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United Kingdom Telecommunications Report Q1 2011
Management Report
Published: February 2011
Pages: For full details, please email deborahf@cmsinfo.com
Tables: For full details, please email deborahf@cmsinfo.com
From: GBP 331.25 Buy Now!
Research from: Business Monitor International
Sector: Mobile Markets
BMI’s update of the UK Telecommunications Report for Q111 includes an analysis of market trends and data using the latest data released by fixed-line and broadband providers, mobile operators and the telecoms regulator Ofcom. It also contains our updated forecasts for the fixed, mobile and broadband sectors through to the end of 2015. The mobile market is expected to expand, but will do so at a much slower rate as it approaches saturation. At this stage of market development, changing competitive dynamics and new patterns of revenue generation are becoming increasingly significant relative to subscription growth. The contraction in the fixed-line market will also continue at a slower rate as operators increase bundled services.
Vodafone, O2 and Everything Everywhere reported rising ARPU for Q310. While the rise in ARPU is relatively modest at about GBP0.5 per month, its significance stems from the reversal of a long-term trend of falling ARPU since Q308. ARPU remains some way off its peak in Q307. However, it is significant that the increase has been driven by growth in data revenues. Vodafone’s data revenues have risen from GBP89mn in Q307 to GBP184mn during Q310. This corresponds to an average of 17.2% q-oq growth over 3 years, outpacing messaging and voice revenue growth, although from a lower base. While data revenue growth has been less pronounced for the other operators BMI notes it made a significant contribution to respective improvements in ARPU. We expect growth in data revenues to continue as Everything Everywhere reported 64% of contract phones sold in Q310 were smartphones, compared to 42% Q409, and projections are that this will increase. Ofcom reports similar figures for the whole market comparing Q209 and Q210.
Our report this quarter contains the second consolidated operational and financial results of Everything Everywhere, the new joint venture company of running the merged operations of T-Mobile UK and Orange UK. The new company is now the largest mobile operator in the UK with a market share of around 36.5%. Perhaps the most notable point in the figures released by the company is the sharp and unexplained fall in consolidated subscriber figures at the end of June 2010 compared to March 2010. This led to a significant contraction of the total subscriber base of the UK mobile market at the end of Q210. Data from all the operators showed that there were 73.824mn subscribers at the end of Q210, down by 7.7% q-o-q due to subscriber losses by Everything Everywhere and Vodafone in the three months to June 2010. However, the UK mobile market experienced subscriber growth in Q310 after declining for two successive quarters, adding 577,000 subscribers, resulting in a total of 74.325mn. Similarly, Q310 also saw the reverse of the trend of declining market operating revenue dating to Q309, with operators reporting a rise in operating revenues to GBP3,198mn.
BT continues to lead in the broadband market although the market is not concentrated with BT as Talk Talk migrated Tiscali subscribers onto its own network. Other alternative providers, including O2 and Orange, have reported strong uptakes of their broadband services. Cable operator Virgin Media and satellite broadcaster BSkyB have also reported strong broadband subscriber growth on their networks. At the end of Q310, BT reported a retail broadband base of 5.32mn and wholesale broadband customer base of 8.013mn. BT claims to be on track with plans to roll out superfast fibre optic broadband to two-thirds of UK households by 2015.
Although the fixed-line sector has been in a state of decline for years now, and is likely to remain so in the short term, we see it experiencing increased activity in the medium-to-long term. One key factor we expect to have an impact on the sector in the long term is the IPTV initiative Youview, formerly Project Canvas. In June 2010, the BBC Trust gave its approval for the project that brings together members from the telecoms and broadcasting industries. Youview was officially unveiled in September 2010 and is expected to launch commercially in early 2011. With BT having received permission to offer triple-play packages, we expect it and Talk Talk to offer bundled packages including fixed-line services.
Vodafone, O2 and Everything Everywhere reported rising ARPU for Q310. While the rise in ARPU is relatively modest at about GBP0.5 per month, its significance stems from the reversal of a long-term trend of falling ARPU since Q308. ARPU remains some way off its peak in Q307. However, it is significant that the increase has been driven by growth in data revenues. Vodafone’s data revenues have risen from GBP89mn in Q307 to GBP184mn during Q310. This corresponds to an average of 17.2% q-oq growth over 3 years, outpacing messaging and voice revenue growth, although from a lower base. While data revenue growth has been less pronounced for the other operators BMI notes it made a significant contribution to respective improvements in ARPU. We expect growth in data revenues to continue as Everything Everywhere reported 64% of contract phones sold in Q310 were smartphones, compared to 42% Q409, and projections are that this will increase. Ofcom reports similar figures for the whole market comparing Q209 and Q210.
Our report this quarter contains the second consolidated operational and financial results of Everything Everywhere, the new joint venture company of running the merged operations of T-Mobile UK and Orange UK. The new company is now the largest mobile operator in the UK with a market share of around 36.5%. Perhaps the most notable point in the figures released by the company is the sharp and unexplained fall in consolidated subscriber figures at the end of June 2010 compared to March 2010. This led to a significant contraction of the total subscriber base of the UK mobile market at the end of Q210. Data from all the operators showed that there were 73.824mn subscribers at the end of Q210, down by 7.7% q-o-q due to subscriber losses by Everything Everywhere and Vodafone in the three months to June 2010. However, the UK mobile market experienced subscriber growth in Q310 after declining for two successive quarters, adding 577,000 subscribers, resulting in a total of 74.325mn. Similarly, Q310 also saw the reverse of the trend of declining market operating revenue dating to Q309, with operators reporting a rise in operating revenues to GBP3,198mn.
BT continues to lead in the broadband market although the market is not concentrated with BT as Talk Talk migrated Tiscali subscribers onto its own network. Other alternative providers, including O2 and Orange, have reported strong uptakes of their broadband services. Cable operator Virgin Media and satellite broadcaster BSkyB have also reported strong broadband subscriber growth on their networks. At the end of Q310, BT reported a retail broadband base of 5.32mn and wholesale broadband customer base of 8.013mn. BT claims to be on track with plans to roll out superfast fibre optic broadband to two-thirds of UK households by 2015.
Although the fixed-line sector has been in a state of decline for years now, and is likely to remain so in the short term, we see it experiencing increased activity in the medium-to-long term. One key factor we expect to have an impact on the sector in the long term is the IPTV initiative Youview, formerly Project Canvas. In June 2010, the BBC Trust gave its approval for the project that brings together members from the telecoms and broadcasting industries. Youview was officially unveiled in September 2010 and is expected to launch commercially in early 2011. With BT having received permission to offer triple-play packages, we expect it and Talk Talk to offer bundled packages including fixed-line services.