TikTok has been dealt a devastating blow as a US bill has been signed into law forcing owner ByteDance to sell within a year or face its removal from app stores.
The stakes are higher than in 2020—China's opposition to a divestment will make an optimal sale harder to conclude, so all sides must be prepared for a ban.
The TikTok bill introduces extraordinary new powers in the context of the US and China's broad systemic rivalry, though online consumer benefits will be limited.
The US is intent on preventing the CCP’s goal of AI supremacy by 2030, banning exports of advanced AI chips to Chinese companies. So far, these bans have largely been shrugged off to create a new commercial dynamic in the region.
Huawei wields a de facto monopoly on the manufacture and sale of advanced chips in China. Huawei also sells cloud services globally and threatens Apple's $70 billion in Chinese revenues through its premium handsets.
China’s AI regulation is highly supportive of the training and deployment of Chinese-language LLMs developed by tech platforms, startups, and device makers, with meaningful revenue gains only appearing by H2 2024.
Market revenue growth was solid at 1.6% in Q4, but subscriber volumes were weak, and ARPU was supported by price rises.
Price rises will be much lower in 2024, with no ease in sight for volume growth, which will likely lead to much lower or even negative revenue growth.
The altnets are adding significantly to incumbent pressure, and their consolidation may ease or worsen this depending on its form.
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.
While altnets continued their strong expansion in 2023, a slowdown in 2024 is looking very likely, with financing drying up due to tougher financial conditions and disappointing operating performances from some.
Consolidation is the obvious answer, and the altnets could consolidate into a pure wholesaler (via CityFibre), a retail/wholesale player, or could be absorbed into VMO2/nexfibre.
Which of these routes is taken, and how quickly, will have a profound impact on the structure of the industry, and all players should be careful what they wish for, with long-term outcomes hard to reliably predict in such a complex marketplace.
VMO2 ended 2023 with strong ARPU and EBITDA growth, meeting its (revised) guidance for the full year, but saw receding subscriber momentum across both fixed and mobile.
2024 will be much tougher across the industry and for VMO2 in particular, with its revenue expected to be flat at best, and waning boosts from price rises and synergies coupled with a series of technical factors shrinking EBITDA.
The company has promised new commercial initiatives in 2024, and thereafter we see strong potential in it maximizing the use of its network and retail arms via breaking the long-standing lock between them, although the formation of NetCo is neither a necessary nor sufficient step for this.
According to press reports, VMO2 is in early stage discussions over buying TalkTalk’s consumer retail broadband business, but not its wholesale business, which may leave the latter in limbo.
There is strong industrial logic to the deal, with a sub-brand useful, and significant synergies from moving the TalkTalk base to VMO2’s network, with the latter gain at Openreach’s expense.
There would be major regulatory hurdles for the deal, with concerns on both a retail and wholesale level, and particularly the future of the altnets, with any deal likely having to protect this.
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.
VMO2’s half-year results were something of a mixed bag with some decent revenue momentum but a big hit to EBITDA as COVID cost-savings unwound and company full year guidance suggests a further deterioration in Q4.
Volt, VMO2’s convergence product, is well-conceived and executed. With a following wind it should avoid the pitfall of revenue dilution whilst potentially offering some upsides.
The company remains in strategic limbo awaiting an outcome on its wholesale discussions with Sky. This will determine not just fibre expansion plans but also branding and co-marketing of its central products.
After China updated its Anti-Monopoly Law to cover platform companies, the Government is bringing to heel privately owned ‘national champions’, including via antitrust measures in their home market—the key source of their astronomical cash flow—and through interference in their expansion outside China
China lacks any tradition of anti-monopoly activity, given its gradual shift to the market from state-owned enterprises, it offers an example of theory in practice for antitrust reformers targeting platforms in the West
The global implications are huge: up to $2 trillion of Wall Street shares are exposed as China tightens controls on foreign IPOs. Regulators could also use enhanced antitrust powers to disrupt global dealmaking for economic leverage