The HTC fall from grace is quite remarkable

In years gone, HTC was one of the most successful and sought-after smartphone brands worldwide, but time has not been kind for the Taiwanese firm as financials for 2018 emerge.

Back in 2012, your correspondent had a One X model HTC and it was a very good phone. Due to a slight malfunction more recently, there was also a couple of months with a second-hand HTC 10. It wasn’t a phone which set the world on fire (although ask Samsung how that went down), but it was a perfectly good device. Unfortunately, it appears the brand is just not doing enough right.

As you can see from the table below, 2018 has not been a kind year as the team brought in revenues of 23.7 billion New Taiwan Dollar (NTD), 61% down on 2017.

Month Revenue Year-on-year comparison
January 3,404 -27.03%
February 2,613 -44.04%
March 2,772 -46.66%
April 2,099 -55.47%
May 2,445 -46.03%
June 2,230 -67.64%
July 1,400 -77.41%
August 1,389 -53.72%
September 1,256 -80.71%
October 1,307 -78.44%
November 1,474 -73.98%
December 1,352 -66.36%
Full year 23,741 -61.78%

All figures in New Taiwan Dollar (millions)

Just as a comparison to previous years, in 2017 HTC brought in revenues of 62.120 billion NTD, 2016 was 78.161 billion NTD and 2015 was 121.684 billion NTD. If you go all the way back to 2012, the team brought in a remarkable 465.795 billion NTD.

Of course, you have to bear in mind the business has offloaded a substantial part of its business to Google for $1.1 billion, most notably c.2000 engineers who were working on the Pixel device anyway and a horde of IP, but HTC is still running as a standalone business. Back in November, Sprint announced it was partnering with Qualcomm and HTC to develop a mobile ‘smart hub’ that will run on 5G next year.

Every now and then it is useful just to look back through the years and remember how different things were. HTC used to be one of the mobile industry’s heavyweights, alas, no more. RIP HTC.

Apple points finger at China for financial woes

It seems the anti-China sentiment is pretty infectious as Apple pins the blame for the company’s shrinking bank account on the misery consumers hiding behind the Great Wall.

For years it seemed Apple was able to defy industry trends. Despite the fact global smartphone shipments were slowing, irrelevant to the fact there was little innovation emerging from the handset segment and in spite of charging a small fortune for the devices, Apple was still able to bleed the iCultists dry. However, now tt appears Apple’s immunity to the plague of normality is starting to wane.

Apple has revised its guidance for the first quarter of 2019, and there’s quite a bit missing. CEO Tim Cook explained the iLeader would only be bringing in roughly $84 billion across the three months which ended December 29, compared to the previous estimated range of $89-93 billion.

And China was of course to blame.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” said Cook. “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

This was not the only reason of course. The launch of the iPhone was too late, putting too much pressure on the channels in the lead up to Christmas. The US dollar was subject to FX swings. Supply could not meet demand. And finally, more people were holding onto their older devices instead of upgrading to new ones. All of these factors combined, plus weak performance in the emerging markets, resulted in a $5-8 billion hole.

It might be easy to blame the external factors here, and they would have almost certainly played a notable role, but perhaps Cook and co should look a bit more inwards to explain the current conundrum; when was the last time Apple did something genuinely innovative?

If you consider what devices are being brought to the market today, there are simply features and gimmicks which are better than what users had before. The age of innovation for the smartphone has temporarily ceased. This has been the case at Apple for some time, though now it appears the brand credit-line has run out. There are still iLifers out there who will upgrade when Cook snaps his fingers, but not as many as there used to be, and it does appear the idea of Apple as a status-symbol in China has died.

Apple has been the master of brand advertising, driving loyalty and asset-bleeding over the years, but this quarter might suggest the power of the Apple brand is beginning to fade due to a lack of innovation and extortionately expensive products. In every segment, Apple of course charges a premium, but it doesn’t necessarily mean the product is actually better. Is the iPhone XS better than the Huawei Mate 20 Pro? Or do the Airpods perform better than Bose? Is the Homepod the best smart speaker out there? Does the product justify the cost? Has the age of holding iLifers to ransom come to an end?

