The boost from annualising the COVID-19 hit dissipated this quarter with service revenues flat-lining at –2.5%. The year-on-year mobility boost weakened and pandemic upsides of lower churn, cost savings and B2B demand unwound.

Q4 looks mixed with an improving year-on-year mobility boost but further unwinding of some pandemic upsides. Spring 2022 has the potential to be the long-awaited panacea with price rises of up to 8% and the prospect of renewed roaming revenues.

The operators continue to seek sources of market repair through price rises (to compensate for regulatory intervention elsewhere) and consolidation—but with little visible support from policymakers as yet.

Market revenue growth remained positive in Q3 despite much of the lockdown bounceback dropping out, and is at a significantly higher level than pre-pandemic.

The backbook pricing pressure that has plagued the operators over the last 18 months appears to be finally starting to drop away, allowing strong demand and firm pricing to feed through.

The prospects for next year are also very positive, with firm price increases expected from April, ultrafast upgrades growing in significance, and continued annualisation of backbook issues.

Market revenue growth improved to -1.4% in Q1 2021, a partial recovery being better than at any point in 2020, but still worse than at any point in 2019.

Next quarter the sports channel suspensions will lap out, driving strong (but temporary) year-on-year growth.

Longer-term revenue growth recovery will need backbook pricing pressure relief, which will start in Q2, and demand for ultrafast broadband.

Spectrum auction assignment stages are normally fairly dull and routine, but due to the two-part nature of the 5G auctions, and the critical importance of proximity and contiguity, this is not the case with 5G.

The assignments won, combined with the Vodafone/O2 deal, ensures that all the operators enjoy at least 80MHz of (essential) proximity, but only O2 gets (nice-to-have) contiguity.

Further swaps could ensure contiguity for all, but this requires H3G to co-operate, which is in its absolute, but not relative, best interests.

Mobile revenue growth improved slightly to -3% this quarter, primarily thanks to a weakening in the drag from the loss of roaming.

European MNOs are guiding to improving trends in 2021—broadly stable revenues and EBITDA vs declines of 5-7% in 2020. This bodes well for guidance from the UK players around mid-May.

However, the outlook is far from rosy, with Q1 2021 still very challenging ahead of an annualisation of the pandemic drags from the June quarter. Growth prospects remain contingent on the resumption of travel and the economic climate.

Spotify paid $5 billion in royalties last year to the music industry. Critics claim the $0.0038 per-stream average royalty rate is too low. However, this is largely due to high volumes of ad-funded listening, a core part of Spotify’s freemium model, and a defence against piracy. 

To silence the critics, the “Spotify Loud & Clear” site presents data on the distribution of industry royalties, which are heavily skewed to established artists. Only the top 5% of artists generate annual industry royalties above $1,000, though they take home less under their deals. 

The remaining 95% of artists on Spotify generate under $1,000 a year and use the platform mainly to reach fans that attend live gigs, their primary source of income, now halted by the virus. These artists’ problem is digital discovery, as Spotify’s playlists push hits rather than the midlist. 

The sector rebounded slightly in the quarter to December thanks to a seasonal improvement in the roaming drag, although the partial lockdown tempered the recovery.

We await imminent news on spectrum trading, and there may also be some licence fee reductions as a consequence of the lower prices in the recent 5G auction.

While the sector is likely to continue to struggle into Q1, the outlook is much brighter thereafter thanks to the annualisation and even reversal of some lockdown effects, and to higher price increases from the spring.

Market revenue growth sunk back to -3% in Q4 from -2% in Q3, with further backbook pricing and lockdown effects to blame .

Backbook pricing will improve with numerous price increases announced, but these will only start to take effect in Q2 2021.

Demand for broadband and ultrafast looks promising, but will also take time to filter through to revenue, with Q1 again lockdown-affected.

Ofcom’s full fibre regulation statement, released today, is largely as trailed, i.e. it allows BT’s Openreach considerable relaxation of wholesale pricing in return for building out full fibre.

On the longer-term regulatory prospects, Ofcom continues to be fair but more obtuse than it could and should be, unnecessarily dampening investor enthusiasm. Ofcom will decide on a case-by-case basis whether to allow Openreach to offer geographic/volume discounts, using slightly contradictory principles.

The publication and increased certainty may allow BT’s Openreach to extend its full fibre roll-out further, faster or even with external financing. The build plans of others will come under increasing question.

Ofcom’s second 5G auction concluded with proceeds half those of historic levels for a number of reasons.

The outcome is positive for all operators with no major surprises. The results imply a much more level playing field for the UK mobile operators than in the past.

A relief for the operators but proceeds for the exchequer will be disappointing, and ALF renegotiation may reduce their revenue steam further.