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.
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.
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.
The post-pandemic recovery has lifted vacancies to a high of 1.27 million, at critical levels in hospitality and health—sectors impacted by the exodus of EU workers. We expect recruitment advertising for private sector roles to have risen 13% in 2022 to £746 million (noting base effects from lockdown in H1 2021), and will decline c.4% in 2023.
LinkedIn dominates recruitment advertising directed at professionals, leveraging its free global networking service. Indeed anchors the other end of the skills spectrum, which is low value and high volume, aggregating openings to create a scale proposition for jobseekers, using technology to target and match them with employers.
Specialists are surviving Indeed’s technology-driven business model by relying on human expertise and ancillary HR services to differentiate. Agencies continue to specialise in supplying workers to large employers for temporary positions. News publishers have retained a small but dwindling slice of recruitment advertising.
Magazine publishers are at different stages of a transformation cycle, but a variety of external and industry factors are massively accelerating change.
Often described as the transition from page to screen, in reality transformation is a deeper redefinition of each brand’s community and purpose, and the use-case benefits it delivers.
Online advertising is evolving into a space where trusted consumer media can exploit their advantages of community engagement and premium context, rather than indiscriminate traffic.
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.
Sky’s performance across 2021 significantly improved, driven in Q4 by a nice c.5% growth rate in UK consumer revenues and the advertising rebound, but effects of the pandemic are still being felt with EBITDA down 30% on 2019.
The decline in Group revenue accelerated in Q4 due to the severe shock to the Italian operation from its loss of most premium football coverage, although we see upsides in a possible rights reshuffle.
In 2022, Sky can leverage growth vectors including bigger content bundles, Glass, advertising innovations and broadband. Consolidating SVOD and telecoms markets may be more favourable to price increases.
Despite operating in a challenging market, Sky has continued to increase revenues, with the resilient performance of its direct-to-consumer and content businesses offsetting the disappointing drop in advertising income.
Across FY 2019, EBITDA was up 12.2%; profit growth driven by a significant reduction in “other” costs as large one-off effects disappear and cost-cutting continues.
Extended distribution deals with Netflix and WarnerMedia will protect Sky’s content proposition for the coming future, as would the mooted integration of Disney+.
Consumer magazine circulation and advertising continue to spiral down, with notable exceptions at the top of the market and in a handful of key genres, triggering ever greater revenue diversification and innovation The market is fundamentally over-supplied and the gap between successful portfolios and the glut of secondary titles is growing. Furthermore, the distribution and retail supply chain hang by a thread There are some encouraging signs. Publishers are evolving, with their strategies and leadership capabilities increasingly defined by the needs of the industry they serve rather than the publishing brands they exploit, bringing the consumer model closer to more thoroughbred B2B models
Specialist publisher Future has offered £140m for generalist TI Media’s 41 brands, which will give Future 220 global brands upon expected completion in Spring 2020. The acquisition, which includes wholesaler Marketforce, is contingent upon shareholder and CMA approval
Future is the darling of publisher stocks, pursuing an energetic growth and scale strategy, and diversifying revenues through digital and experience innovation
How Future’s culture of experimentation and optimisation will work with TI Media’s more general portfolio is an open question. Only time will tell if the overall portfolio balance will work