Blog, UK

Sky: New products fence off telco and OTT – 1.5M pay not to stream


You have to admire the way Sky continues to grow customer base and revenue in the UK and Ireland. Most of us thought that satellite TV belonged in the past century, but Sky has through constant development of their products and offerings, by e.g. integrating broadband, multi-screen and streaming, revitalised and modernised the customer experience.

Sky sub revenue dev 2012 2014

Have in mind that Sky in this period was challenged by BT who in August 2013 launched BT Sport – their own sports channel with exclusive rights to football games which previously were exclusive to Sky. A channel which BT provides for free to their broadband customers.

Sky is of course at the same time challenged by Netflix and other streaming services. On this part, it’s interesting to note how successful Sky Go Extra is. The “Extra” allows customers to download content to portable devices like tablets and bring it with them – to watch offline. This is a premium service (5 GBP extra per month) whereas the streaming-only variant (Sky Go) is without any extra charge.

This is an indication that people now are ready to pay not to stream. Access to Wi-Fi is unpredictable. Mobile data allowances are typically low in the UK and 4G network coverage is not yet universal. Are we getting tired of streaming?

Blog, Netflix

Trivia: Is Netflix the root cause also to mobile data usage?

Netflix MBoU corr

 

This is a correlation graph that simply had to be done 🙂 We know that Netflix is the single biggest driver of fixed Internet bandwidth in its original market, USA, with up to 40% of downstream traffic at peak hours.

In just two years, Netflix built as large subscription bases as the largest pay-TV providers in some of the European markets launched, so it’s likely that Netflix has a major impact on fixed Internet traffic also in Europe.

One of the benefits with Netflix is portability: It runs on almost any device you might have. Many of these devices – smartphones and tablets e.g. – are often connected over mobile networks. Have the Netflix viewing habits gone mobile beyond Wi-Fi? Can we observe a Netflix effect on the mobile data usage?

The graph correlates the average mobile data usage per any SIM with the number of years Netflix has been in service per country. It’s not perfect, but let’s not dismiss it as just trivia.

Netflix has competitors. The entry of Netflix into new country markets has often paved the way for others (like HBO) when consumers have come to adopt a video streaming habit. Plus that Netflix in most markets have forced incumbent cablecos and satellite providers like Sky to launch portable streaming platforms to complement the traditional viewing experience at home.

This month, Netflix launches in four additional European markets: Germany, France, Austria and Belgium. Austria has high mobile data usage already, but let’s see if the other three laggard markets are elevated.

Analysis, equipment sales

Early upgrade plans: Sweet now. Turns sour?

early upgrade plans analysis 5 2014The equipment instalment plan has proven capable of substituting the subsidy model in mobile – even in traditional subsidy markets like the USA and the UK.

While the EIP opens for more competitive service pricing, it also opens for flexibility when it comes to equipment upgrades: Pay remaining instalments – and upgrade. Some operators go further, though:

Realising that customers aren’t particularly interested in obtaining the ownership of (aged) equipment, pioneering operators introduced a variant of the EIP – based on an early return of equipment: The early upgrade plan.

It’s a recurring upgrade promise – often without any additional fee. Take-up has been great, but it’s only now the pioneering operators need to start delivering on this promise.

Download analysis: tefficient industry analysis 5 2014 early upgrade plans 19 Sep

4G LTE, Blog

“Build it, and they will come” – 4G LTE in Europe

In four of the largest European markets – Germany, France, UK and Spain – we see three out of four mobile operators reporting their 4G LTE rollout status. Most of them also report (or indicate) their 4G LTE customer base.

After much hesitation, the 4G LTE rollout eventually started also in Europe. And you know what? Customers are coming. If they are covered, that is.

4G LTE stats DE FR Q2 2014

The country pictures show the overall market leader at the top. Telekom has the largest 4G LTE network in Germany and had 11% of its customer base on 4G LTE by the end of June.

In France, Bouygues Telecom shows how a small No 3 operator through aggressive focus on 4G LTE rollout can challenge the 2.5x larger Orange on the total 4G LTE customer base. 16% adoption is among the highest in Europe.