Unfortunately for Apple, at a time when innovation is at a premium a supply-chain expert is in charge of the business. The company might be the smoothest running machine around, but innovation has certainly lacked without Steve Jobs at the top, though the big question is whether the great mind of Jobs could squeeze out any new ideas in these meagre times.

After Cook announced the firm would stop detailing shipment numbers in the financial reports we should have all seen this coming, but what we have learned here is that not even Apple is immune to global trends. It can’t charge more an offer no added values in exchange. Its customers are just as cash conscious as others. New products require innovation to work.

Dell flies through Q3 with 15% revenue growth

Dell Technologies has reported its financials for the third quarter of 2018, with few complaining about15% revenue growth to $22.5 billion.

While the company still has a considerable bill to pay off following the $67 billion acquisition of EMC in 2016, the firm has boasted about paying off approximately $1.3 billion of core debt after three months of positive growth across the group.

“The digital transformation of our world is underway, and we are in the early stages of a massive, technology-led investment cycle,” said Michael Dell, CEO of Dell Technologies. “Dell Technologies was created to meet this opportunity head on for our customers and our investors. You can see the proof in our strong growth, in our powerful innovation and in the depth of our customer relationships.”

With total revenues standing at $22.482 billion, most of the numbers are heading in the right direction. The company is still loss-making, though this has narrowed to $356 million for the last three months and $522 million for 2018 so far, improvements of 13% and 78% respectively compared to the same periods of 2017.

Starting with the Infrastructure Solutions Group, revenue for the third quarter was $8.9 billion, a 19% increase, with the servers and networking delivering its sixth consecutive quarter of double-digit revenue growth. Storage products saw a 6% increase in revenues taking the total up to $3.9 billion.

The Client Solutions Group saw revenues increase by 11% to $10.9 billion, with Dell suggested strong growth in both the commercial and consumer units. Commercial revenue grew 12% to $7.6 billion, and Consumer revenue was up 8% to $3.3 billion, while the firm outperformed the PC industry for total worldwide units.

In the VMWare business unit, revenue for the third quarter was $2.2 billion, up 15%, with operating income of $768 million. This is one area where the Dell management team feel some of the biggest benefits of the EMC acquisition are being felt, with the dreaded ‘synergies’ tag emerging. However, it’s the external AWS partnership which seems to be claiming the majority of the plaudits.

“Overall, I think yesterday’s announcement at re:Invent just reinforced the momentum that we have in the partnership with Amazon,” said Patrick Gelsinger, CEO of VMWare. “And clearly, the VMware Cloud on AWS, we continue to see great customer uptake for that. We reinforce the expansion of that with the Relational Database Service, the RDS announcement that we did at VMworld and yesterday’s Outposts announcement just puts another pillar in that relationship. So now I’d say, we’re on Chapter 3 of the partnership. And overall, we just can see the continued momentum.”

Dell Technologies is not a company which get a huge amount of press inches nowadays, though trends are certainly heading in the right direction here.

Softbank is now more of a VC than a telco group

Back in 2016 when Softbank CEO Masayoshi Son announced plans for the $100 billion Vision Fund it looks like a ludicrous plan, but with such incredible growth perhaps we should ask whether Son has been missing his calling for decades.

Looking at the financials for the first half of 2018, the most interesting story aspect is linked back to the Softbank Vision Fund (SVF) and Delta Fund (DF) investment bodies. Over the first six months, net sales for the Softbank Group came in at roughly $41 billion, with the team collecting an operating income of roughly $12.5 billion. The operating income attributable to the SVF and DF is $5.7 billion, roughly 45%.

45% might sound like a good number, but it becomes even more impressive when you consider how the funds are accelerating. In the first three months of 2018, the funds accounted for approximately 33% of operating income, but this ratio increases to 55% when you look at the second quarter alone. As you can see from the table below, the cash being generated by the funds is quickly racking up.

Q3 2017 Q4 2017 Q1 2018 Q2 2018
Gain on investments for SVF and DF $530 million $860 million 2.18 billion 3.55 billion
Realized gain on investments NA NA NA 1.29 billion
Unrealized gain on valuation of investments $490 million $830 million $2.24 billion $2.27 billion
Interest and dividend from investments $33 million $20 million $12 million $10 million

(Approximate values after currency conversion)

The fund itself, which has come under pressure recently due to involvement from Saudi Arabia, has consistently been consistently questioned by investors, though perhaps monstrous profit is a language which they will be more familiar with. Son has prioritised artificial intelligence in a portfolio which contains investments in Uber, Nvidia, Arm, GM Cruise, Doordash and Compass. The only one which doesn’t really fit into the family is WeWork, a shared office business which would be more comfortable inside a real-estate investment portfolio. That said, few will argue with the results.

