VMO2 had a subdued Q1, with EBITDA growth only just positive—this was pre-warned due to tougher comparables and the mid-teens price rise not due to take effect until April/May.

KPIs were mixed: fixed was fairly strong and mobile was slightly weak, with there being realistic hope that the former is a trend and the latter a blip, although more work is required to fully turn around fixed.

Guidance for mid-single-digit EBITDA growth for 2023 has been maintained. This now excludes the nexfibre construction margin benefit, thus is in a sense an upgrade, and still looks eminently achievable.

Telcos are pressing the EU to force big tech to make a ‘fair contribution’ to their network costs, although this has drawn opposition from telecoms regulators, who rightly fear risks to the wider ecosystem

There are valid concerns to address however, with content providers not currently incentivised to deliver traffic efficiently, and telcos constrained by net neutrality rules from doing anything about it, resulting in unnecessary costs and service degradation

However, there may be better ways to address these, through reforming the implementation of existing rules to encourage more efficient content delivery, and allowing the telcos to provide enhanced delivery routes of their own, with Ofcom’s approach in the UK a step in this direction, but perhaps not a step far enough

Cost-of-living pressures and tougher fixed competition drove VMO2’s revenues (just) back into negative territory this quarter.

Synergy benefits, however, delivered impressive EBITDA growth (+5%) with more to come as the Virgin Mobile MVNO shifts on-network next quarter.

We struggle to foresee convergence becoming the company’s next growth driver as trailed by the CEO, but the mobile outlook is fairly robust and there are steps that can be taken to shore up the pressurised fixed business.

Rupert Murdoch is seeking to merge News Corp and Fox Corp, split up a decade ago, to create greater corporate scale and streamline management.

A recombined News Corp would generate revenues of c.$24 billion based on fiscal 2022 results, with EBITDA of $4.6 billion, and an enterprise value in the region of $25-26 billion.

An additional rationale for News Corp is the financial protection of cherished news brands such as the Wall Street Journal and the Times inside a stronger enterprise. While the first phase of online transformations has been successful, sustainability of trusted, quality news media is never settled or guaranteed. The objective could hardly be more important now and in the coming years.

Market revenue growth continued to accelerate in Q2 to reach 3%, but broadband growth worryingly dipped as the lockdown boost waned.

Differing pricing dynamics (among other factors) led to very different outcomes for the main players, with BT’s growth surging to 7% while VMO2’s revenue stayed in decline.

Underlying trends of weakening broadband growth, keener pricing and customer bargain seeking point to slower growth ahead … until the next price increase.

With the cost-of-living crisis expected to worsen over the coming months, the telecoms operators must walk a fine line—support customers but protect their financial performance in the face of a likely recession and rising costs.

We are likely to see weakness on the B2B side and consumers will look for ways to reduce out-of-bundle spend, seek retention discounts and spin down to lower speed tiers and data bundles, but we expect that dropping services completely will hold limited appeal.

Proactive retention activity and promotional pricing is likely to pay off more than slashing headline prices, and will help to avoid a damaging price war—a far bigger risk to their revenues than spin-down.

On 12 May 2022, Enders Analysis co-hosted the annual Media and Telecoms 2022 & Beyond conference with Deloitte, sponsored by Barclays, Financial Times, Meta, and Deloitte Legal

With up to 500 attendees and over 40 speakers from the TMT sectors, including leading executives, policy leaders, and industry experts, the conference focused on regulation, infrastructure, and how new technologies will impact the future of the sector

These are edited transcripts of Sessions 4-6 covering: European media, sustainability in the TMT sector, and advertising mega-trends. Videos of the presentations are also available on the conference website

While VMO2’s Q1 results were strong, its subscriber additions were weak, particularly on the broadband side, with a seemingly somewhat deliberate go-slow as the year began, but cost-of-living crisis and fibre overbuild may also be factors.

We see considerable scope to ramp up commercial aggression from here given the sizeable tailwinds from price increases, synergy benefits and the migration of the Virgin Mobile MVNO from Vodafone.

We remain sceptical of VMO2’s further network extension ambitions and hope that no news on securing a financial partner is good news, increasing the odds of it pursuing the less risky strategy of expanding its footprint through wholesale.

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.