UK consumers bought £123 billionof goods online in 2023, up 63% on 2019 (vs 7% for offline). Online sales of non-store retailers, such as Amazon (and Temu, Shein, Next), reached £60 billion in 2023, of which Amazon—a nascent online advertiser in the UK—accounts for about £43 billion.

The pandemic’s structural boost to the online channels of store retailers—which operate on the open internet, outside online walled gardens—lifted sales to £63 billion in 2023, up a huge 78% on 2019. With more competition for spend in straitened times, they are using advertising more aggressively.

The open internet is also the domain for online-transacted services: the return to in-person experiences drove the biggest ecommerce gains since 2022, as consumers purchased services online worth an estimated £291 billion in 2023 and rising.

VMO2 ended 2023 with strong ARPU and EBITDA growth, meeting its (revised) guidance for the full year, but saw receding subscriber momentum across both fixed and mobile.

2024 will be much tougher across the industry and for VMO2 in particular, with its revenue expected to be flat at best, and waning boosts from price rises and synergies coupled with a series of technical factors shrinking EBITDA.

The company has promised new commercial initiatives in 2024, and thereafter we see strong potential in it maximizing the use of its network and retail arms via breaking the long-standing lock between them, although the formation of NetCo is neither a necessary nor sufficient step for this.

There are various reasons why the mobile virtual network operators (MVNOs) have been adding many more subscribers than the mobile network owners over the past couple of years, including the cost-of-living crisis, and the expansion in their addressable market from the shift to online.

MVNOs' bargaining power to secure favourable rates has also improved sharply, with Lyca Mobile's move to the EE network indicative of their strengthened hand.

While some factors in their favour may wane over time, the prospective Vodafone/Three merger would be a marked positive, with the imperative on the operators to fill at least 25-50% additional capacity.

Germany’s RTL+ streaming platform has been revamped into an 'all-in-one' bundle of content including premium sports, music and audiobooks.

RTL wants to leverage its FTA reach to build an online subscription base large enough to influence the future shape of German TV.

To sustain subscriber growth we argue that RTL will need to release defining content and explore partnerships beyond its current deals with telcos.

Meta's China risk is overstated: the spend from Chinese advertisers is diverse and resilient to everything short of a full-blown trade war. 

Apple (and Tesla) are in the more precarious position of selling directly in-market, and face sharpening domestic competition.

Amazon's exit from selling in China still leaves it exposed: its marketplace strategy is built on Chinese sellers, whose potential routes to market are proliferating with local platforms going global.  

Vodafone’s Q3 results were slightly disappointing following the green shoots of Q2, with growth in Germany slipping back again, albeit some of it already flagged.

It is difficult to imagine the full year results event being a positive catalyst with the likelihood of a dividend cut, a recognition of the hard-currency reality of the financials, and a still challenging outlook for FY 2024/25.

Deal-making is a positive counter with a highly accretive deal still in the offing in Italy, and the prospect of execution in Spain and the UK. Various inorganic deals with 1&1, Microsoft and Accenture will also be helpful, although none of them as valuable as an improvement in the core operations.

BT’s Q3 was robust in financial terms, delivering revenue growth of 3% and EBITDA growth of 1%, both in-line/ahead of analyst expectations.

Strong broadband ARPU and accelerating FTTP performance at Openreach were the highlights, a weakening BT Business and continued Openreach broadband losses were the main concerns.

This year’s guidance should be easily met, next year’s will be trickier given lower price rises due in April, but the long-term plan of a massive cashflow turnaround when the FTTP build ends is still well on-track.

UK law permits PPL to collect royalties on the public performance of recordings, but performers on US recordings are not eligible for distribution, except for digital transmissions, under the principle of material reciprocity. The Government may reverse this principle, with US labels (and their UK subsidiaries) likely to lose out.

The EU Member States are also grappling with the issue. Rethinking reciprocity is more disruptive there than it would be in the UK, because of how the 'artist's share' of royalties has been treated.

Progress has stalled in the US on legislation to provide for sound recording radio broadcast rights, which would be of huge benefit to performers and labels, but is ferociously opposed by broadcasters.

The CMA has announced the launch of its Phase 1 review of the proposed Vodafone/Three merger, with the timeline suggesting a Phase 1 conclusion in late March and a Phase 2 decision around September/October.

The main focus is likely to be whether the merger would lead to a substantial lessening in competition (SLC), with the companies' varied market positioning helpful in this regard.

The merger's prospective 'countervailing factors' are substantial, with an estimated 25-50% increase in sector capacity further strengthening the imperative for the operators to get customers signed up.

Ofcom’s final statement on net neutrality addresses most of our prior concerns, leading to opportunities for UK telcos to effectively address internet congestion, and monetise their network capabilities.

BT is looking to take advantage of its new freedoms with new TV distribution services, which could save network capacity, improve user experience and earn it a share of the content distribution value chain.

We think that there are many other attractive opportunities, but telcos will have to work hard to sell any of them given the need to work together and reverse the bad blood that has developed with many content providers.