Market revenue growth turned (slightly) negative in Q1 2023, driven by weak demand and the waning of 2022 price boosts.
Next quarter will benefit from the high 2023 existing customer price increase, but this effect will wane across the year, and go into reverse next year due to lower inflation.
Other factors are mixed, with new-customer pricing tentatively rising, many smaller ISPs struggling, but altnet gains still likely to get worse before they get better.
BT hit all its targets for the 2022/23 financial year, ending the year with a (predicted) consumer service revenue growth slowdown but a surprisingly strong B2B performance fully compensating.
Investors were disappointed in the outlook for cashflow in 2023/24, with tax benefits being absorbed by the cost of faster-than-expected full fibre adoption, ignoring that this is good news rather than bad.
Next quarter the company will get a substantial boost from the price rises, and in the longer term an even more substantial boost from the completion of the full fibre build is looking increasingly secure.
We forecast broadcaster viewing to shrink to below half of total video viewing by 2028 (48%)—down from 64% today—as streaming services gain share of long-form viewing time.
On the key advertising battleground of the TV set, broadcasters will still retain scale with a 63% viewing share by 2028, even as SVOD and YouTube double their impact.
Short-form video will continue to displace long-form as video-first apps (e.g. YouTube, Twitch, TikTok) gain further popularity and others (e.g. Facebook, Instagram) continue a relentless pivot to video. This will expand the amount of video watched and transition habits—even amongst older demographics.
Market revenue growth slowed to under 1% in Q4, driven by consumers economising in tough times through re-contracting and dropping add-ons.
Early 2023 is likely to be worse, with growth likely to turn negative again in Q1, again driven by ARPU with volumes more robust.
April price increases will give at least a temporary boost, but need to be managed very sensitively to avoid reputational damage and churn.
VMO2 and CityFibre are reportedly holding merger talks, which would bring together by far the two largest fibre builders competing with Openreach.
On a conventional altnet acquisition assessment, CityFibre is an attractive target given its scale, but a very expensive one at a full price given the degree of overlap.
The acquisition might still be attractive given the opportunity to take out a wholesale competitor but, for this same reason, regulatory clearance would be very tough.
At this year’s Mobile World Congress, new hardware was stuck in beta, but glasses-free 3D screens impressed.
The metaverse confronted its identity crisis in a deflated hype cycle: blockchain and NFTs withdrew to the shadows, leaving the focus on enterprise and industrial applications.
AI: while aware of the (numerous) issues, discussions occasionally skated over issues of effectiveness, data inputs, the role of humans, and conditions for adoption.
BT’s revenue and EBITDA growth fell in the December quarter, with consumer broadband in particular suffering from weakening volumes and ARPU, as last year’s price rise benefit wanes and broader macro pressures hit.
Openreach, however, had an improved quarter, with the broadband market returning to growth, full fibre build and take-up progressing at or ahead of expectations, and the altnet threat fairly subdued.
Inflationary price rises in April will give a temporary fillip, and likely help drive a decent 2023/24 for Group financials, but it will take much longer for full fibre benefits to really be felt.