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.

Europe’s larger MNOs are falling over each other to demonstrate support for OpenRAN, which has become a primarily operator-driven standards initiative, with governments also firmly behind it.

This is driven by a desire to improve equipment interoperability from the current de facto monolithic standards, improve supplier diversity, and ultimately drive down cost.

While some movement towards interoperability is perhaps overdue, OpenRAN is not a panacea, and some trade-offs between price, performance, supplier diversity and reliability have to be accepted.

Despite relying on a narrow IP base, US content production is booming, overwhelming other markets and seeking alternative distribution to cinema.

Responding to the rise of Netflix and Amazon Prime, studios seek to shift distribution from wholesale to retail—but only Disney may succeed.

Most content is likely to remain accessed by consumers through bundles. Provided they engage with aggregation, European broadcasters can adjust to the new studio model.

Despite linear TV viewing benefiting from recent lockdowns, across 2020 it still declined among younger audiences. Online video habits have solidified, most notably for adults in their 30s and 40s

As a result, traditional broadcasters are more vulnerable now than ever before. Long term, we forecast their audiences to fall further than previously expected—down to 61% of all video viewing in 2027 from 72% today—as streaming platforms make ever-deeper inroads

Given linear TV’s reliance on older cohorts, plus an ageing UK population, we predict that two-thirds of traditional broadcasters’ viewing in 2027 will come from over-55s, with less than 13% from under-35s

Netflix believes that it no longer needs to raise external financing for its day-to-day operations. This has come quicker than expected—a product of the pandemic, fuelled by an extra $4.8 billion in streaming revenue (+24% on 2019) and aided by the production shutdown and proportionally lower marketing spend

Baked into Netflix’s confidence for the future is the knowledge that the pandemic has allowed greater exploitation of price rises, given the residual lower churn

While Disney+’s content slate is impressive, Netflix has countered it with breadth alongside scale and a massive 2021 film schedule that given it is not geared for the box office, will be a more diverse offering than that of the major studios

Mobile growth improved very marginally to -3.6% this quarter as roaming revenues were harder hit and competitive intensity bounced back, but usage recovered from the lockdowns in Q2 and cuts to intra-EU calls were annualised.

Italy’s fortunes took a turn for the worse as roaming hit particularly hard and Iliad resurged. After a spate of downgrades to the outlook last quarter, there were some tentative upgrades in Q3 although the tone remains cautious.

The diminished drag from roaming is the primary positive driver from here. Although lockdowns of some degree are in place in Q4, their impact will be less severe than those in Q2.

 

Service revenue declines stabilised at -7% this quarter with a myriad of factors at play: roaming worsening, the end of lockdown taking some pressure off, B2B a mixed bag, and the annualisation of cuts to intra-EU calls.

Ofcom’s second 5G auction will be a focus in January. We expect selective bidding, proceeds of up to £2.7bn, and some wrangling over spectrum trading.

The outlook is better from here as the drag from roaming eases, in-contract price rises step up from the spring, Carphone Warehouse diminishes as a factor in the market, and the prospect of consolidation is still on the table.

Netflix’s usage and churn are “back to what they were a year ago”, while subscriber growth was down (+2.2 million globally) as the two levers—reduction in churn and the "pull-forward" effect of the pandemic—for its recent explosive growth softened

Although there will be some lag, content production is back to a near steady state. Since the shutdown eased Netflix has completed principal photography on 50+ productions and the company is optimistic that it will complete shooting on over 150 other productions by year end

The pandemic has handed Netflix residual benefits, including an acceleration of the changes in viewing behaviour and an improved position in terms of cash: it stated that its “need for external financing is diminishing [so] we don’t have plans to access the capital markets this year”

Admissions and box office revenues in 2020 will be the lowest in over three decades. The pandemic forced the closure of theatres, putting pressure on cinema to a degree unlike ever before.

The reasonable success of the straight-to-TVOD releases under lockdown has some studios suggesting TVOD distribution will live alongside theatrical in the future. However, simultaneous releases are unacceptable for cinemas and TVOD’s sub-optimal financial reality means theatrical release will remain essential for most films.

TVOD distribution will temporarily play an expanded role, while SVOD will pursue its climb up the distribution chain and big studios will assert their increased power to negotiate more favourable terms with cinema owners.

Press reports suggest that the restrictions on Huawei equipment may morph into a full ban, with new installations stopping soon and existing equipment to be removed by 2029.

The direct ‘tear-out’ and replacement costs for mobile would be very high at up to £2bn, and there would be significant disruption to 5G roll-outs as operators’ focus moves to replacing what they already have as opposed to pushing into new coverage areas.

Previous rules applied to fixed line broadband networks with as much force as mobile; having to replace Huawei broadband kit would almost certainly delay the move to ‘full fibre’, for no good reason even according to the government’s own report.