Looking at the rest of the business, the story is pretty positive if less glamorous next to these monstrous profits. Total revenues and profits are up in the Softbank telco business, while the net gain on customer subscriptions is up approximately 1.2 million in comparison to the same period of 2017. Churn was also at a healthy 0.93% for the quarter and ARPU is flat. Not a bad return for the period. Sprint in another which is performing surprisingly well. Although subscription numbers are down sequentially, year-on-year Sprint managed to find 520,000 subscriptions from somewhere.

Son’s traditional stomping ground is looking very healthy, though with the acceleration of the VCs you really have to wonder whether the audacious businessman has been in the wrong industry all these years.

Apple shares fall 5% on weak forecast

With Apple pointing the finger at fluctuating currency, poor performance in emerging markets and supply issues, its busiest quarter might not be as busy as investors had hoped.

While CEO Tim Cook has defended the soundness of the supply chain, worries over whether the business can keep up with demand over the final quarter leading into Christmas seem to have spooked investors. Combined with warnings over performance in emerging markets as well as volatile currencies around the world, the team has stated it might miss guidance over the next three months, sending share price down 5% in afterhours trading.

“The emerging markets that we’re seeing pressure in are markets like Turkey, India, Brazil, Russia,” said Cook. “These are markets where currencies have weakened over the recent period. In some cases, that resulted in us raising prices and those markets are not growing the way we would like to see.”

India should be seen as quite a worry for the iChief’s as while the country has been undergoing its own digital revolution over the last 18 months, Apple seem to be missing out on the biggest rewards. With India now being the second-largest smartphone market in the world, but with half the penetration of China, the opportunities are clear. Despite attention from Apple, it’s opening new production facilities and shops across the country, according to data from Canalys it is yet to break into the top-five smartphone brands.

Shipments in India across the most recent quarter dropped by 1%, though Xiaomi grew 31.5% year-on-year to claim the number on spot, at the expense of Samsung, where shipments dropped 1.6%. Vivo, Oppo and Micromax complete the top five, while the ‘others’ saw shipments decrease 34%. The Chinese brands seem to have found the right recipe to appeal to the Indian user, while Apple is still searching for the sweet spot.

“To give you a perspective in of some detail, our business in India in Q4 was flat,” said Cook. “Obviously, we would like to see that be a huge growth. Brazil was down somewhat compared to the previous year. And so I think, or at least the way that I see these, is each one of the emerging markets has a bit of a different story, and I don’t see it as some sort of issue that is common between those for the most part.”

One market where this isn’t the case is China, with the business growing 16% year-on-year. On the money side of things, it certainly is a different story. Total revenues across the business grew to $62 billion, an increase of 20% over the same period in 2017, though guidance is not as positive. Cook expects Apple to pocket between $89 billion and $93 billion over the next three months, though Wall Street has generally been hoping $93 billion would be the bottom end of the guidance.

Looking at the explanation, CFO Luca Maestri has pointed to four areas. Firstly, the team have launched products in reverse order compared to last year. Secondly, with many international currencies depreciating against the US dollar, Maestri anticipates a $2 billion headwind as a result. Thirdly, due to the number of products Apple has pumped into the market, the team is nervous about supply/demand. And finally, at the macroeconomic level in some emerging markets consumer confidence is not as high as it was 12 months ago.

Heading back to the positives, Apple is making more money now than it was a year ago. Despite there being no shipment growth in any of the major product lines (iPhone was flat year-on-year, iPad was down 6% and Mac was down 2%), Apple is still a money making machine. iPhone revenue increased 29% thanks to ridiculously high unit costs, while the services business was up 17%. This is an area which will be of significant interest to investors, as there is only so much Cook and co. can increase the price of iPhones to compensate for flat growth.

As part of the services division, the App Store has been trundling along positively, though with companies like Netflix and Fortnite stating they would be circumnavigating both the App Store and Google Play, all involved will hope this does not encourage others to do the same. Cook pointed out that the largest developer only account for 0.3% of revenues at the App Store, losing one or two won’t matter, but if the trend spreads too far the product might find troubling times ahead.

