Service revenue growth was broadly flat this quarter as some unwinding of price increases was compensated by a pickup in roaming revenues.
Vodafone has made some progress on its turnaround plan: it has sold its ailing Spanish unit; is rumoured to be in talks about a deal in Italy; and its German business is (just) back to growth (for now).
We expect muted guidance for 2024 with lower prospective price increases for most, inflated cost bases, and continued consolidation uncertainty.
Service revenue growth dipped by 0.7ppts to 1.2% this quarter—a slightly disappointing performance given the price rises implemented in some markets.
The impact of price increases has been mixed, with little revenue benefit in France, somewhat better in Spain, and a shift to Iliad in Italy.
Q2 should be stronger, with the UK price rises kicking in, the promise of a turnaround from Vodafone Germany, but a waning of price rise benefits elsewhere.
Sky has withstood the consumer crisis better than its telco peers, but owners Comcast are stepping up pressure nevertheless.
No buyer for its German unit has yet emerged. In Italy, the outcome of the ongoing Serie A rights auction will shape that company’s growth prospects.
Looking forward, Sky has built a solid content supply line and is likely to strengthen further from the deflation following the end of the SVOD bubble.
The Italian football league is auctioning its media rights for up to five seasons from 2024/25, with bids due by 14 June.
As in previous cycles, Sky and DAZN will probably bid below the minimum prices, which could trigger further auctions.
Plans for a league DTC service are unrealistic, and free-to-air broadcasts would be uneconomical.
We forecast broadcaster viewing to shrink to below half of total video viewing by 2028 (48%)—down from 64% today—as streaming services gain share of long-form viewing time.
On the key advertising battleground of the TV set, broadcasters will still retain scale with a 63% viewing share by 2028, even as SVOD and YouTube double their impact.
Short-form video will continue to displace long-form as video-first apps (e.g. YouTube, Twitch, TikTok) gain further popularity and others (e.g. Facebook, Instagram) continue a relentless pivot to video. This will expand the amount of video watched and transition habits—even amongst older demographics.
Service revenue growth was flat at 1.9% this quarter—a reasonable performance considering waning boosts from roaming and UK price rises, and a challenging macroeconomic backdrop.
Looking ahead, operators in most markets are now implementing price rises, providing a welcome (albeit transitory) tailwind to revenue growth—although EBITDA momentum remains subdued.
We expect a consolidation deal to be announced between Vodafone UK and H3G in the coming weeks and a decision from the EC on the Orange/MásMóvil deal in August—crucial issues for the sector’s prospects.
Sky has extended its Italian Champions League coverage to 2027, most of it to become exclusive, but at a higher price.
Amazon keeps its Wednesday first-pick
Having secured the UEFA rights, Sky has derisked the upcoming Serie A auction for seasons from 2024/25.
The Italian deal highlights the rebalancing of media rights value from domestic leagues to European competitions.
Microsoft’s planned acquisition of Activision Blizzard is in trouble. US, UK, and European regulators may make the deal impossible for Microsoft—and a disaster for Activision and the wider industry.
Sony’s late improvement in PlayStation 5 sales is only just enough to reach its target numbers for the year. It needs a more dynamic approach to a rapidly changing industry, and a less dogmatic message to consumers and regulators.
Netflix Games is more than a trial—it’s on track to become a major games platform.
European mobile revenue growth was flat again this quarter as a larger boost from annualising the roaming drag was outweighed by B2B weakness, a waning mobility boost and the unwind of pandemic upsides.
Italy saw the biggest improvement in its underlying trend as Iliad struggled to regain momentum, while competitive tension remains elevated in Spain and France.
Q4 looks mixed before 2022 kicks off with some market-specific positives for the UK, but the other European countries will finally face the impact of end-of-contract notifications.
European mobile growth was essentially zero year-on-year—a significant improvement thanks to annualisation of the pandemic but there is little evidence of the reversal of its negative impacts.
Italy saw the biggest improvement in its underlying trend as the pandemic continued to suppress Iliad’s momentum, while elevated competitive tension in Spain and France ate into their annualisation boost.
Mobility and flight data suggests that Q3 will evidence a bigger boost from renewed travel than in Q2—positive for roaming revenues—but that the improvement in mobility will be weaker than in the June quarter.