Virgin Media to make COVID-19 retail closures permanent

Virgin Media has made the decision to remove itself from the high street, permanently closing its 53 retail stores which have been shut during the COVID-19 lockdown period.

Trends have been shifting away from in-store purchases for years, and it appears the pendulum has swung far enough for Virgin Media. None of its 53 retail locations will be reopened following the period of lockdown, with the 341 employees all being offered alternative roles in the business.

“We are focused on delivering the service customers want, in the ways they want it and at a time and a place that suits them,” said Rob Orr, Executive Director for Sales at Virgin Media.

“By creating new jobs in our most popular care and sales channels, we will be better able to provide our customers with the top service and support they rightly expect while retaining our talented workforce.”

Virgin Media has said at least 300 new customer service roles would be created to compensate for lost in-store roles, the majority of which will be work-from-home roles. The majority of sales already take place over the phone or via other digital channels.

Is there any need for a high-street presence for the telcos nowadays?

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Virgin Media is the first company to make such an announcement, but we suspect there will be others. We are not necessarily limiting our assumption to the telecoms and technology industries, but this lockdown has shown that operations can continue with physical shops or offices, therefore digital transformation programmes might be encouraged.

Looking specifically at the telco space, Vodafone is currently working on a phased reopening plan for post-lockdown, and although it cannot guarantee it will be able to reopen every location, that is the plan. BT will also implement a phased reopening strategy, opening as many locations as Government guidance will allow for.

At the time of writing, O2 and Three had not responded to emails from

There might of course be accountants and strategists who would want to close down physical sales channels, digital is much more profitable after all, but this is unlikely to be the case for mobile network operators.

As many customers would be interested in seeing and holding a smartphone before signing a £1000 cheque, a retail presence would be desirable. Closing down these shops might encourage customers to look at devices elsewhere, which might mean losing a postpaid customer. It is a delicate balance, but perhaps a necessary cost, at least for the moment.

Virgin Media is in a different position; how many people want to inspect a router prior to buying a broadband package. It might sound like a negative for the business, but realistically it probably is an unnecessary expense. COVID-19 was probably a contributor to the decision to permanently closing the high street present, but we suspect executives have been discussing this for some time.

Nokia scores a new PON deal with Openreach

Finnish kit vendor Nokia received a boost to its fixed line business by securing a bunch of fibre work from UK network wholesaler Openreach.

Openreach is the semi-autonomous bit of BT that manages its wholesale fixed line network. As a consequence it is the company most responsible for rolling out fibre to the home across the UK, which means it needs lots of optical kit. Much of the announcement focuses on what a great idea fibre is, what with it being much faster than copper and all that, and how good for the country having more of it is.

They do eventually get to the point, however, noting that Nokia’s contribution to the Openreach fibre rollout, which is aiming to reach 4.5 million premises by the end of March 2021, will focus on deploying GPON and XGS-PON access technologies. This will futureproof the network by giving it the ability to deliver up to 10Gb/s symmetrical broadband speeds in the future, as well as giving it the latest virtualization bells and whistles.

“We’re accelerating our full fibre build to deliver an ultrafast, ultra-reliable and futureproof broadband network throughout the UK,” said Clive Selley, CEO of Openreach. “This new digital platform will help our economy to bounce back more quickly from the COVID-19 pandemic – enabling people to continue work from home, and millions of businesses to operate seamlessly online for decades to come.

“Right now, we’re making the new network available to around 32,000 homes and businesses every week, and Nokia’s innovative solutions are helping us to build it better, broader and faster. Our partnership with Nokia will be critical in helping us to upgrade the nation and hit our target of reaching four and a half million premises by the end of March 2021.”

“Ensuring everybody has access to broadband services is critical, especially during unprecedented times like these where it has become the lifeline to millions working, handling healthcare and learning from home,” said Sandra Motley, President of Fixed Networks at Nokia. “Our fiber solutions will help Openreach bring enhanced ultra-broadband services to millions of new customers across the UK today while our 10G PON technology will help to futureproof their network against whatever may come next.”

