Mobile growth improved very marginally to -3.6% this quarter as roaming revenues were harder hit and competitive intensity bounced back, but usage recovered from the lockdowns in Q2 and cuts to intra-EU calls were annualised.

Italy’s fortunes took a turn for the worse as roaming hit particularly hard and Iliad resurged. After a spate of downgrades to the outlook last quarter, there were some tentative upgrades in Q3 although the tone remains cautious.

The diminished drag from roaming is the primary positive driver from here. Although lockdowns of some degree are in place in Q4, their impact will be less severe than those in Q2.
 

The COVID-19 crisis and suspension of sport has hit Sky hard, with Q2 revenue falling 12.9% year-on-year, and EBITDA (while flat for now) expected to fall 60% in H2 as the rights costs from a condensed schedule hit the bottom line

Underlying trends are hard to discern amidst massive disruption, but the UK remains strong, and increasingly less dependent on sport, with continental Europe a work in progress to repeat this model

Longer-term initiatives continue, with new branded channel launches in the UK, broadband launched in Italy, and scope for further moves in Germany provided by significant sports rights cost savings following recent auctions

European mobile service revenue growth strengthened very slightly to -0.3% this quarter but, with many positive and negative factors at play, it would be wrong to conclude that we evidenced a convincing improvement in momentum.

Most operators have reiterated their financial guidance in spite of COVID-19 but there is caution from Vodafone and those exposed to sports rights (BT and Telefonica).

The outlook benefits from continued lockdown measures (reducing churn and spin-down) and the annualisation of some financial drags from the middle of next quarter. However, competition in Spain remains intense and the sector is exposed to any economic downturn.

Sky posted understandably weak results for Q1, amid the ongoing COVID-19 crisis. Revenue fell by 3.7% year-on-year, with most sports subscriptions on pause and advertising markets in shock

The company has guided to a 60% fall in EBITDA over the next two quarters, as it bears the extra costs of a very condensed sporting schedule, but much will depend on what level of rebate it negotiates from the rightsowners for the disruption

On screen, Sky faces similar production issues to other broadcasters, but it has continued to enhance its platform gatekeeper role and strong content offering, most recently by integrating Disney+

European mobile service revenue growth improved by 1ppt to -1.2% primarily as a consequence of diminished competitive intensity in France. Trends elsewhere were largely flat.

The mobile sector is playing an important role in tackling COVID-19 and is likely to be relatively resilient in the short term with a broadly neutral financial impact. Longer term it will be exposed to the fortunes of the economy.

There are reasons to believe that the improvement in trends evidenced in the last quarter may continue as churn reduction takes the heat out of some markets, cuts to intra-EU calls annualises out and for most countries, end-of-contract notifications will only begin to impact in 2021.
 

Demand for telecoms capacity is booming, and the networks can (broadly) cope, with the increase primarily in off-peak demand. However, as the crisis continues, maintaining resilience becomes more challenging.

In the short term, the demand for ample, reliable connectivity coupled with reduced churn will add resilience to operator financials, although there may be significant weak spots especially in business markets.

However, as the crisis goes on, the pressure on capacity and network maintenance may grow, and the impact of the dramatic economic slowdown on consumers and businesses will also put pressure on financials.

At the Enders/Deloitte Media & Telecoms 2020 and Beyond conference the economic and policy importance of telecoms infrastructure was a major theme, particularly in the current climate.

Operators envisage a pricing environment that will continue to be very challenging.

Help is required to secure infrastructure investment, deliver the economic upside from 5G, and level the playing field between sub-sectors.

Market revenue growth dipped to below zero in Q4 2019, as pricing pressures bite and smaller players gather share.

2020 is off to a challenging start, with new customer pricing dipping down again, and existing customer pricing under regulatory assault.

With expensive full fibre networks being built, persuading consumers to pay more for the higher speeds they enable will be key.

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+.

BT had a weak December quarter, with revenue falling 3% and EBITDA 4%, despite a recovery at Openreach, mainly driven by tough competition and regulatory hits, with operating metrics solid but not noticeably improving.

These hits look set to continue, so the company’s hopes of a return to EBITDA growth in 2020/21 probably hinge on brand and service improvements actually becoming visible in operating performance.

A successful full fibre roll-out would be a boon for BT in the longer term, and regulatory developments are headed in the right direction, if not quite there yet. However, its affordability without a dividend cut remains questionable in the current challenging environment.