Broadband market volume growth resumed its downward trend in the September quarter after a blip in the previous quarter that was likely caused by a wholesale transfer distorting the figures. Revenue growth, however, perked up to 1.9% from 1.7% in the previous quarter, an encouraging recovery especially given that it was not primarily driven by the timing of a price increase

ARPU growth improved across all four of the major operators, countering recent trends, with a focus on higher value offerings a common theme. High speed broadband adoption accelerated in the quarter across most operators, encouraged by Openreach’s volume discount offer, although this was partially driven by keener high speed pricing

Revenue growth at Virgin Media, Sky and TalkTalk converged at around 3%, with BT Consumer lagging at -1%. However, excluding the effect of BT’s shrinking telephony-only base and smoothing the sporadic boost of its 9-monthly price rise, BT Consumer’s revenue is in the middle of the pack at 3.0% 

There is a belief in some quarters that there is space for a myriad of large SVOD services in the UK. We question whether there is room for more than the current three pacesetters; Netflix, Amazon and NOW TV

Like the UK, the US market is dominated by three services, and there is evidence of an appetite for further offerings. But the US market is conspicuously different to the UK's, with the forces behind cord-cutting in the States less apparent this side of the Atlantic

Potential domestic UK services would struggle to compete with the resources—supported by debt-funded and loss-leading models—that foreign tech giants can marshal

The Public Service Broadcasters (PSBs) have been mulling a possible SVOD service, a decade after their ad-supported Project Kangaroo was blocked on competition grounds

Even if a reboot between the BBC and ITV were this time to be approved, we do not think Kangaroo 2 can succeed as a significant SVOD entrant in its home turf of the UK, above all because it’s too late

Other flaws in the offer are that it would be too small, non-premium, too old (archive), and too old (viewing profile), plus lacking sufficient financial resource to produce a pipeline of unique series

Radio faces challenges from Spotify and other online audio propositions, while the radio “dial” is challenged by smart speakers and global tech. UK radio broadcasters have risen to the occasion through innovation

New DAB stations have helped radio achieve record audiences and revenues. Combined digital listening is now over 50%, but FM remains the primary platform. The current mix of FM/AM and digital maintains radio’s relevance for the medium term

The long-term future is digital—a wide-ranging sector review is required to determine how to support digital radio’s growth and the question of a future switchover

The Public Service Broadcasters (PSBs) are in the process of sliding from TV dominance to middling contenders, in terms of content expenditure and significance to viewers

There are calls from many sides that the PSBs need to collaborate in order to thrive, in an era when global debt-funded SVOD services are making all the running

This note explores what can realistically be achieved by PSB collaboration; where partnerships work best; and the areas best avoided

Drawn by its rapid growth and enviably youthful audience profile, incumbent broadcasters are paying increased attention to esports and its followers

Viewership of esports on UK broadcasters’ linear channels is low, with consumption on their online platforms likely the same. The market’s fragmented nature and global audience, along with the dominance of Twitch—and to a lesser extent YouTube—makes this unlikely to change

Broadcasters’ low-cost approach has primarily benefited competition organisers and games publishers. For broadcasters to create real revenues, massive upfront investment would be needed, with the risk of failure high

European mobile service revenue growth was sharply lower this quarter dropping to -0.7% after two years in positive territory, owing to weakness in the southern(ish) European markets of France, Italy and Spain

Iliad has strong momentum in Italy and we expect ARPU dilution to worsen into Q3, with the subscriber loss impact also growing.  Any loss of traction for Iliad is likely to drive another round of price cuts

We expect continued north/south divergence in Q3 with the anniversary of the European roaming cuts boosting the UK and Germany in particular whilst the outlook for Southern European operators remains challenging

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

Virgin Media had a mixed quarter, with subscriber ARPU growth maintained, partly driven by a triple play focus with pay TV and telephony adds much improved, but subscriber and broadband net adds unchanged

Cable revenue growth did slow from 3.6% to 3.1%, mainly due to the previous quarter’s net adds slowdown working through, and it is still growing the fastest of the big operators in a slow-growth market that still suffers from pricing pressure at the low end

Its network roll-out was slower than last year and only just above the weather-impacted previous quarter, which appears to be deliberate, and which may at least partly relate to an uncertain regulatory and commercial climate over ‘full fibre’ roll-out by others

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