BT’s March quarter appeared to have been going reasonably well until COVID-19 hit, with full year guidance still being broadly met, but the new financial year will be hit harder, with BT Sport, SME and new fibre connection revenue particularly vulnerable.

BT’s full fibre roll-out has been temporarily slowed by COVID-19, but it is accelerating its ambitions regardless increasing both its 12-month (4.0m to 4.5m) and longer term (15m to 20m) coverage targets.

BT is suspending and then rebasing its dividend, in part to cover the above costs. While we regard BT’s fibre investment as a good one, investors and analysts alike have been frustrated by a lack of clear multi-year guidance of the benefits, perhaps as a result of BT not wanting to reveal its negotiating hand to the regulator, government and retail partners.

Demand for telecoms capacity is booming, and the networks can (broadly) cope, with the increase primarily in off-peak demand. However, as the crisis continues, maintaining resilience becomes more challenging.

In the short term, the demand for ample, reliable connectivity coupled with reduced churn will add resilience to operator financials, although there may be significant weak spots especially in business markets.

However, as the crisis goes on, the pressure on capacity and network maintenance may grow, and the impact of the dramatic economic slowdown on consumers and businesses will also put pressure on financials.

The UK mobile market was steady this quarter at around -2% ahead of out-of-contract notifications hitting from February.

The mobile sector is playing an important role in tackling COVID-19 and is likely to be relatively resilient in the short term with a broadly-neutral financial impact. Longer term it will be exposed to the fortunes of the economy.

Elsewhere, there have been green shoots of positivity in the outlook: some good regulatory news; a degree of price inflation; Carphone Warehouse’s retreat is a positive for the operators, and some financial drags will drop out as the year progresses.

At the Enders/Deloitte Media & Telecoms 2020 and Beyond conference the economic and policy importance of telecoms infrastructure was a major theme, particularly in the current climate.

Operators envisage a pricing environment that will continue to be very challenging.

Help is required to secure infrastructure investment, deliver the economic upside from 5G, and level the playing field between sub-sectors.

Market revenue growth dipped to below zero in Q4 2019, as pricing pressures bite and smaller players gather share.

2020 is off to a challenging start, with new customer pricing dipping down again, and existing customer pricing under regulatory assault.

With expensive full fibre networks being built, persuading consumers to pay more for the higher speeds they enable will be key.

Despite two decades of online disruption, the UK remains reliant on traditional platforms and brands across the media sector more so for older cohorts, but also for younger generations

13% of adults still do not use the internet and, in reality, an online only media ecosystem remains a distant prospect

Traditional providers, particularly within TV, radio and news, look set to endure for the long term , aided by the trajectory of the UK’s ageing population

The speeds made possible by full fibre build are unnecessary for most users in the short term, giving limited commercial advantage to those that can offer them, but are likely to prove essential in the medium/long term.

The economics of full-scale, independent alternative networks look very challenging in our view – especially without the support of Sky – although there are some limited arbitrage/cherry-picking opportunities.

The Openreach full fibre model makes economic sense under Ofcom’s proposed regulatory framework, provided it retains the lion’s share of the market, although considerable risks remain.

UK mobile market service revenue grew by 2.4% in Q3, a level not seen since early 2011. However, this 0.6ppt improvement on the growth rate in Q2 was very disappointing in the context of an expected 2-3ppt revenue growth bolster from the annualisation of roaming tariff cuts 

EE and O2 shared the top spot for growth, more than double the growth rate of H3G and far ahead of Vodafone which remains in negative territory and had only the slightest uptick this quarter

O2 is likely to be hit by its well-publicised network blackout in December, but experience from a similar problem back in 2012 suggests this will be modest and temporary, and it is otherwise performing well

UK mobile market service revenue grew by 1.7% in Q2, up from 1.3% in the previous quarter, a disappointing result in the context of boosts from both IFRS 15 accounting and the annual price rises in the quarter

O2 was the star performer this quarter, with its service revenue growth leaping ahead to claim the top spot. BT/EE’s service revenue growth declined on an underlying basis, with weak contract net adds over the last six months catching up with it, and H3G and Vodafone were slightly improved and steady respectively excluding some one-off effects

Next quarter, the impact from the EU roaming cuts will annualise out, providing a substantial fillip to all operators. Ceteris paribus, this would put market growth in the vicinity of 4%, a figure not reached for years

Many European telecoms operators are pursuing a fixed/mobile convergence strategy on the pretext that the addition of mobile reduces churn. We see no evidence of churn reduction from this strategy

Discounts required to encourage take-up of fixed/mobile services are often value-destructive, even before competitor reaction: a 10% bundle discount necessitates a 2ppt improvement in churn to wash its face economically. M&A premia on the basis of convergence synergies raise the hurdle even higher

Most UK operators offer very limited discounts on fixed/mobile bundles for now, sensibly focusing on enhanced services. Vodafone is the most aggressive, albeit less so than it is elsewhere. All UK players should hope that it stays this way