All this general talk about the virtues of fibre creates the impression that the deal itself isn’t amazingly significant. On the other hand it at least confirms Nokia’s role in the UK’s fibre network and permits the two companies involved to do a spot of connectivity virtue signalling, so fair enough.

Sunrise and Salt supply strategic support to scupper Swisscom

Sibilant Swiss service providers Sunrise and Salt are forming a strategic partnership for the rollout of fibre across the country.

It will take the form of a joint venture called Swiss Open Fiber, in which they will have an equal shareholding and may get equity partners involved too. The aim is to drop CHF 3 billion on fibering-up 1.5 million Swiss homes (chalets?) over the next seven years. While Sunrise and Iliad-owned Salt will be the ‘anchor tenants’ other retail operators can lease the lines too, if they fancy it.

“We are excited to embark on this joint venture which will accelerate ultrafast broadband connectivity and significantly improve fiber penetration in Switzerland relative to other European countries,” said André Krause, CEO of Sunrise. “This platform is open and transparent to the market and we are extremely happy to have secured Marc Furrer, the most distinguished expert in the domestic market, to chair Swiss Open Fiber.”

“In 2008 we initiated the round-table, with which we achieved FTTH-deployment to around one third of the Swiss population,” said Furrer. “Now we want that the rest of Switzerland can benefit from high-quality FTTH-products, which are essential for home-office, home-schooling and home entertainment. The planned Joint Venture will bring this high-speed connectivity to most of the remaining market while ensuring infrastructure competition.”

“This project is unique of its kind, leveraging the capabilities and reach of two strong Swiss operators to create a nationwide infrastructure,” said Pascal Grieder, CEO of Salt. “Growing importance of flexible and virtual working and learning models will continue to drive the need for high-performance broadband services across Swiss households, and our initiative will facilitate such services at attractive prices. We have an ambitious roll-out plan and encourage municipalities and utilities looking into FTTH deployment to reach out to us. We are open for business.”

This move gives the two companies a better chance of competing with Swisscom, which is the dominant ISP in the country. For that reason there should be no resistance from Swiss competition authorities. On top of that is also creates more competition in the leased market and gives private equity a chance to get involves, so this looks like good news for everyone except Swisscom.

UK broadband networks are standing up to coronavirus pressures – Ofcom

UK telecoms regulator Ofcom has suggested while there has been a very minor impact to broadband speeds during the COVID-19 pandemic, it isn’t enough for anyone to be concerned.

In the UK Home Broadband Performance report, Ofcom noted average download and upload speeds fell by 2% and 1% respectively, and latency increased by 2% when comparing pre- and post-lockdown performance. The surge has had a statistical impact, however a 2% decrease is download speeds is highly unlikely to have any material impact on experience.

“Broadband in the UK has really been put to the test by the pandemic, so it’s encouraging that speeds have largely held up,” said Yih-Choung Teh, Ofcom’s Group Director for Strategy and Research.

“This has helped people to keep working, learning and staying connected with friends and family.”

This is of course not a report designed to give confidence to the UK in light of the COVID-19 pandemic, it is supposed to be a periodic measure of how broadband infrastructure is progressing across the country. But the publication of performance levels across the country is a very useful by-product.

Looking at the wider trends across the UK, average speeds are on the up. There might be some incremental gains from upgrades which are being done on networks, but a more likely explanation is more people subscribing to superfast and ultrafast broadband services. This is a trend which seems to be extended to the countryside also, potentially eroding the digital divide.

From a full-fibre perspective, trends are heading in the right direction from an infrastructure perspective, but it is not necessarily translating through to commercial gains. Ofcom is now suggesting 12% of homes now have fibre services available, though a much lower number of customers have actually upgraded.

According to the latest statistics from the Fibre to the Home Council Europe, only 18% of the households who are able to subscribe to full-fibre broadband do so, meaning 2.8% of UK households have a fibre broadband package. It does appear UK telcos are a lot better and laying fibre than they are at selling it.

Three UK turns to Virgin for 5G backhaul

Virgin Media Business has signed a deal with Three UK to provide dark fibre backhaul for a bunch of its 5G cell sites.