SFR – in the process of being acquired by Numericable – didn’t report their 4G LTE figures in Q2. Arcep, the French telecom regulator, however critisised SFR in June for their 4G LTE coverage claims, saying their population coverage was just 30%. [Bouygues and Orange claims were OK whereas also Free was critisised. Their population coverage was said to be 24%].

4G LTE stats UK Spain Q2 2014

UK is behind on 4G LTE rollout, partly because of late licensing. Market leader EE was given a head start when it was allowed to refarm 1800 MHz spectrum and use it for 4G LTE.

In Spain, market leader Movistar is behind Vodafone and Orange on 4G LTE rollout. Telefónica doesn’t report the number of 4G LTE customers in Movistar which might be an indication of that it’s low.

Neither E-plus, Free, ‘3’ nor Yoigo report figures on 4G LTE. We see this an indication of them being behind on rollout and adoption. E-plus is now in the process of merging with O2.

Blog, equipment sales

Yoigo lost 53% of equipment sales as Telefónica reinstated handset subsidy

The economic crisis put significant pressure on the Spanish telcos. Telefónica (Movistar) and Vodafone each lost around 4 millions SIMs in the past two and a half years. Orange and Yoigo have fared much better. Yoigo, with its no-frills low cost profile, grew subscriber base from 3 to 4 million at the same time. But suddenly – in Q1 2014 – Yoigo’s total revenue fell 26% quarter-on-quarter.

In TeliaSonera’s new reporting format – implemented Q2 2014 – we could see why total revenue fell: Equipment revenue declined 53% quarter-to-quarter. We could also see that in Q4 2013, 40% of Yoigo’s total revenue stemmed from equipment sales. By any standard, that is high.

Spain mobile equipment revenue dev 2012 2014

Why was it so high? In March 2012, Telefónica decided to abandon handset subsidisation altogether. It had an immediate negative impact on Telefónica’s equipment revenue: From Q2 to Q3 2012, equipment revenue fell from 300 to 150 MEUR (see graph). When Telefónica didn’t any longer discount customer equipment, customers bought it elsewhere. Vodafone followed the market leader and stopped subsidisation as well. Orange did not – and had a few easy quarters during which it churned over customers from Telefónica and Vodafone. Yoigo’s differentiation was instead its low service prices. Many cost-aware mobile users went to Yoigo for this reason, even if it meant that they had to pay the full price of a handset. Yoigo’s service revenue was low, but it was compensated by an increasing revenue from equipment sales…

…until Telefónica decided that they saved enough. The inserted frame in the graph shows that Telefónica grew handset sales 40% in Q1 2014 and 61% in Q2. At the same time, Telefónica’s margin fell. Equipment revenue expanded, but not in line with the number of handsets sold. All this together signal handset subsidisation. Telefónica: back in the game. Yoigo: equipment sales halfed.

TeliaSonera was for a long time open about their interest in selling Yoigo. With the improved results 2012 and 2013, that message changed. But after the Q1 2014 surprise, TeliaSonera put Yoigo back on the transfer list. All of Yoigo’s revenue expansion 2012-2013 was based on hardware sales. A weak foundation when the market leader changes direction.

Blog, equipment sales, Shared plans

Why “grandfathering” is a four letter word inside Verizon and AT&T

Verizon It’s been more than two years since the June 2012 launch of Verizon’s shared data plan which took out all other Verizon postpaid plans at one go. From this point on, new Verizon customers (or prolonging customers) had to take the Share Everything plan (later renamed More Everything). The initiative was Verizon’s final attempt to get rid of unlimited data and make usage-based data monetisation a reality.

Since the standard US postpaid contract is running for 24 months, we should after two years consequently see a 100% adoption of Share/More Everything within Verizon’s postpaid accounts? No, it is 55%.

at&t logoVerizon’s primary competitor, AT&T, launched their shared data plan, Mobile Share, in August 2012. Unlike Verizon, they kept other postpaid plans available to begin with. More than one year later, in October 2013, Mobile Share was eventually made the only plan. AT&T reports that 56% of their postpaid SIMs are on Mobile Share. Still not 100%.