Overall, Apple is still in an incredibly dominant position, though the inability to capitalise on opportunities in the developing markets should be a slight worry.

Apple Financials

Apple Products

Chip division continues to carry Samsung

Samsung has released its quarterly numbers, and while it is an improvement on the last quarter, the business is seemingly being propped up by a surging semiconductor unit.

Total revenues for the three months stood at roughly $57 billion, a 5.5% increase from the same period in 2017, while operating profit came in at roughly 15.5 billion, a year-on-year increase of 20.9%. The earnings were largely in line with the expectations the management team floated a few weeks back.

“In the third quarter, operating profit reached a new quarterly high for the company driven mainly by the continued strength of the Memory Business,” the team said in a statement. “Total revenue increased YoY and QoQ on the back of strong sales of memory products and OLED panels.

“The Korean won remained weak against the US dollar, resulting in a positive QoQ effect of approximately KRW 800 billion, experienced mainly in the components businesses. However the Korean won rose against major emerging currencies, which weighed slightly on the set businesses.”

Looking at the individual business units, the chip team rose to the top of the rankings once again. Revenues came in at roughly $22 billion for the quarter, with profit standing at $12 billion. Although demand is set to be weaker for the next quarter, the team anticipate slight increases over the next twelve months as demand for public cloud market, and mobile storage expands.

With fingers pointing to increased competition, revenues fell in the IT & Mobile Communications with over smartphone shipments remaining flat due to a decrease in sales of mid- to low-end products. High promotional costs and fluctuating currencies have been blamed for a dip in profitability, with the division only contributing $1.9 billion, despite it claiming pretty much the same revenues as the chip boys.

Another unit worth keeping an eye on will be the Networks unit. While revenues were down year-on-year, owing to decreased investments in 4G and the 5G euphoria yet to kick in, Samsung does seem to be benefiting from the increased scrutiny placed on Huawei in recent months. With many telcos snubbing Huawei, or at least decreasing dependence on the vendor, Samsung could certainly take advantage.

With Huawei and Xiaomi offering a more sustained threat in markets where Samsung traditionally dominates, this might not be the end of the woes for the start-studded division of Samsung.

Microsoft’s resurgence continues, driven by strength in cloud and gaming

Microsoft’s results demonstrated a continued upward trajectory, with the cloud and gaming units standing out with particularly strong performances.

Since wrapping up the last financial year by breaking the $100 billion annual revenue mark three months ago, Microsoft should not have been immune to the recent financial market gloom hanging over the technology sector. But the Q1 results of its financial year 2019 published on Wednesday are telling a different story.

On corporate level, the total revenue was $29.1 billion, up by 19% over the same period last year, and net income reached $8.8 billion, up by 34%, indicating an excellent management of both the top line and bottom line.

“We are off to a great start in fiscal 2019, a result of our innovation and the trust customers are placing in us to power their digital transformation,” said CEO Satya Nadella. “We’re excited to help our customers build the digital capability they need to thrive and grow, with a business model that is fundamentally aligned to their success.”

All the business units have registered growth, but the most impressive part is how balanced the company has become.

Microsoft Financials Q3 2018

More Personal Computing continued to be the largest revenue contributor with $10.7 billion, an increase of 15%; this is a story of two extremes. Standing out in this group is the gaming division, which reported a revenue growth of 44%, with Xbox software and services revenue up by 36%, indicating its strategy to tie exclusive titles from gaming companies is reaping rewards. At the other end of the spectrum, Windows OEM grew by 3%, further proof that the PC market is slowing, but the pronouncement of its demise is still premature. Between the two extremes sat search advertising (Bing) which grew by 17%, Surface up by 14% indicating the new models are winning some traction, and Windows commercial products and cloud services, up by 12%.

Productivity and Business Processes contributed $9.8 billion in revenue, an increase of 19%. The Office commercial and consumer products and cloud service as the business application suite Dynamics all registered healthy growth, but what caught our eyes was the 33% revenue growth by LinkedIn, and a 34% increase in average session length. The revenue numbers may still be small (it is not disclosed separately) but it is a sign that two years after the $26 billion acquisition of the professional social network Microsoft is turning it around. This is particularly impressive when compared to the lacklustre performance reported by Facebook recently.

