Openreach has simultaneously announced that it is applying a full 11% inflationary price increase across all its key products, and effectively removing this price increase (and a bit more) for full fibre products through an update to its ‘Equinox’ special offer pricing.

Equinox 2's purpose is described as to encourage migration of existing connections to full fibre, but this is hard to see, and it looks more like a defence against migration to altnets and/or VMO2’s emerging wholesale proposition, albeit one that seems like it will not fall foul of regulatory rules.

Openreach will still benefit from the 11% price increase across most of its revenue base in 2022/23, and the shift to FTTP will remain accretive. Openreach’s customers will suffer from the price rise, but with a stronger outlook as they move to FTTP, while the altnet/VMO2 wholesale economics are as-you-were.

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.
 

BT maintained (proforma) revenue growth at 1% in Q2, EBITDA growth was a healthy 5%, and retail net adds were solid across broadband and mobile, with evidence of an economic crisis hard to discern.

Investors have concerns around Openreach, with a market-driven slowdown in wholesale broadband, extra capex this year, and a further ‘special offer’ price cut being negotiated for next year combining to create understandable anxiety.

We think that Openreach continues to have a healthy outlook overall, with there being greater risks in consumer and business retail revenue in toughening economic conditions, albeit this is a storm that BT has weathered very well so far.

60% of Chinese online ad spend is directly driven by ecommerce, compared to 40% in the West. The gap will close as content and ads move closer to transactions.

General search engines are not central to the customer journey in China: Baidu fell below 10% of online advertising last year, compared to Google’s c.55% share in the UK.

The Chinese model now has a vector to the rest of the world in the form of TikTok, whose parent company ByteDance added more retail GMV in China than Alibaba last year. TikTok wants to grow video shopping in the West, targeting a huge $470 billion in transactions by 2027.

Market revenue growth continued to accelerate in Q2 to reach 3%, but broadband growth worryingly dipped as the lockdown boost waned.

Differing pricing dynamics (among other factors) led to very different outcomes for the main players, with BT’s growth surging to 7% while VMO2’s revenue stayed in decline.

Underlying trends of weakening broadband growth, keener pricing and customer bargain seeking point to slower growth ahead … until the next price increase.

BT Group’s revenue growth surged in Q1 to 1%, the first time it has been positive in five years, with a stronger than expected boost from the April price rises partially offset by the Virgin Mobile MVNO loss.

EBITDA growth, however, actually dipped to 2%, with little operating leverage due to cost pressures, although the company is still very confident in its full year EBITDA guidance (which implies 4% growth).

BT is far from immune to macroeconomic pressures, with pressure on costs, corporate revenue and signs of a sharp dip in broadband market growth, but it is well placed to deal with them given strong growth at Consumer and Openreach.

UK altnet full fibre rollouts are accelerating, with an aggregate build pace close to that of Openreach, but customer acquisition is not growing at the same pace, and overbuild in the most attractive areas is becoming a significant issue.

Altnet business models remain challenging and are getting worse as Openreach builds out, and (although there are some notable exceptions) most will need to rapidly achieve scale and turn around their performance to survive.

Consolidation is very likely, along with business failures, and while some market share loss for Openreach looks likely as serious scale players emerge, the downside is limited, and even more so for retail ISPs.

Reportedly, BT Sport is about to seal a deal to extend its coverage of the revamped Champions League until 2027. Amazon is going to step in with a weekly game, and the BBC will get the rights to the highlights.

In France, Canal+ has outbid Amazon to claim the full rights package thanks to a bid that has grown the total value of the rights by 28%.                                  

With Canal+’s football content secured, the upcoming Ligue 1 auction may struggle to find bidders, a fate threatening other short-sighted leagues.

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.

With more clubs, more games and no long Christmas break, the revamped Champions League (CL) will test its value to broadcasters with a tender that has just been released in France, over two years before the cycle begins

UEFA is banking on the rivalry between Canal+/BeIN, the ongoing rights-holders, and Amazon, broadcaster of Ligue 1 in France, and of the CL in Germany and Italy

Prime’s economics point to Amazon sticking to cautious, ‘value’-driven bidding in France. It could expand its limited sports line up in the UK and Spain with the CL, but only if current licensees BT/Warner Bros. Discovery and Telefónica take a step back from 100% coverage