Service revenue growth almost doubled this quarter to 2.4% aided by price rises in the UK, Spain, and France, but remains well below inflation-levels.
The revenue boost from in-contract price rises will ultimately disappear as customers recontract, dampening the EBITDA outlook as costs continue to rise.
Operators are looking to other strategies to strengthen their positions, including edging up new-customer pricing, M&A, and attracting wholesale MVNO business.
In a reform of the competition regime for digital markets, by 2025 the UK will have conduct regimes for platforms including Google, Meta and Apple, overseen by the Digital Markets Unit.
Nested within could be a ‘fair bargaining’ regime for platforms and news groups, following Australia and Canada, whose lessons could be valuable to preserve platforms’ incentives to serve news. In Canada, platforms are refusing to pay to serve news links to their users, and plan to exit this form of content.
Financial transfers to UK news groups by platforms is among the new UK regime’s aims, but is unlikely to make up for the declining revenue trend of local news provision whose sustainability is most at risk.
Vodafone's headline revenue growth of +3.7% is actually a small decline once Rest of World exchange depreciation is accounted for. Europe, however, delivered an improving revenue trend to +0.4%, as signalled at Vodafone's FY results announcement.
The mix and operating trends are less positive, with growth driven by low-margin B2B, and subscriber losses accelerating in German fixed. Investors will be weighing up whether these results are green shoots of a recovery or another false dawn.
Although the company may reach its guided EBITDA on assumed exchange rates, it looks set to fall short in euro terms, which has implications for FCF and dividend cover.
On 18 May 2023, Enders Analysis co-hosted the annual Media and Telecoms 2023 & Beyond Conference with Deloitte, sponsored by Barclays, Financial Times, and Salesforce.
With over 550 attendees and over 40 speakers from the TMT sector, including leading executives, policy leaders, and industry experts, the conference focused on how new technologies, regulation, and infrastructure will impact the future of the industry.
This is the edited transcript of Session Four, covering: news publisher growth, the way forward for UK telecoms, regulation, and closing remarks. Videos of the presentations will be available on the conference website.
Providing home broadband connections via a mobile network (FWA) is gaining traction in certain markets where local conditions make it a viable alternative to fibre, such as New Zealand, Italy and the US.
FWA is a time-limited opportunity for most, with mobile traffic growth absorbing capacity for it and fixed traffic growth depleting the economic case. An ultimate shift to fibre is the best exit strategy.
In the UK, H3G's spare capacity could support up to 1 million FWA customers on a ten-year view—enough for a meaningful revenue fillip for H3G, but not enough to seriously disrupt the fixed market.
Whether to allow a Vodafone/H3G merger is essentially a trade-off between range of consumer choice and costs of network duplication. With the need for the former diminishing and the latter increasing, the case for approval is strengthened.
H3G is in a negative spiral of small scale, low investment, and low returns. A merger would allow it to form part of a more credible competitor with a transformed returns profile—without rising prices or reduced industry investment levels.
The CMA’s aversion to mergers has been very stringent of late—an approach that risks deterring investment and compromising competitiveness. Consolidation in UK mobile is unlikely to happen without a change of mindset.
This report is free to access.
The Glasgow Climate Pact agreed at COP26 sets out national pledges to achieve net zero and contain global warming to 1.8°C above its pre-industrial levels— COP27 will buttress pledges, now at risk from the energy crisis, and advance some nations to 2030.
The TMT sector is a leader on net zero in the private sector. Companies that measure their end-to-end carbon footprint throughout their supply chain—as many do in the UK’s TMT sector—can target their GHG emissions.
The TMT sector underpins the UK’s vibrant digital economy that enables hybrid work-from-home (WFH), which reduces fossil fuel use thus heading off both the energy crisis and the climate crisis.
The EU’s GDPR enforcers have ruled that IAB Europe’s framework for collecting user consent, a standard used by about 80% of sites on the continent, is in violation of the regulations
This is one of the clearest signs yet that regulation is starting to catch up with Apple and Google’s privacy push, as support for cookies and mobile ad IDs is due to end over the next few years
Publishers must prepare now by treating privacy as a core part of user experience and adopting a reader-first revenue model that also supports advertising in a trusted environment
Whilst we remain sceptical of the churn reduction benefits of fixed/mobile convergence, the pandemic and a more astute approach from the operators is enhancing the case for it in the UK.
Creating the impression of a giveaway whilst minimizing the effective discount is key, as is extracting any loyalty and cost benefits.
Even if well executed, any upsides are likely to be modest. Operators are right to keep discounts to a minimum and to avoid M&A premia predicated on fixed/mobile convergence synergies.
The UK mobile operators are increasingly vocal about their concerns regarding the tech giants, namely Apple and Google, encroaching on the mobile connectivity market.
eSIMs enhance the case for the tech giants launching their own MVNOs (such as Google Fi in the US) or, perhaps more realistically and concerningly, becoming gatekeepers to mobile airtime subscriptions.
Many things would need to line up for the tech giants to effect this and the MNOs need to stand as one to ensure that they are not successful. Policy makers should be equally reticent.