On 12 May 2022, Enders Analysis co-hosted the annual Media and Telecoms 2022 & Beyond conference with Deloitte, sponsored by Barclays, Financial Times, Meta, and Deloitte Legal

With up to 500 attendees and over 40 speakers from the TMT sectors, including leading executives, policy leaders, and industry experts, the conference focused on regulation, infrastructure, and how new technologies will impact the future of the sector 

These are edited transcripts of Sessions 7 and 8 covering: UK mobile and the opportunities and challenges of infrastructure. Videos of the presentations are also available on the conference website

BT’s Q4 was mixed in the detail, with consumer broadband volumes weakening but FTTP roll-out and adoption surging, with performance at the Group level solid enough.

The April price increase has reportedly landed well, strongly supporting BT’s guidance for revenue and EBITDA growth in 2022/23 with no other improvements required.

The macroeconomic environment continues to weaken, affecting BT and its premium brands in a number of ways, but it appears to have enough room in its guidance to weather this storm.

Vodafone attributed its muted outlook for the coming year to macroeconomic headwinds but it has more to do with the German cable business, which is now in decline rather than being the growth engine that it was billed to be when acquired.

Value-accretive deals remain on the agenda but management are rightly reluctant to appear desperate—a difficult balancing act with the risk of missing out on further opportunities.

Substantial fibre investment in Germany looks inevitable, as does sustained competitive pressure there. Even if the former is off balance sheet, the combination will dampen hopes of growth and a progressive dividend.

Whilst we remain sceptical of the churn reduction benefits of fixed/mobile convergence, the pandemic and a more astute approach from the operators is enhancing the case for it in the UK.

Creating the impression of a giveaway whilst minimizing the effective discount is key, as is extracting any loyalty and cost benefits.

Even if well executed, any upsides are likely to be modest. Operators are right to keep discounts to a minimum and to avoid M&A premia predicated on fixed/mobile convergence synergies.

Market revenue growth accelerated to just under 2% in Q4, with broadband growth holding up despite the ending of most pandemic restrictions.

Backbook pricing pressure should continue to retreat in 2022, and ultrafast speed premia should also bolster ARPU as FTTP roll-outs accelerate.

The price increases due in April will further support growth, with BT in particular to benefit, and all will have to be wary of customer backlash.

BT had a solid Q3, with some mixed results but key metrics all improving, and a (perhaps unsurprisingly) slow post-lockdown recovery the only negative.

The price increase in April should drive dramatic (for BT) revenue and EBITDA acceleration at Consumer, Openreach and BT as a whole, and easily cover pressures within BT’s own cost base.

Longer-term growth is dependent on FTTP performance, which continues to look promising with improving metrics across the board in the quarter, and no news is good news in terms of ISPs signing with competitor networks.

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.

Market revenue growth fell in Q3 to below 1%, and may drop below zero next quarter as existing customer pricing comes under more pressure

New customer pricing is however rising, and average pricing should rise much further as ultrafast increases in availability and popularity 

Political enthusiasm for full fibre should be welcomed, although some specific plans are likely to do more harm than good if implemented literally