The wave of deal-making in the European towers sector is driven by cash-strapped telcos seeking a form of sale and leaseback financing.

While the operators are incentivised to provide a medium-term growth trajectory for these towers companies, sustainability of that growth is more questionable, especially as 5G will not require additional base stations.

Cellnex continues to insinuate itself into the UK market with its most recent deal signaling the ultimate unwinding of the MBNL JV. Further UK towers consolidation seems a long way off but could facilitate, or indeed be facilitated by, consolidation at the MNO level.

The Consumer Electronics Show (CES) this year was held virtually, with announcements revolving almost exclusively around the pandemic and addressing changing consumer needs. The evolving use of tech at home was a particular focus for brands as consumers are now demanding more of their homes than ever before.

Following a record 2020, ecommerce was a topic that garnered a lot of attention, with retailers emphasising the importance of a consumer centric 'digital first' strategy, accepting the fact that ecommerce is going to be bigger than it ever has been.

Amid increased tech use at home, moves to ban third-party cookies and impending regulatory changes to data collection in the US, the conversation around data and privacy was more prominent than ever before. First-party data is going to be more valuable, even if tracking restrictions limit what can be done with that data.

UK mobile operators seem set to offer EU roaming on selected bundles only—a welcome new form of price differentiation.

This move is economically efficient and particularly helpful for MVNOs for whom the erstwhile arrangements were particularly punitive.

We don't envisage a return to the days of super-normal returns from roaming, but it is nonetheless conducive to much-needed price inflation in the sector.

The UK mobile market suffered its worst performance in six years this quarter as competition heated up and regulation continued to bite

Vodafone’s unlimited tariffs have proven popular, reaching 5% of its contract base in one quarter, helping to drive its outperformance

Some reprieve is in prospect next quarter, before the impact of out-of-contract notifications and automatic discounts from February, although there is the possibility of pre-emptive moves bringing some of the effects forward 
 

Mobile sector returns are low, particularly for smaller-scale operators, with H3G earning less than its cost of capital. Regulatory initiatives, spectrum auctions and 5G look set to worsen this picture as H3G strives to gain viable scale

Back-book pricing is crucial to the returns of fixed challengers. Regulatory intervention is likely to lead to a waterbed effect in the fixed sector and exacerbate challenges in mobile

New entrant business case in full fibre is limited to de facto monopoly opportunities. There is the potential for BT’s returns to increase markedly if it gets full fibre right but new entrants’ inferior economics are unlikely to offer sufficient investor appeal

The UK mobile market suffered its worst performance in five years this quarter with Vodafone alone, somewhat inexplicably, bucking the trend

5G capacity is impacting pricing trends with SIM only packages flattening and unlimited packages increasing in popularity and complexity

As the operators invest in solving rural coverage and rolling out 5G, they will continue to be hit by regulation. Out of contract notifications and discounts are next in a long series of assaults

In China, Alibaba and Tencent compete for food delivery to expand access to a fast-growing source of mobile user data, using their chat and wallet super apps to funnel customers to their food delivery apps

In the West, the rivalry is direct between the food delivery apps – Just Eat, Uber Eats, and Deliveroo – and the costs of last-mile delivery dissuade challengers

In the UK, Amazon will change the game if it succeeds in its proposed purchase of a minority stake in Deliveroo, which Uber failed to buy last year. Progress on the merger of Amazon and Deliveroo is suspended by the regulator

The capacity boost with 5G will be more important than any speed or latency uplift. We estimate a 7-fold increase in mobile capacity in the UK and 13x+ for O2 and H3G

We view fixed mobile substitution products as quite niche although the number of mobile-only households is likely to creep up. mmWave would have the capacity to substitute for fixed but has many hurdles to overcome

Capacity-constraints have tempered competition of late and their removal risks an increase in intensity, especially as H3G views itself as sub-scale – good for policy makers but another challenge to add to the industry’s woes
 

Following record growth last quarter, the UK mobile market took a step down to just 0.9% growth in the quarter to December on the back of increasing pressure in the business market and the impact of out-of-bundle limits

2019 looks set to be a tough year for the sector with: a series of potentially painful regulatory hits; markedly lower price rises than last year; and early signs of a degree of creeping competitive intensity

We view 5G as a much-needed means of expanding capacity in the sector with upsides from M2M and IoT likely to remain relatively small

Launched to the world in September 2017, TikTok is the first Chinese app to pose a serious threat to Western social media companies as it attracts hundreds of millions of Generation Z users around the globe

Privately-owned parent company Bytedance earned $7 billion in online advertising revenues in 2018 and is valued at $75 billion, placing it ahead of Uber as the world’s most valuable internet start-up, with an IPO likely this year

Bytedance’s goal of earning half its revenue outside China by 2022 is far from certain. In order to hit the target, TikTok will need to attain super scale with best-in-class revenue per user, an unlikely combination