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.

Service revenue growth was flat at 1.9% this quarter—a reasonable performance considering waning boosts from roaming and UK price rises, and a challenging macroeconomic backdrop.

Looking ahead, operators in most markets are now implementing price rises, providing a welcome (albeit transitory) tailwind to revenue growth—although EBITDA momentum remains subdued.

We expect a consolidation deal to be announced between Vodafone UK and H3G in the coming weeks and a decision from the EC on the Orange/MásMóvil deal in August—crucial issues for the sector’s prospects.

Headline inflation-busting price increases of 14% mask effective increases averaging a sub-inflation 8%, due to their limited scope across the customer base and over time.

The high headline increases have led to attacks from political and consumer groups, we would argue unfairly, and may yet drive reputational damage.

Looking forward, inflationary increases may be banned, but we would expect higher fixed increases to replace them, and micro-regulating pricing structures does tend to result in unintended consequences.

Mobile service revenue growth remained strong at 5% this quarter, albeit 1ppt lower than Q3 as boosts from roaming and the spring price rises diminished.

The cost-of-living crisis is becoming evident in weak net adds in the consumer segment while the B2B market remains quite robust for now.

Although the operators will implement in-contract price rises of 14-17% in April, the revenue impact will be much more muted (+4-9% for 2023), and transient (disappearing as customers recontract)—unlike their rising costs.

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.

Q4 results were resilient on the top line and stellar at the EBITDA level with mobile compensating for pressures elsewhere, although the company has warned of a tough first quarter 2023 before recovery

Steps are being taken to improve the prospects of the fixed business but they will take time to bear fruit and there may be rocky times in the process, notably the spring price increases this year                                                  

2023 looks set to be a strong year financially, even if some KPIs remain challenging, with the structure of the nexfibre deal flattering the longer-term picture

Providing home broadband connections via a mobile network (FWA) is gaining traction in certain markets where local conditions make it a viable alternative to fibre, such as New Zealand, Italy and the US.

FWA is a time-limited opportunity for most, with mobile traffic growth absorbing capacity for it and fixed traffic growth depleting the economic case. An ultimate shift to fibre is the best exit strategy.

In the UK, H3G's spare capacity could support up to 1 million FWA customers on a ten-year view—enough for a meaningful revenue fillip for H3G, but not enough to seriously disrupt the fixed market.

Microsoft’s planned acquisition of Activision Blizzard is in trouble. US, UK, and European regulators may make the deal impossible for Microsoft—and a disaster for Activision and the wider industry. 

Sony’s late improvement in PlayStation 5 sales is only just enough to reach its target numbers for the year. It needs a more dynamic approach to a rapidly changing industry, and a less dogmatic message to consumers and regulators. 

Netflix Games is more than a trial—it’s on track to become a major games platform.