Intelligent Cloud, the smallest of the three business units by revenue reported the highest growth rate of 24%. Azure continued to deliver stellar numbers, its revenue increased by 76%. This may be lower than the 90% growth it reported last quarter but would surely be the envy of any other company.

If Microsoft’s mobile first strategy flopped badly a few years ago, its cloud first strategy is definitely paying off. As Amy Hood, the CFO said, “We see continued demand for our cloud offerings, reflected in our commercial cloud revenue of $8.5 billion, up 47% year over year.”

The management is confident in the next quarter, giving bullish guidance during the earnings call

Cisco investor fears of ‘melting ice cube’ are wrong – analyst

Despite reading off positive results for the last three months, it seems investors are still worried about how much influence Cisco can have in the digital economy. But investment bank Jefferies think they are all wrong.

While Cisco reported positive results in the last 24 hours, $49.3 billion for the last twelve months (a 3% year-on-year increase), George Notter, MD of the Telecom & Networking Equipment group at Jefferies, notes there are still fears from investors that Cisco will not maintain the influence is swings around today as the world transitions to the digital economy. For Notter, the business is in a solid position and will only get stronger.

“Growing economies, data growth, and the general shift to a Big Data/Analytics-driven world are big (and accelerating) drivers for the company,” said Notter. “Further, investor perceptions about the company as a “melting ice cube” fighting against workload migration, market share pressures, etc. are wrong.”

The strength of the business here is the end-to-end network capabilities, which Notter notes will become increasingly strategic to Enterprise and Service Provider customers. Notter also points to improved product orders, growth for product deferred orders and enhanced backlog. Many of the indicators are heading in the right direction.

While there is of course work to do on the transformation project at Cisco, there is evidence it is working. The team has been seeking ways to boost the recurring revenues column on the spreadsheets, with the latest results demonstrated an increase to 32% of total revenues. Admittedly this is only up from 31%, but an increase none the less.

One area which Jefferies is not as confident is on the financials. Notter and his team believe revenues will be on the up over the next twelve months, hitting $51.1 billion for FY2019, though this estimate is about $600 million below the bottom end of Cisco’s own estimates. Although Jefferies are not as confident as the Cisco management team, at least they agree revenues will be heading in the right direction.

BT to make 13k redundancies and restructure supply chain in transformation bid

Alongside full-year earnings which saw the telco’s revenue decline by 1%, BT has announced 13,000 jobs will be heading to the chopping block, while its supply chain has also been lined up for a shake down.

After a torrid 18 months which has seen the business stumble from disaster to scandal and then onto blunder, the team is seeking to save $1.5 billion over the next three years through the changes. Aside from 13,000 job cuts, the majority of which will come from back office and middle-management roles, and restructuring its supply chain, BT has also announced it will be leaving its central London HQ after almost 150 years. All to rectify the horror show which has been BT in recent months.

In terms of the redundancies, BT has stated the objective is to simplify the structure of the organization, creating fewer, but bigger and more accountable leadership roles, while also de-layering its management structures. Automation will also play a role here, with the team looking to streamline operations and simplify business processes. The message seems to be BT is an inefficient beast, and these are the plans to address that.

“We have announced today an update to our strategy to accelerate leadership in converged connectivity and services,” said BT CEO Gavin Patterson. “Our strategy will drive sustainable growth in value by focusing on delivering differentiated customer experiences, investing in integrated network leadership, and transforming our operating model.”

Patterson might be confident on the future of the business, but he has arguably overseen one of the biggest disasters in the telco industry in recent memory. Whether discussing the continued, and questionable, venture into sports content, nefarious accounting, pension scandals or managing a seemingly ineffective relationship with regulators, the BT journey has been almost everything but successful over the last couple of years.

One area which has not bitten BT too hard yet is the acquisition of EE, though it is still early days.

“It’s been a while since BT acquired EE and we’ve yet to see significant benefits from the deal given the ongoing challenges facing the overall group,” said Paolo Pescatore of CCS Insight. “With this in mind it is unsurprising that some of the successful executives at EE have now secured key roles as part of the new entity. Marc Allera being one as well as Gerry McQuaid. EE has been a wonderful asset in its own right and BT needs to do a better job of leveraging this business. It almost feels like a reverse takeover.