In its Q2 reporting of yesterday, AT&T says that 80% of postpaid smartphone subscribers are on usage-based data plans. Leaving 20% of smartphone subscribers (plus a bunch of data-only subscribers – no reporting for that segment) that still are unlimited.

Verizon and AT&T’s principal method to convince customers to let go of their unlimited plans has been equipment subsidy: You wouldn’t get any unless you go for the new plans.

But T-Mobile’s disruption of the subsidy model – later embraced by AT&T and (somewhat reluctantly) implemented by Verizon – has led to US customers shifting away from subsidy, instead going for installment plans or BYOD. And with these models, customers can easier hold onto their grandfathered unlimited data plans.

Benchmarks, Network sharing JVs, References

Network sharing JV benchmark 2014

Network sharing benchmarkBenchmarks, 2014

For the second consecutive year: Comprehensive business benchmark including a total of 159 KPIs covering revenue, OPEX, CAPEX, productivity, traffic load and network quality – with a peer group solely consisting of network sharing joint ventures.

Due to pre-agreed confidentiality requirements, the identities of participating JVs are fully anonymous.

Once again, the results demonstrate the value of the JV-specfic benchmark approach: Network sharing JVs have throughfocus on core activities, higher freedom in selecting operation methods and attention to detail established cost and productivity levels that are elevated beyond the obvious sharing effect. Also network quality is very high even though traffic load increases when sharing. To improve further, JVs need to compare with their likes – other JVs – and not to regular mobile operators. The benchmark will run again in March 2015.

Blog, Germany

EU’s largest mobile operator born. But has EplusO2 passed best before date?

45 million SIMs: The combined EplusO2 will be the largest mobile operator in Germany and in the European Union. A mobile giant was in practice born today with EU’s approval of Telefónica’s acquisition of E-plus.

But during the more than 11 months of approval, the competitive playground changed:

  • Vodafone acquired Kabel Deutschland and is about to integrate it in order to offer quad-play
  • Telekom developed a new strategy, bringing quad-play to Germany during 2014

Germany revenue dev 2012 2014

Realising that the future battlefield won’t be mobile-only, we should understand how EplusO2 would rank when it comes to integrated revenue. See the graph above.

When we sum up O2 and E-plus (dotted line), we are no longer looking at market leader. EplusO2 will be number 3.

E-plus is (and has always been) mobile-only. O2 has a fixed arm in Germany, but its share of integrated revenue is just about 25% (and much of it relates to wholesale). What’s worse from a quad-play perspective is that O2 discontinued its TV product by the end of 2013. It never gained more than 90 000 customers – nothing in a country with a population of 82 million.

Telefónica might have something up their sleeve, but the question still has to be asked: Has the mobile-only scale logic behind the merger of O2 and E-plus passed best before date?

Blog, equipment sales, SAC and SRC, Sweden

Telenor and ‘3’ sell more equipment than Telia and Tele2 – or?

TeliaSonera started to separate out equipment revenue in their new reporting format. Lovely!

Sweden equipment revenue of mobile revenue ratio 2012 2014

We can now compare the equipment revenue vs. mobile revenue ratio for all Swedish operators (see graph). According to reporting notes, Telenor and ‘3’ realise the full equipment price as equipment revenue and let the equipment subsidy dilute service revenue instead. Telia and Tele2 realise the actual equipment sales price after subsidy as equipment revenue.

Active in the same market, there is likely no material difference between the equipment sales of the operators; the differences between Telenor/’3′ on one side and Telia/Tele2 on the other are rather a consequence of the revenue recognition used.

If so, we can by comparing these two approaches estimate that Swedish operators averagely subsidise around one third of the nominal equipment price. That is how much Telia and Tele2’s lines would have to be raised to match the lines of Telenor and ‘3’.

Measure, compare and improve competitiveness within telecoms