Service revenue growth remained firmly negative at -1.0% in spite of inflation of +2.1%, as competition remains intense and pricing power weak.

Operators are guiding to a 2025 EBITDA performance that is broadly in-line with, or weaker than, their 2024 performance, with SFR choosing to abstain from guidance this year.

In-market consolidation cries are getting louder, with France, Italy and Germany the most obvious candidates.

2024 was the first year in history in which the network operators lost contract subscribers. MVNOs added 1.7m.

In-contract price increases are dominating revenue trends, with a somewhat flatlining outlook on an underlying basis but boosted by accounting technicalities.

We expect the Vodafone3 merger to close on 1 of May which has implications for buyout timing and will prompt higher capex, some early network upsides, and big strategic decisions for both Vodafone3 and BT/EE.

Most regulations within the TAR26 condoc were continuations of the previous pro-investment regulations, albeit with little progress made on copper withdrawal, no extra help for the struggling altnets and a number of unexpected twists at the margin. 

Within the detail, the most significant hit is the return of cost-based price controls to some leased line charges, and across all of the proposed changes, Openreach has on balance fared worse than retail ISPs, albeit at a scale that is manageable within the BT Group.

Ofcom showed no inclination to offer any extra help to the struggling altnet industry, regarding its inefficiencies as being its own (and its investors’) problem, with consolidation the only sensible path forward for most.

Geopolitical clashes between the US and Europe were a barely concealed undercurrent at this year’s MWC, with European tech regulation at odds with US moves, and telcos pitching for regulatory favours on firmer ground than they have had for years.

Perhaps the largest impact is on the satellite industry, with Eutelsat OneWeb having been given a new lease of life as the EU champion versus a now disfavoured SpaceX/Starlink.

AI was of course the talk of the town, but largely in ways that are tangential at best to traditional telcos, with the necessary building blocks for telcos to play a big role (i.e. network APIs) still needing much work.

With the formation of Vodafone3, we envisage continued intense competition at the low end of the mobile market, a ramping up of pressure at the top end over time, and some opportunities in the short term.

New information on spectrum trading confirms the view that BT/EE will be most capacity constrained, but with various strategic options available to it.

Expected EBITDA growth of 9% p.a. at Vodafone3 would allow Vodafone Group to almost double its excess FCF. Budgeting for buying CK Hutchison’s stake, however, may curtail Vodafone’s spending over the coming years.

Telcos are increasingly developing APIs to share selected network data with third parties, with the goal of supporting useful end-user applications.

Capabilities are still nascent, but the potential is real. Telcos need to adopt a pragmatic approach that looks to match API capabilities to useful products, and build increasing scale over time.

Security is the largest near-term opportunity for API products, but AI is the key emerging area, with telcos potentially able to play an ambitious role in providing APIs to help manage the growth of autonomous AI agents.

Vodafone has signalled a tougher outlook in Germany primarily due to a worsening competitive backdrop for mobile.

Although Vodafone has reiterated its guidance for the full year, this now relies heavily on developing countries, with currency risk emerging for FY26.

Investors are likely to be sceptical of the company’s “ambition” to grow in Germany next year, with this seemingly predicated on an improving competitive environment. Nonetheless, the company can point to some early fruits of its turnaround endeavours there, and next year’s trends should be better than the current ones regardless.

The mid-sized UK altnets Zzoomm and FullFibre have agreed to merge, in what looks like an all-share merger of (nearly) equals, both of whom have been struggling to raise finance.

Why did they pick each other rather than the larger CityFibre/Netomnia/nexfibre options? Valuation may have been the key factor, but it has left them still vulnerably low scale with further consolidation necessary.

Much more consolidation is required for the sector to be sustainable in our view, and further financial distress may be required for realistic valuations to emerge.

Service revenue growth dropped further to -1.7% this quarter as pricing remains under pressure and in-contract price increases no longer benefit

Competition is heating up in Germany and France, and Digi is taking an aggressive stance as it enters the Portuguese and Belgian markets

While there is increasing awareness that investment levels in Europe are compromised by the current market structure, support for in-market consolidation remains lukewarm at best at the EU level

Apple is investing an additional $1.5 billion into its satellite partner Globalstar to build a new satellite network and expand its direct-to-device text and call capabilities, setting Apple up to take a sizeable piece of this emerging market

The FCC has approved Starlink's direct-to-device service, opening the path to an imminent commercial launch in the US and elsewhere, though it deferred on controversial power and interference questions

In the UK, while Ofcom will potentially approve services in the second half of 2025, we continue to expect no commercial services apart from Apple to be launched before 2026, with the UK market an imperfect fit for direct-to-device for now