Market revenue growth surged to 2% in Q2, but entirely-and-more driven by price rises, with underlying trends negative across volumes and ARPU.
Broadband volumes in particular turned sharply negative, largely due to a post-lockdown hangover combining with weak economic conditions.
The outlook is bleak: price rise benefits are set to wane and then reverse, and weak volumes will feed through, with economic recovery needed for a return to sustainable growth.
Social tariffs have provided relief for some at a time of household income squeeze and otherwise unavoidable high inflation-driven telco price increases.
Adoption has risen but remains very low, limiting their effectiveness, and more widespread adoption would expose their shortcomings, with the risk of penalizing low cost operators and significantly increasing prices for non-adopters (by up to 20%).
A better approach might be to recognize that affordability issues are narrower but deeper than current social tariffs can address, with fuller, centrally funded subsidies targeted more narrowly at those most in need.
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.
Market revenue growth turned (slightly) negative in Q1 2023, driven by weak demand and the waning of 2022 price boosts.
Next quarter will benefit from the high 2023 existing customer price increase, but this effect will wane across the year, and go into reverse next year due to lower inflation.
Other factors are mixed, with new-customer pricing tentatively rising, many smaller ISPs struggling, but altnet gains still likely to get worse before they get better.
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.
Market revenue growth slowed to under 1% in Q4, driven by consumers economising in tough times through re-contracting and dropping add-ons.
Early 2023 is likely to be worse, with growth likely to turn negative again in Q1, again driven by ARPU with volumes more robust.
April price increases will give at least a temporary boost, but need to be managed very sensitively to avoid reputational damage and churn.
At this year’s Mobile World Congress, new hardware was stuck in beta, but glasses-free 3D screens impressed.
The metaverse confronted its identity crisis in a deflated hype cycle: blockchain and NFTs withdrew to the shadows, leaving the focus on enterprise and industrial applications.
AI: while aware of the (numerous) issues, discussions occasionally skated over issues of effectiveness, data inputs, the role of humans, and conditions for adoption.
Consumer tech revenue growth ground to a halt by the end of 2022.
Changes in technology and user behaviour are creating risks for incumbents.
Shareholder pressure is driving efficiencies, but high costs are an inevitable response to growing challenges.
A combination of factors drove the worst quarter ever for big tech growth, though the secular shift online of the economy and society will continue.
Advertising demand is down, reflected in lower prices. Ads did better the closer they are to transactions, with variability by category.
Efficiencies and AI are the investor-soothing buzzwords going into 2023.
This report is free to access.
Cross-party support for an 11th hour amendment to the Online Safety Bill’s Commons report stage has forced the Government to agree that a new criminal liability for tech executives will be added in the Bill’s passage through the Lords.
The proposed amendment cites faulty precedents, including in financial services, and a new, not yet established Irish online safety regime that is lengthy in procedural steps before criminal sanction.
The introduction of criminal liability will not strengthen the safety objectives of the bill. It is at odds with the approach of the wider regulation, and is practically unworkable.