Europe experienced flat service revenue growth in Q2, with French trends worsening as SFR’s woes intensified.

There are signs of better pricing momentum in several markets, particularly in Italy and in Germany where O2 has softened its aggressiveness.

This, together with expected improved momentum in the UK, and a likely resolution in France, paints a more positive outlook—and will be particularly helpful for Vodafone’s German turnaround ambitions.

Service revenues were flat this quarter, pointing to strong underlying performance in spite of the drag from changing in-contract price increases and subscriber decline.

Traffic growth has picked up to 15% over the past couple of quarters, suggesting that at least some of the recent sharp slowdown was somewhat one-off in nature.

The outlook for revenue growth is positive, particularly thanks to BT/EE leading the way on ramping in-contract price increases, but there are also inherent risks in such moves.

Revenue growth in mature markets is now price-driven and therefore lumpier. While the US leans on bundling, European scale requires wholesale distribution with pay-TV incumbents. Fledgling streamer to streamer/PSB deals are more of a distribution nudge than a step towards the US model.

Profit momentum is real but fragile: H2 content/sports ramps will test margins; the Versant/Discovery Global carve-outs are about protecting multiples while ring-fencing legacy decline.

Engagement is the key battleground: live sport is increasingly important although streamers remain reticent on rights spending. While sport boosts acquisition and ad reach, ROI hinges on price discipline and shoulder programming. Europe remains a tougher nut to crack.
 

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.

UEFA and Relevent, a newly appointed media rights sales partner, are already surveying the rights market for the next cycle starting in 2027.

With minimal competitive tension in major European markets, incumbent broadcasters are unlikely to increase their bids.

Relevent will, however, try to leverage increased US appetite for soccer to lure a streamer into a global deal.

Globally, subscriber growth remains the driver of topline streaming improvements—86% of Netflix’s 2024 global revenue growth came from subscriber additions, with 85% for WBD and 54% for Disney

However, in mature markets growth is underpinned by ARPU. Subs growth is becoming volatile with more customers churning in and out of services around key releases

Relevantly, the race to scale up SVOD ad-tiers will continue to have an ARPU-dilutive effect: CPMs are lower than expected and the growing price divide between premium and ad tiers will persuade more existing users to spin down 

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.

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.

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

Sky UK and Warner Bros. Discovery have reached a deal for the pay-TV platform to carry WBD's Max, non-exclusively, when it launches in early 2026. The ad-supported version will be bundled at no extra charge for Sky and Now subscribers

The non-exclusive nature of the deal appears to have invigorated Sky into a restructuring of its packages, essentially unbundling Sky Atlantic for the first time