VMO2 survived the hammer blow of lower inflation-linked mobile price increases in Q2 with substantially unchanged revenue and EBITDA growth, helped by improving broadband ARPU

However, both mobile contract and broadband subs suffered declines, likely driven by issues with serving existing customers as well as attracting new ones, and these trends have to improve for the company to return to top and bottom line growth

Guidance implies that EBITDA growth will worsen in H2, but this would be good news in our view if it is driven by expenditure to support improved subscriber growth across broadband and mobile 

BT’s revenue growth in Q1 was hit by lower price increases, but positive EBITDA growth was achieved thanks to strong cost control as inflationary pressures abate.

Subscriber figures were decidedly mixed, with mobile much improved, retail broadband much the same in a difficult market, and Openreach broadband much worse (but still manageable in context).

The bigger picture is that BT is successfully keeping all metrics roughly stable as it completes its fibre roll-out and waits for the inevitable cashflow turnaround as a result.

Service revenue growth was broadly flat at 1.7% as improvements in Germany offset weaknesses in Italy.

The impact of price increases has been mixed, with subscriber losses dulling their upside, and the mixed picture looks set to continue into Q2.

The market continues to be challenging with elevated competition at the low end, pressure from some regulators to increase network coverage, and a somewhat soft EBITDA outlook.

AI integration into production tools throughout media industries will deliver increased productivity for professional content creation. Generally available tools will also improve quality and production speed for individual user-creators.

Roadblocks include the uncertain copyright status of models and their outputs, attitudes of creative workers and consumers, and the AI tech underdelivering versus what was promised. The need to integrate new tools into existing processes is perhaps the biggest brake.

There are stark differences by sector: the opportunities are greatest in games, where costs have ballooned and software engineering is core. Marketing is furthest in exploiting AI, while audiovisual production is more cautious.

On 4 June 2024, Enders Analysis co-hosted the annual Media and Telecoms 2024 & Beyond Conference with Deloitte, sponsored by Barclays, Salesforce, the Financial Times, and Adobe.

With over 580 attendees and over 40 speakers from the TMT sector, including leading executives 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 One, covering: the evolution of streaming models, and public service broadcasting in the digital age. Videos of the presentations will be available on the conference website.

BT’s underlying performance was solid in Q4 FY24, with one-offs turning firm underlying growth into flat/negative reported revenue and EBITDA.

FY25 will be hit by much lower inflation-linked price increases driving a 3ppt revenue drag, but BT may still be able to grow revenue and EBITDA, helped by the unwinding of Q4 one-offs and lower inflationary cost pressures.

Investors were cheered by BT’s confidence in its longer-term outlook, which we share, with FTTP build, take-up and monetisation all going strong, and barely any improvement in underlying performance required in its retail divisions for it to double its cash flow by 2030.

In-contract price increases have been the worst of all worlds—reputationally damaging for telecoms operators but contributing (temporary) revenue growth of just half the rate of inflation. We expect the revenue boost from in-contract price increases of 5% last year to become a 2% drag from Q2 2024.

Cost inflation is, however, cumulative with an acceleration in the gulf between costs and revenues forecast from here. We expect muted financial guidance for 2024/25 from BT Consumer and Vodafone UK over the coming weeks.

Rising new-customer pricing is a necessity if margins are not to be significantly squeezed, but competitive intensity and scale economics continue to thwart such efforts, with no real resolution in sight.

Direct greenhouse gas emissions from the UK telecoms sector equate to around 0.1-0.3% of the UK total. Most operators have set targets to reach net zero across their direct emissions in the next 10-20 years, with the move to electric vehicles an obvious win.

Network upgrades to 5G and fibre have the potential to cut emissions from electricity by a factor of 10, and consolidation offers further decarbonisation upside.

The industry could enable emissions savings in other sectors equivalent up to 30x its own by averting the need to travel and through IoT applications, with the latter requiring careful commercial assessment given the financial constraints in the industry.

BT’s Q3 was robust in financial terms, delivering revenue growth of 3% and EBITDA growth of 1%, both in-line/ahead of analyst expectations.

Strong broadband ARPU and accelerating FTTP performance at Openreach were the highlights, a weakening BT Business and continued Openreach broadband losses were the main concerns.

This year’s guidance should be easily met, next year’s will be trickier given lower price rises due in April, but the long-term plan of a massive cashflow turnaround when the FTTP build ends is still well on-track.

Sony PlayStation’s next CEO will have hard decisions to make: compete against a resurgent multiplatform Microsoft, or retreat and defend an increasingly rickety PlayStation console model.

New gaming hardware will have an outsize influence in the year ahead, giving gamers unprecedented choice, starting with XR headsets and continuing to a likely new Nintendo Switch.

YouTube’s foray into browser-based games will be the service to watch in 2024. If successful, streaming services, including Netflix, will be on track to become heavyweight game platforms.