O2’s service revenue growth slipped decisively into negative territory at -1.8% this quarter as the punishing regulatory regime took its toll

Underlying EBITDA growth of 4% was particularly impressive in the circumstances; likely aided by more direct distribution as well as tight cost control

The coming week will unveil how this compares to peers; we anticipate results which reflect a tough environment with little let-up on the horizon

Google’s advertising business has begun losing market share in the US, with competition from Amazon, Facebook and Microsoft intensifying in search and display

In response, the company is redoubling efforts to reshape its apps, services, and the entire web for more efficient monetisation, spelling uncertainty for partners and users

The adaptability and complexity of Google’s services reduce business risk from targeted regulatory measures, but increase the pressure for a radical intervention

The UK mobile market posted its slowest growth in more than two years this quarter; just 0.5% service revenue growth although net adds were strong and churn was down

ARPU is under considerable pressure thanks to regulation limiting out-of-bundle spend which will exacerbate as the year progresses

Several other negative developments look set to be layered on the pressures this quarter, including a step-up in competitive intensity as 5G launches –  with H3G’s pricing of unlimited data a sign of a resurgence in its aggression

After a period of significant outperformance, O2’s Q1 results reverted to sector average revenue growth with ARPU down by 3% and all of the growth coming from ‘other’ revenues

Regulation limiting out-of-bundle spending has been a significant drag which will continue to worsen

A more competitive market and a punishing regulatory outlook will make it very challenging to sustain 2018 growth trends as this year progresses

Video sharing platforms, like YouTube, Facebook Watch and Twitch, are vying to attract creators with monetisation options such as branded content and user payments.

Advertising income, already limited for many small and medium-sized creators, has been undermined by YouTube’s response to brand safety concerns.

The new tools come with their own obstacles, but are necessary to keep platforms attractive to video creators.

Vodafone’s operating performance worsened again this quarter with revenues down 3.3% and an extension of its underperformance relative to peers 

Vodafone was right to cut its dividend given the extremity of the cash constraint. With financials in Euro terms in negative territory and worsening, an elevated and progressive dividend was not sustainable 

In spite of difficult market conditions, the lower end of guidance looks achievable as comparables will become easier and football rights costs decline. The transformation programme will need to pay off fast to deliver any meaningful growth
 

After the most challenging period in its history since 2012, Facebook has been able to stabilise its fundamental metrics and announce a major product overhaul

Despite talk of a business model pivot, Facebook’s focus remains on advertising, whose growth will remain concentrated in developed markets

News publishers wishing to stay relevant on the upgraded product set need to target exclusive layers of social interaction, with groups particularly important

The commercial challenges for media online are well-documented: online advertising pays for utilities such as search and social networking many times over, but not for media beyond user-generated content and low-investment journalism.

There are also costs from a user perspective: wasted time, harmful content created to attract views, and the collection, sale, use and frequent leakage to criminals of personal data.

Different sectors have found varying success with alternatives: games, video and music are attracting user payments, driving the paid online economy up 15.5% to £8.2 billion in 2018.

The capacity boost with 5G will be more important than any speed or latency uplift. We estimate a 7-fold increase in mobile capacity in the UK and 13x+ for O2 and H3G

We view fixed mobile substitution products as quite niche although the number of mobile-only households is likely to creep up. mmWave would have the capacity to substitute for fixed but has many hurdles to overcome

Capacity-constraints have tempered competition of late and their removal risks an increase in intensity, especially as H3G views itself as sub-scale – good for policy makers but another challenge to add to the industry’s woes
 

Apple is strengthening its household model by doubling down on family-friendly content subscriptions and payments

The model is reliant on hard bargains with mainly US partners, which risks sacrificing potential scale for a short-term boost in margin dollars

The new services offer glimpses of novel concepts, but stop short of taking risks to truly differentiate—a problem in TV, where Apple’s distribution advantage is slimmer than Oprah would have it