Service revenue growth was broadly flat this quarter as some unwinding of price increases was compensated by a pickup in roaming revenues.
Vodafone has made some progress on its turnaround plan: it has sold its ailing Spanish unit; is rumoured to be in talks about a deal in Italy; and its German business is (just) back to growth (for now).
We expect muted guidance for 2024 with lower prospective price increases for most, inflated cost bases, and continued consolidation uncertainty.
Sky has withstood the consumer crisis better than its telco peers, but owners Comcast are stepping up pressure nevertheless.
No buyer for its German unit has yet emerged. In Italy, the outcome of the ongoing Serie A rights auction will shape that company’s growth prospects.
Looking forward, Sky has built a solid content supply line and is likely to strengthen further from the deflation following the end of the SVOD bubble.
On 18 May 2023, Enders Analysis co-hosted the annual Media and Telecoms 2023 & Beyond Conference with Deloitte, sponsored by Barclays, Financial Times, and Salesforce.
With over 550 attendees and over 40 speakers from the TMT sector, including leading executives, policy leaders, and industry experts, the conference focused on how new technologies, regulation, and infrastructure will impact the future of the industry.
This is the edited transcript of Session Four, covering: news publisher growth, the way forward for UK telecoms, regulation, and closing remarks. Videos of the presentations will be available on the conference website.
The amended Online Safety Bill contains sensibly scaled back provisions for “legal but harmful” content for adults, retaining the objectives of removing harms to children and giving users more choice. However, this comes at the expense of enhanced transparency from platforms.
News publishers have won further protections: their content will have a temporary ‘must-carry’ requirement pending review when flagged under the Bill’s content rules. Ofcom must keep track of how regulation affects the distribution of news.
The Bill could be further strengthened: private communications should be protected. Regulators will need to keep up with children’s changing habits, as they are spending more time on live, interactive social gaming.
Revenues were stable year-on-year in Q3, with UK growth offsetting Continental decline. All three markets posted positive customer net adds across the quarter.
Underlying profitability is improving, and although World Cup-related changes to the football schedule depressed net income in Q3, they will lift it in Q4.
A possible sale of Sky Deutschland would make sense if it helps the buyer reach superior scale within Germany.
60% of Chinese online ad spend is directly driven by ecommerce, compared to 40% in the West. The gap will close as content and ads move closer to transactions.
General search engines are not central to the customer journey in China: Baidu fell below 10% of online advertising last year, compared to Google’s c.55% share in the UK.
The Chinese model now has a vector to the rest of the world in the form of TikTok, whose parent company ByteDance added more retail GMV in China than Alibaba last year. TikTok wants to grow video shopping in the West, targeting a huge $470 billion in transactions by 2027.
The UK government is on the cusp of introducing legislation that will force online platforms to monitor and mitigate the presence and spread of harmful and illegal content, in a regulatory first for big tech.
Affected companies should take note: they will need to prepare for a higher level of transparency and communication with regulators, and larger service providers will require expanded moderation, user verification and research capabilities.
Users should be protected as platforms balance complex competing duties. News publisher content has a carveout, but publishers may experience butterfly effects as the online environment is reshaped.
TikTok has reached a billion users worldwide just four years after its global launch, much quicker than social media rivals, though its ban in India is a drag on growth.
TikTok’s popularity with under-25s has contributed to a hollowing-out of Meta’s active userbase. During the pandemic, TikTok also expanded its reach among older demographics, cementing its position within the mainstream and posing a further threat to Meta.
TikTok could earn twice as much revenue as Snap in 2022, making it the first app to break out of the mid-league in years, with a huge runway for growth backed up by ByteDance’s remarkable success in China.
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.