This week we have analyzed in our weekly newsletter eKISSCOPIO (only for Telefónica’s employees) one of the most important markets for our company, the British telecommunications market. The key 3 UK operators are Everything Everywhere (FTE/DTE JV), O2 (Telefonica) and Vodafone (Vodafone). 3Uk is the fourth UK mobile operator. The mobile market is more advanced than many European markets in the shift to data from legacy voice and also has high Smartphone adoption. The UK mobile market is competitive but has shown signs of rational behaviour.
For example there has been effective network consolidation from 5 networks to two (MBNL and VOD/TEF), Orange and T-Mobile have merged to become Everything Everywhere and wholesale pricing is rational. The fixed line market is showing increased competition in pay TV (Launch of BT Sports) but the market continues to put through fixed line telephony price increases and is relatively rational. UK pay TV should be a beneficiary of improving UK macro.
Macquarie Research believes Everything Everywhere (EE) is best placed for success as 4G becomes mass market in the UK. In our assessment of the drivers of 4G success EE is the clear leader; EE has 1m 4G subs (as peers are just launching), 4G brand recognition, a speed advantage to UK peers, coverage advantage (60% UK pop), a pricing advantage and spectrum advantage (holds 39% of all UK spectrum with indefinite licences on 45Mhz paired and 20 years outstanding on another 40Mhz paired).
Enders Analysis says that UK mobile market revenue growth improved in Q2, rising to -3.6% from -5.0% in the previous quarter, but they see this as driven entirely by an easing in the regulated MTR impact, with underlying growth actually dropping. O2’s revenue growth has continued to improve, Vodafone and EE’s revenue growth both improved roughly in line with the market, and H3G’s growth declined but remained much above the other three.
As for the UK residential market, Enders indicates that communications revenue growth was again strong in Q2 2013 at 4% supported by strong unit volume growth (despite seasonal factors in the quarter) and firming ARPU, helped by firm pricing and high speed broadband take up.
For more information on the subject, (only for Telefónica’s employees), you can access the Telefónica’s knowledge center, eKISS, by clicking HERE.