The deal covers over 3,000 existing and future cell sites around the UK, presumably any that Virgin has fibre to. On top of that Virgin has committed to build new fibre connections to a bunch of urban hotspot locations. This represents a good win for Virgin, building on the backhaul work it got from Vodafone as part of the MVNO deal the two of them signed back in November.

“We’re building the high capacity fibre backbone that will link mobile phone masts and cell sites across the country and power the UK’s 5G future,” said Peter Kelly, MD of Virgin Media Business. “With a powerful network and skilled engineers already in place, our infrastructure will help mobile operators to roll out their 5G network at scale. Virgin Media Business is fast becoming the backhaul bastion for 5G rollout.”

Virgin says that even before this deal it accounted for the backhaul and aggregation of around 40% of the UK’s voice and mobile data traffic. Momentum seems to be in its favour and it could end up grabbing a bigger chunk of the 5G business. One reason for this is presumably the desire on the part of other MNOs not to give business to their direct competitor BT in they can possibly avoid it.

According to the FT, Virgin is also chatting to O2 UK about a similar deal, which would give it the full non-BT set. However, the two are also mulling a merger, which would make turn Virgin into a direct competitor of Vodafone and Three too. Existing backhaul deals would presumably be honoured, but if that merger goes ahead smaller providers such as CityFibre may benefit.

In other Three UK news, its CEO Robert Finnegan has published an update on how the company is dealing with the current unique circumstances. Most of it is the standard corporate stuff about how caring and conscientious the company is, but there are some interesting data points concerning the changes in network traffic after the country was locked down in late March.

  • Calls – increase of 8% to 2.5 billion in March.
  • Average call duration increased by 21% to almost 4 mins.
  • Data usage up 12% despite main video providers reducing the quality of their streaming
  • Use of Zoom up 1325% and Facetime up 100%.
  • Calls to prayer lines doubled in the first two weeks of lockdown

Finnegan also mentioned that Three has had over 30 attacks on its mast sites, which seems consistent with what other MNOs are reporting. “There is absolutely no link between 5G and Coronavirus,” he said. “The 5G rollout by all UK MNOs complies with all global standards on health and safety which have been developed since the early 1990s.” That should do it.

Fibre deployments heading in the right direction, sales not so much

New data from the FTTH Council Europe points to promising trends for fibre deployment, but a closer look at the figures suggest demand is not quite as high as some would imagine.

As somewhat of a disclaimer, immediate sales are not necessarily required, fibre-optic broadband infrastructure is not going out of date anytime soon, though return-on-investment (ROI) is a major element factored into CAPEX decisions. As long as the services are sold over the next 30-40 years, ROI can be realised, however the telcos are impatient, short on cash and being asked to spend an eye-watering amount everywhere (fibre deployments and 5G); the sooner the better for ROI.

The table below might seem confusing, but it demonstrates that telcos haven’t quite figured out how to sell fibre broadband solutions to customers.

Country Homes Passed (FTTH/B) Take-up Total Subscribers
UK 15.1% 18.2% 2.8%
France 57.1% 44.8% 25.6%
Germany 10% 32.8% 3.3%
Spain 85.6% 63.4% 54.3%
Iceland 96.7% 68.2% 65.9%
Italy 30.6% 13.5% 4.1%

The ‘Homes Passed’ column is the percentage of households within that country who are able to subscribe to fibre broadband. The ‘Take-up’ column shows how many who are able to purchase fibre actually do. The final column is the percentage of households across the country who have fibre connectivity. The remainder will either be on copper products or perhaps a FWA solution.

What is worth noting is that while it would be unfair to assume a 100% ‘Take-up’ rate, the fact that the ratios are very slow demonstrate there is perhaps not as much demand as some would assume. This could be explained by three points:

  • Fibre connectivity is being priced too high
  • There are not enough usecases/applications to justify upgrading to fibre
  • Misleading advertising is breaking trust and dampening demand

There will of course be other factors in-play impacting the adopting of fibre broadband services, but these are the three which we feel as the most relevant for the moment.

As mentioned above, immediate demand is not a necessity for fibre services, as there is plenty of time to demonstrate ROI. Adtran Chief Technology Officer Ronan Kelly highlighted to that fibre infrastructure has a guaranteed product lifecycle of at least 40 years, though we do not exactly know how long it actually is. The first deployments have not gotten to this point yet, so it might well be longer depending on degradation.

