European mobile revenues remain decidedly in decline this quarter at -2% – a slight worsening since Q2 as the full force of cuts to intra-EU calls hits 

There are signs that dual-brand strategies may be reaching their useful limit as erstwhile premium customers shift to value

There is scope for some trends to slowly improve from here, although end-of-contract notifications will impact all markets before the end of 2020, with the UK first off the blocks in Q1
 

With pay-TV competition faltering, UEFA is aiming to stimulate demand for 2021-24 TV rights with early auctions, a possible relaunch of FTA broadcasts, and even, unrealistically, by considering an online service of its own

In the recently completed UK auction, facing no major threat from Sky, BT kept the rights at an almost flat price – probably missing a cost saving opportunity

In the upcoming auctions on the Continent, with former buyers such as SFR, Mediaset and Vodafone having cut back on premium sports, the major platforms’ bids will probably be unchallenged

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

European mobile service revenue growth slipped again to -2.0%; its worst performance in four years

Regulation limiting intra-EU call prices could hit hard next quarter – with the UK likely to be hardest hit by up to 6% of revenues and 20% of EBITDA

Excluding the EU-call impact, we see greatest scope for improving trends in Italy and France thanks to easier comps and diminishing competitive intensity

Sky made a surprisingly weak start to 2019, with revenue growth decelerating to 1.9% (the first time below 4% since the European businesses merged in 2015), due to weaker ARPU trends.

However, Sky expects improvement to follow, blaming one-off factors in the quarter. The ARPU weakness drove EBITDA down 11.3%, but this should bounce back across the rest of 2019 as football rights costs turn from a drag to a positive.

Comcast highlighted collaborations with Sky across tech, advertising, content distribution and even news, stating it is on track to achieve the anticipated $500 million in annual synergies over the next couple of years.

European mobile service revenue growth dropped to -1.3% – its lowest level in three years – particularly disappointing as growth should be bouncing back post-EU roaming tariff cuts

Having enjoyed relatively favourable dynamics in 2018, the UK and Germany are facing marked changes in momentum from here

Regulation limiting intra-EU call prices could hit hard – up to 6% of revenues and 20% of EBITDA in the UK, although other EU countries may be less exposed due to lower tariffs currently

Across the EU4, pay-TV is proving resilient in the face of fast growing Netflix (with Amazon trailing), confirming the catalysts of cord-cutting in the US are not present on this side of the Atlantic. Domestic SVOD has little traction so far.

France's pay-TV market seems likely to see consolidation. Meanwhile, Germany's OTT sector is ebullient, with incumbents bringing an array of new or enhanced offers to market.

Italy has been left with a sole major pay-TV platform—Sky—following Mediaset's withdrawal, while Spain's providers, by and large, are enjoying continued growth in subscriptions driven by converged bundles and discounts.

Sky’s revenue growth under Comcast appears to have accelerated since it last reported as an independent company, largely driven by sports rights expansion in Italy, which also drove bumper subscriber growth in Q3 2018 

Sky UK likely enjoyed a steadier performance, helped by accelerating high speed adoption, a price rise in April, increased international sales, and improving premium channel adoption on third-party platforms

Comcast expects continued acceleration into 2019, with profitability taking a hit from increased sports rights in Italy in H1, but this is more than compensated for by reduced English Premier League rights costs in H2
 

European mobile service revenue growth again improved, albeit marginally, with the quarter’s gain driven by declines easing further in what nevertheless remain the three weakest markets: France, Italy and Spain. Generally stabilising pricing environments were a key factor although ARPUs in these markets remain largely in decline, under continued pressure from strong out-of-bundle revenue declines

In a post-consolidation world, H3G/O2 in the UK and Yoigo in Spain will be the only mobile-only MNOs in the top five European mobile markets, effectively cementing a convergence based future. Consolidation trends might point to the prospect of greater price stabilisation but a fresh land grab for the converged market could derail this

Overall, in spite of healthy underlying data trends, we continue to see medium term growth recovery prospects capped at around 1% given precedent from both the UK, where a healthy economy, healthy pricing environment and strong data trends have failed to exceed this level, and Germany, where post-consolidation revenue growth has reverted to negative territory, both due to competition and consolidation

European mobile service revenue growth improved to the highest in over four years driven by improvements in the three slowest growing markets of late. Out-of-bundle revenues are still declining at a rate of over 10% but data revenue growth trends point to underlying strengths in the revenue profile. Looking at the longer term picture begs the question as to whether the quarter’s improvement can be repeated over the next 18 months, transforming the industry into one with extremely healthy revenue growth of 5%-10%; on balance we are not very optimistic

Two major in-mobile transactions are yet to be approved by the EC, namely H3G/O2 in the UK and an H3G/Wind JV in Italy. The recent precedent from Denmark is somewhat discouraging, although the Danish consolidation was unusual in some respects. Nonetheless comments from the new competition commissioner Margrethe Vestager suggest that regulatory caution towards 4-to-3 mergers is still high

Progress towards convergence is continuing with few operators in a post-consolidation world being either 100% fixed or 100% mobile. Convergence has to date been discount-led and damaging to market revenues, but post-consolidation, operator rhetoric has been reassuringly more focused on intentions for increased investment in both LTE mobile networks and high speed fixed networks