turning negative but Openreach external revenue growth accelerating to 10%, leaving the Group level unchanged at -1% and EBITDA on course to meet guidance.

Consumer was hit by several regulatory and pricing factors mainly affecting mobile, and the short-term outlook remains tough, with a number of legacy pricing issues across fixed and mobile still to be resolved.

Openreach is reaping the benefit of previous price declines annualizing out, allowing it to take full advantage of higher speed demand, and due to its full fibre roll-out this dynamic could persevere for years.
 

Ofcom’s recommendations to Government suggest updating EPG prominence legislation to cover connected TVs, and were warmly welcomed by the PSBs

Balancing various commercial, PSB and consumer interests will be key; determining what content qualifies for prominence will be a particularly thorny issue to resolve

Extending prominence to smart TVs and streaming sticks is critical, but implementation will be challenging

Google’s advertising business has begun losing market share in the US, with competition from Amazon, Facebook and Microsoft intensifying in search and display

In response, the company is redoubling efforts to reshape its apps, services, and the entire web for more efficient monetisation, spelling uncertainty for partners and users

The adaptability and complexity of Google’s services reduce business risk from targeted regulatory measures, but increase the pressure for a radical intervention

The UK mobile market posted its slowest growth in more than two years this quarter; just 0.5% service revenue growth although net adds were strong and churn was down

ARPU is under considerable pressure thanks to regulation limiting out-of-bundle spend which will exacerbate as the year progresses

Several other negative developments look set to be layered on the pressures this quarter, including a step-up in competitive intensity as 5G launches –  with H3G’s pricing of unlimited data a sign of a resurgence in its aggression

BT is accelerating its ‘full fibre’ rollout, likely due to a combination of a successful build to date, very promising regulatory developments, and (let’s not deny it) worrying competitor build plans

Full year results were a little weak versus consensus, with guidance a little soft as well, leading to questions of how this can be funded, particularly the roll-out acceleration from 2021/22 to cover half the country by the mid-2020s

Whatever the funding mechanism, we regard the investment as sound, with BT’s planned operational transformation also promising but potentially requiring further upfront investment

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