Free roaming in several countries around the world was an appealing differentiator for H3G when it launched Go Roam in 2013. Soaring usage and the imperative to establish a sustainable business model have conspired to bring an end to this.

The pricing is similar to BT/EE and Vodafone plans for the EU, but the timing and detail is different, and a package will continue to be available for the other worldwide countries on the 'Go Roam Around the World' plan.

The reintroduction of EU roaming fees is somewhat inevitable as current arrangements leave operators exposed to up to €75 of monthly wholesale charges, and even more as legacy EU wholesale deals expire.

The two-part nature of the UK 5G auctions has thrown up various issues, with non-contiguous spectrum blocks proving the most challenging to resolve.

The Annual Licence Fees (ALFs) attached to H3G’s spectrum are the crucial stumbling block in spectrum trading negotiations, creating a level of uncertainty which is not conducive to striking a sensible deal.

Ofcom has a crucial role to play in securing an efficient outcome and time is very much of the essence.

The bounceback from COVID is yet to be evidenced in UK mobile as there was no improvement in service revenue trends this quarter beyond the simple annualisation of the pandemic hit.

More mobility and international travel will be crucial tailwinds. Q3 travel rates are only slightly higher than a year ago, limiting the near-term upside. Some pandemic boosts such as lower churn and higher B2B demand will also unwind somewhat.

Spring 2022 looks set to be a turning point for the sector with price increases of 6-7% in the offing on the basis of recent inflation rates, and the potential for renewed roaming revenues, even from Europe.

As we expected, UK mobile operators are beginning to introduce EU roaming tariffs, with EE taking the first major leap in the hope that others will follow.

This move is somewhat inevitable as current arrangements leave operators exposed to up to €75 of monthly wholesale charges.

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 last lockdown caused service revenues to dip again to -7% in spite of some easing of roaming pressure and the annualisation of some early pandemic weakness.

The heralded, elevated in-contract price rises will fail to drive higher growth this year due to lower inflation—we estimate zero impact at BT/EE relative to 2020 and a reduction in revenue momentum of around 0.5ppts for each of the other operators.

The annualisation of the first lockdown is the most meaningful upside from here with a boost of around 5-7ppts possible. However, some pandemic upsides will also unwind, notably lower churn and enhanced B2B demand with the latter vulnerable to the end of furlough support and the economy.

The sector rebounded slightly in the quarter to December thanks to a seasonal improvement in the roaming drag, although the partial lockdown tempered the recovery.

We await imminent news on spectrum trading, and there may also be some licence fee reductions as a consequence of the lower prices in the recent 5G auction.

While the sector is likely to continue to struggle into Q1, the outlook is much brighter thereafter thanks to the annualisation and even reversal of some lockdown effects, and to higher price increases from the spring.

Ofcom’s second 5G auction concluded with proceeds half those of historic levels for a number of reasons.

The outcome is positive for all operators with no major surprises. The results imply a much more level playing field for the UK mobile operators than in the past.

A relief for the operators but proceeds for the exchequer will be disappointing, and ALF renegotiation may reduce their revenue steam further.

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.

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.

Service revenue declines stabilised at -7% this quarter with a myriad of factors at play: roaming worsening, the end of lockdown taking some pressure off, B2B a mixed bag, and the annualisation of cuts to intra-EU calls.

Ofcom’s second 5G auction will be a focus in January. We expect selective bidding, proceeds of up to £2.7bn, and some wrangling over spectrum trading.

The outlook is better from here as the drag from roaming eases, in-contract price rises step up from the spring, Carphone Warehouse diminishes as a factor in the market, and the prospect of consolidation is still on the table.