Metrics in Vodafone's Q3 results pointed in various directions with the main positive being revenue growth in Germany, but there were also concerning data points including continued subscriber decline there, and EBITDA across all of Europe.

The company reiterated its guidance for EBITDA and FCF for the year which looks achievable but a stretch. More importantly, these numbers exist only in theory with the Euro-based results looking set to be lower—with implications for the outlook and dividend cover.

Ridding the Group of its Spanish business, and possibly the Italian one too, will be helpful in delivering on the promise of growth, but whether it creates value for shareholders is another matter.

Market revenue growth was robust in Q3 at 1.4%, but heavily supported by price rises whose effect will wane over the next year.

Broadband net adds remained negative, with pay TV and telephony more negative still, mainly thanks to strained consumer finances.

Declining volumes and waning price rise boosts are likely to lead the market into decline next year, with a recovering economy needed to reverse this.

With a difficult price rise adjustment now behind it, VMO2’s subscriber momentum is much improved, in part aided by accelerated network expansion.

Backbook pricing remains under pressure on the fixed network with revenues down 1.2% in spite of sizeable price rises and footprint expansion—upcoming OTS may exacerbate this issue.

VMO2 has thus far only countered the downside of the UK’s fibre revolution. A new approach to branding and expansion of its addressable market are upside opportunities—with the ultimate potential to even deliver improvements on its previous position.

BT continued to perform well financially in Q2, with revenue and EBITDA growth remaining robust, and full year cashflow guidance nudged up.

ARPU growth remained robust across fixed, mobile and Openreach, but subscriber growth was weaker, especially in mobile and Openreach, and this will become more of a concern if it persists.

Maintaining growth across retail divisions will be a challenge as the price rise effect wanes, especially in weak economic conditions, and while Openreach’s FTTP roll-out is going well, full success is still not assured.

Project Gigabit, the process of awarding subsidies to cover the hardest-to-reach 10-15% of the UK with gigabit broadband, is well underway, with altnets having been awarded all of the contracts won so far, although these are only 5-10% of the prospective total.

While wholesale provision is mandatory under the contracts, logic and experience suggests that this option may prove impractical, leaving the national ISPs (such as BT, Sky and TalkTalk) at risk of losing up to 15% of the market, and consumers being denied hard-won choice.

Openreach would be well advised to build its own network in these areas using the ducts and poles of the subsidy winners (also mandated), to protect the prospects of its ISP customers and maintain consumer choice.

A cooler consumer market sees Sky now facing the same pressures as its SVOD competitors, with a loss of pay-TV subscribers in the UK.

However, Sky is performing better in telecoms in both the UK and Italy. These markets are less susceptible to recession with Sky also benefitting from its position as more of a challenger than an incumbent.

Uncertainty continues to loom over both the sale of its German platform and the upcoming allocation of Serie A rights in Italy.

Market revenue growth surged to 2% in Q2, but entirely-and-more driven by price rises, with underlying trends negative across volumes and ARPU.

Broadband volumes in particular turned sharply negative, largely due to a post-lockdown hangover combining with weak economic conditions.

The outlook is bleak: price rise benefits are set to wane and then reverse, and weak volumes will feed through, with economic recovery needed for a return to sustainable growth.
 

While VMO2's fixed price rises this year were always going to be quite tricky, the 1ppt boost to revenue growth was nonetheless disappointing on the back of price rises of 14%.

Both mobile and EBITDA performances were better, but H2 EBITDA growth will need to be considerably stronger to get to guidance levels, which will be all the more challenging with the loss of the Lycamobile MVNO.

With the erosion of VMO2's differentiators of split contracts and broadband speeds, growth at VMO2 will require addressing new parts of the market—both geographically and across the customer range.

BT got its financial year off to a strong start in Q1, with Group revenue and EBITDA growth of 4%/5% both well on track to hit guidance of merely 'growth'.

Price rises across broadband, mobile and Openreach all landed well, driving strong ARPU growth of 5%/9%/10% respectively, but subscriber growth was likely weak, mainly reflecting a tough environment.

Growth is set to wane across the year as consumer price rise boosts start to re-contract out, leaving Openreach as the main growth driver for as long as the economic environment remains challenging.

Vodafone's headline revenue growth of +3.7% is actually a small decline once Rest of World exchange depreciation is accounted for. Europe, however, delivered an improving revenue trend to +0.4%, as signalled at Vodafone's FY results announcement.

The mix and operating trends are less positive, with growth driven by low-margin B2B, and subscriber losses accelerating in German fixed. Investors will be weighing up whether these results are green shoots of a recovery or another false dawn.

Although the company may reach its guided EBITDA on assumed exchange rates, it looks set to fall short in euro terms, which has implications for FCF and dividend cover.