Vodafone has signalled a tougher outlook in Germany primarily due to a worsening competitive backdrop for mobile.

Although Vodafone has reiterated its guidance for the full year, this now relies heavily on developing countries, with currency risk emerging for FY26.

Investors are likely to be sceptical of the company’s “ambition” to grow in Germany next year, with this seemingly predicated on an improving competitive environment. Nonetheless, the company can point to some early fruits of its turnaround endeavours there, and next year’s trends should be better than the current ones regardless.

BT had a solid-but-mixed Q3, with revenue growth slightly weaker than expected, EBITDA growth slightly stronger, and subscriber net adds a touch weak across broadband, mobile and Openreach 

The outlook is buoyed by a likely altnet slowdown at some point in FY26, with this set to help subscriber numbers at Consumer/Openreach and pricing at Consumer

The main cloud is the potential effect of a merged Vodafone-Three challenging BT/EE for best network and boosting MVNOs, a challenge we feel is real but manageable for BT

Vodafone has announced that it is looking to launch a satellite direct-to-device service with AST Space Mobile in Europe "later in 2025 and 2026", while also demonstrating the first satellite video call in the UK.

The key challenge for AST Space Mobile is scaling up its constellation, with significant uncertainty remaining around their ability to both manufacture satellites on time and the rockets available to deliver them.

Potential for a full mobile broadband service is a key differentiator versus Starlink's text-only service, and if AST can deliver then Vodafone could be first to market in the UK with a direct-to-device service.

Service revenue growth dropped further to -1.7% this quarter as pricing remains under pressure and in-contract price increases no longer benefit

Competition is heating up in Germany and France, and Digi is taking an aggressive stance as it enters the Portuguese and Belgian markets

While there is increasing awareness that investment levels in Europe are compromised by the current market structure, support for in-market consolidation remains lukewarm at best at the EU level

Apple is investing an additional $1.5 billion into its satellite partner Globalstar to build a new satellite network and expand its direct-to-device text and call capabilities, setting Apple up to take a sizeable piece of this emerging market

The FCC has approved Starlink's direct-to-device service, opening the path to an imminent commercial launch in the US and elsewhere, though it deferred on controversial power and interference questions

In the UK, while Ofcom will potentially approve services in the second half of 2025, we continue to expect no commercial services apart from Apple to be launched before 2026, with the UK market an imperfect fit for direct-to-device for now

The CMA has approved the merger of Vodafone and H3G, paving the way for the UK’s largest mobile network operator.

Remedies are in place to ensure pricing stability in the short term, with the increase in sector capacity keeping the pricing side of the equation in check over the longer term, together with network quality upsides for users.

This is the right outcome in our view, with the alternative of a slow, painful retreat by H3G much less desirable for the industry. BT/EE will face the greatest challenges in adapting to the new market structure, with upward pressure on capex spend for all network operators.

Service revenue growth flat-lined at -1% this quarter. The operators’ year-to-date net adds remain in negative territory while the MVNOs have taken more than 1 million
 

The accounting treatment of the new, absolute, in-contract price increases will provide something of a boost to some operators this year, but worsen the trend next year, particularly for BT/EE
 

The likely Vodafone/Three merger will be the primary theme for the industry in 2025 and beyond, putting upward pressure on capex levels industry-wide 
 

Vodafone’s Q2 performance was in line with the company’s guidance on almost every metric and was always going to be a tough one given the hit from TV losses in Germany and the annualisation of price increases there

The share price reaction (-6%) is likely a reflection of fears around Vodafone’s ability to improve underlying operational performance in Germany. Whilst this remains a valid concern, there is nothing in these results to amplify our worries on the issue

Escalating competitive pressure in German mobile is, however, a threat to the company’s growth outlook, and Vodafone’s promise to be “disciplined” in its approach to it may turn out to be too conservative a strategy

BT Group was hit by an unexpected slowdown in Global/Portfolio non-UK corporate revenue in Q2, with this impacting quarterly and full year expected revenue by 2ppts.

EBITDA, cashflow and all other operational metrics were steady or improving, with Openreach particularly strong, and without the non-UK impact it would have been a solidly good if unspectacular quarter.

The fibre-driven cashflow turnaround plan is therefore still very much on track, with the expected altnet slowdown/consolidation an added potential bonus, and the Vodafone-H3G merger a manageable challenge.

VMO2’s Q3 results were mixed, with underlying revenue and EBITDA slightly improving (but still negative), subscriber momentum slightly improved, but customer service issues still apparent.

The company’s broadband momentum is clearly being significantly curtailed by altnet gains (and Openreach overbuild), with substantial network expansion resulting in anaemic subscriber growth.

A return to growth in 2025 certainly looks possible, but it will depend on customer service issues being resolved, and industry consolidation going VMO2’s way.