Another point which Kelly made was the dangers of comparing nations without taking into account the differences and nuances. For example, smaller and less geographical diverse countries will be easier to deploy fibre connectivity, while nations like Spain have a higher percentage of citizens living in multi-dwelling units (MDUs), again making the task of deploying fibre infrastructure to higher percentage of the population simpler.

Overall, the trends are heading in the right direction. Government policy and political rhetoric are adding momentum to the fibre rollout movement, while investors are mobilising behind a wide range of telcos to add more cash. Consumer demand for fibre services will be a contributing factor, but the demand creating by 5G backhaul also makes fibre investments more attractive nowadays.

Trends are coming together very nicely, and now the telcos just need to figure out how to sell these fibre services properly.

As mentioned before, due to the lifetime of fibre-optic products, the pressure to upgrade customers from copper to fibre is lessened, but considering the financial strain some of Europe’s telcos are facing, increased ARPU and ROI for fibre deployments would certainly be a requirement.

Proximus cuts dividend to fund #inspire2022 strategy

Belgian telco Proximus unveiled its four-pillar transformation strategy at its Capital Markets Day, which will partly be funded by a 20% cut to dividend payments.

The four-point plan will focus on accelerating connectivity products and services, digital transformation initiatives to improve Net Promoter Score (NPS), achieving profitable growth by 2022 and embedding sustainability and digital inclusion throughout the organisation. The plan is ambitious, and to meet the financials promises to investors, the 5G and enterprise revenue streams will have to deliver.

“The experience of the Covid-19 pandemic we are going through, reinforces our belief that Proximus is a key component of a prosperous digital Belgium,” said CEO Guillaume Boutin.

“Especially in these unseen times, we are aware of our responsibility towards our employees, customers and the Belgian society at large to offer access to high-quality networks and delightful services and experiences, every day, without failing.

“In the next couple of years, we will massively invest to roll out the next generation of networks at an industrial pace, structurally transform our operating model and accelerate the pace of customer innovation. This strategy will lead to increased customer satisfaction, engaged employees and partners, as well as a sound financial trajectory towards growth.”

Although investors will be encouraged by the ambition of the team, some might not be completed satisfied with the way it will be paid for. Alongside an increase in debt and divestment in up-to €700 million worth of assets, shareholders will also have to swallow a 20% cut in dividend payments.

Over 2020, 2021 and 2022, Proximus will offer an annual gross dividend of €1.20 per share, down from €1.50 which has been consistent since 2014. Prior to that it was up to €2.49, though these were the days prior to the OTT invasion and competition forcing a race to the bottom on pricing.

The first pillar for the strategy will focus on the networks. Proximus aims to connect 2.4 million homes to fibre by 2025 and will also be launching a commercial 5G service tomorrow (April 1, 2020) priced at €49.99 for unlimited data. A new Network Business Unit will also be created which will focus on the wholesale ecosystem.

The second pillar is focused on digital transformation, with the team hoping to yield an average yearly net indirect OPEX reduction of between 1% to 2% from 2020 to 2022. The hope is this will enable Proximus to operate like a ‘digital native’ company, removing all legacy IT systems by 2025, which should have an impact on customer retention and experience.

The third pillar is all about developing ecosystems and partnerships. The team is hoping to improve the commercial prospects by leaning on the expertise of the internet giants. A partnership with Microsoft, to embed Azure Edge computing functionalities directly into the core network, is an example of these tie-ups.

Finally, the fourth pillar will address how Proximus can embed sustainability and digital inclusion into the DNA of the organisation.

Every telco is scrapping and scraping to ensure operations are up-to-scratch to meet the demands of the digital economy, but it remains to be seen how satisfied shareholders will be with the plan considering it will be shaving down annual dividend payments.

CityFibre completes £200mn FibreNation acquisition

With TalkTalk shareholders approving the sale of FibreNation to CityFibre for £200 million, the wholesale infrastructure challenger has increased its rollout target to 8 million premises.

