VMO2 had another mixed quarter to end a difficult 2024, with revenue growth improving but EBITDA growth falling, and other metrics mixed at best.

The company hopes to put this behind it with guidance for both revenue and EBITDA growth in 2025, a tough ask given current momentum.

Ultimately achieving or exceeding this may depend on altnet pressure receding, which we expect it to do, but perhaps more towards the end of the year than the beginning.

Telcos are increasingly developing APIs to share selected network data with third parties, with the goal of supporting useful end-user applications.

Capabilities are still nascent, but the potential is real. Telcos need to adopt a pragmatic approach that looks to match API capabilities to useful products, and build increasing scale over time.

Security is the largest near-term opportunity for API products, but AI is the key emerging area, with telcos potentially able to play an ambitious role in providing APIs to help manage the growth of autonomous AI agents.

CityFibre has reported positive EBITDA in 2024, albeit at a slim 4% margin, and still needs further scale—and to successfully onboard its new wholesale customer Sky—to drive decent investment returns.

CityFibre’s organic build rate is dropping sharply as it (sensibly) looks set to rely on consolidation to achieve the required scale, with its organic build focused on Project Gigabit areas.

CityFibre remains well-positioned for consolidation, but this may take some time yet, with the altnet sector set to slow organic progress anyway in the interim.

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

The mid-sized UK altnets Zzoomm and FullFibre have agreed to merge, in what looks like an all-share merger of (nearly) equals, both of whom have been struggling to raise finance.

Why did they pick each other rather than the larger CityFibre/Netomnia/nexfibre options? Valuation may have been the key factor, but it has left them still vulnerably low scale with further consolidation necessary.

Much more consolidation is required for the sector to be sustainable in our view, and further financial distress may be required for realistic valuations to emerge.

Starlink has unveiled its plans for its next-generation satellites, boasting dramatically more capacity than was anticipated, as it aims to bring gigabit speeds to its broadband users.

This rapid growth in capacity poses the risk of a more commercially aggressive Starlink. While this will amplify its impact on the broadband market, it remains a somewhat niche consumer proposition but with additional B2B appeal.

Amazon's Kuiper is gearing up to begin launching its own satellites. While its target of introducing service later this year is likely to slip, Kuiper will bring an important peer competitor to Starlink, and will be the first time that Amazon's retail and marketing heft enters the UK connectivity market.

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.

Market revenue dipped into marginal decline in Q3, as both ARPU and sub growth weakened, both partly driven by the continued altnet onslaught
 

Backbook pricing effects will be of marginal help in the short term, but new customer pricing competition is still fierce, and households are still cash-strapped
 

In the longer term, pressure from the altnets should wane substantially as their roll-outs slow and they consolidate towards a wholesale model (or fail)

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