With an existing FibreNation network in York, construction projects underway in Harrogate and Dewsbury, as well as plans slated for Bolton, CityFibre has now set its sights on 62 towns and cities outside of London for fibre. The rollout of services to 8 million premises will eventually span to 100 towns and cities, as CityFibre continues its mission to be a scaled and nationwide competitor to Openreach in the wholesale segment.

“In the face of the rapid spread of the Coronavirus and its unprecedented impact on the UK’s society and economy, we believe that the need for world-class digital infrastructure has never been greater,” said CityFibre CEO Greg Mesch.

“Completing our acquisition of FibreNation marks an acceleration in our ability to deploy the critical future-proof digital infrastructure our country needs. By significantly expanding our rollout ambition to up to 8 million premises, CityFibre is helping to answer the call for a full fibre Britain.”

What this means for TalkTalk remains to be seen, though it appears its mission to challenge the ISP market by both owning the infrastructure and the relationship with the customer is drawing to a close. Sceptics might suggest this transaction is a sign of a struggling business, as a result of the lower-cost fibre services and the vast expense of deploying full-fibre networks, weighing heavily on the spreadsheets.

“The sale of FibreNation to CityFibre, in combination with a competitive wholesale agreement, enables us to continue our strategy to accelerate TalkTalk’s fibre growth for our residential and business customers, thereby delivering a superior customer experience at an affordable price,” said TalkTalk CEO Tristia Harrison.

This is of course another step forward for CityFibre. This is a company which is cash rich, thanks to it being acquired by a Goldman Sachs owned fund, allowing for aggressive construction of full-fibre networks, though acquisition is in the heritage of this business. Let’s not forget, CityFibre exists thanks to the acquisition and integration of distressed fibre businesses (H2O Networks, Fibrecity Holdings and Opencity Media, for example) in 2011.

On the construction front, CityFibre has been given the greenlight to continue its ambitious rollout from the UK Government. Prime Minister Boris Johnson has paid particular attention to the progress being made in the broadband segment, and recently requested deployment should continue during the outbreak as it will allow both society and the economy to function and to enable rapid economic recovery when the crisis is over.

Italian networks having a bit of a wobble under the strain

Although Italian networks seem to be holding-up under the increased traffic, data from Opensignal and MedUX suggests there has been material levels of service degradation.

What is worth noting it that while performance is seemingly suffering, there is not a threat of a full internet black-out in the impacted regions. Customers might just have to be a bit sympathetic to the circumstances and wait a bit longer.

Starting with the mobile networks, Opensignal measured the performance of the networks over a six-week period, starting at the beginning of February and finishing towards mid-March. Over the first five weeks, network performance was consistent, though from March 10 onwards, the beginning of the lockdown in the country, there was a very notable decline in 4G download speeds.

Although these numbers are still at speeds which might be tolerable, the longer the lockdown continues, the more people will be working from home, the greater the strain will be. This is far from a threat of the networks shutting down due to increased traffic, but it is a degradation which people will have to be aware of.

At the time of writing, the Italian Government has warned that while the COVID-19 impact was stabilising in the Northern regions, there were signs of increased effects in the Southern regions. Should there be a significant flare-up in the South, it would suggest the lockdown would continue across the country, instead of drawing to the end as some had been hoping.

Looking at fixed broadband networks, MedUX has done some analysis on the performance of Telecom Italia, Fastweb, Vodafone and Wind. Once again, the networks are holding pretty steadily, but performance has been impacted.

While there has been an impact on networks throughout the country, Piemonte, Lombardia, Toscana, Emilia-Romagna, Campania, and Sicilia have had a more material impact.

During the week beginning March 9, MedUX notes there has been up to a 50% increase in latency for FTTH during morning hours and up to 150% increase during afternoon hours. For FTTH and VDSL services, there was also a 15% decrease in compliance with contracted download speeds. The team also noted a 15% increase in web loading time and a 10–15% increase in the start-up and loading time of videos during the afternoon on the worst effected days.

Although these statistics are a slight dampener, the networks are still continuing to perform their duties. It might not be the lightening speeds which are promised in adverts, but these are extraordinary times where consumers might have to offer some flexibility to the telcos.