“We do not expect major changes overnight. However, changes need to be made across the board with a clear focus on putting the customer at the heart of everything. There is no question that BT has the network assets to play a key role.”

Part of this transformation will be hiring an additional 6,000 employees to support network deployment and customer service, and also addressing an inefficient supply chain. The aim here will be to move from buying to strategic sourcing, consolidating spend from our current 18,000 suppliers. In short, the number of suppliers will be reduced. Part of this initiative will be to standardise the design and sourcing of materials and services for products. It might sound like management talk, but considering the pressure Patterson is under, we would expect some big changes to the supply chain and the way BT interacts with the ecosystem.

On a more positive note, BT will now be able to put (partially at least) the pension scandal in the past. The team has come to an agreement with the Trustee on the pension valuation and recovery plan, which the team has described as ‘affordable’ within the capital allocation framework. The funding deficit has been agreed at £11.3 billion, and will be met over a 13-year period. Payments of £2.1 billion will be made up to 2020, with a further £2 billion contribution, to be funded from the proceeds of the issuance of bonds, due as soon as possible. £950 million payments will be annually between 2020 and 2030. Investment strategies will also be altered to move the focus from growth assets, such as equities and property, to lower-risk investments, such as bonds.

Looking at the performance for the year, revenue was down 1% to £23.723 billion, which includes a £87 million favourable impact from foreign exchange movements and a £157m reduction in transit revenue. ARPU has increased in the consumer business to £41.7. The total number of mobile customers has decreased by 300,000 to 29.6 million over the last twelve months, though the number of broadband customers is up by 300,000 to 20.7 million. Openreach fibre net adds were 555,000, taking the total to 9.8 million, though the troublesome TV business demonstrated another decline.

This has probably been the most bruising mistake for Patterson as the content venture has continued to look like a very expensive mistake. Some might also ask whether such catastrophic redundancies could have been avoided with the error-strewn and wasteful venture into sport. The last quarter saw another net loss of 16,000 subscribers, taking the total down to 1.74 million.

“Worrying times for the consumer unit with another quarter of line and TV losses,” said Pescatore. “Marc Allera has a lot to ponder and faces some tough decisions with the integration of the consumer units. His strive for simplicity and customer friendly approach will put the new entity in good stead. However, he now needs to take a broader role beyond mobile and individual consumers and more about household telecom requirements.”

This is perhaps the harsh lesson Patterson has learnt here. In chasing the content dream, Patterson was after the bells and whistles. Other telcos, the ones which are looking much more primed for the digital economy, invested heavily in readying the network. It might be boring, but the likes of Orange across Europe or T-Mobile in the US have simply focused on making the customer experience better. This is a strategy which is now paying off.

Patterson has seemingly swallowed his pride here, announcing an additional £200 million investment annually, taking the number up to £3.7 billion per year for the next two years. At just over 15% of annual revenues, spent correctly this investment could go some way to future-proofing BT’s broadband and mobile networks. It might be late, but better late than never.

BT has not been an enviable company over the last 18 months, but there is a sense of owning mistakes and taking the mature route forward here. Perhaps the influence of straight-talking, no-nonsense Chairman Jan du Plessis is starting to make waves.

Virgin Media tries to steal the limelight from Global Media

Liberty Global offloading non-core assets isn’t the only bit of news coming out of the offices today as Virgin Media’s Project Lightning continues to defy its name.

Financials for the quarter were pretty positive overall, revenues for the UK and Ireland grew 5.2% (rebased) to $1.77 billion, while the team boasted of a 25,200 net gain of mobile subscribers. On the more disappointing side of the quarter was Project Lightning.

Over the course of the three months, 111,000 marketable premises were added to the roster, taking the total to 1.2 million since the launch. While this might sound positive, this is the slowest progress for the last four quarters and let’s not forget the aim is to take this number to 4 million by the end of 2019; this isn’t the most rapid rollout we’ve ever seen.

Missing this target is not necessarily the end of the world, it was after all a self-imposed one, but it does perhaps indicate a bit of internal lethargy. Again, not exactly hit the panic button time if it was only measuring itself against the cumbersome BT, but the emergence of Vodafone as a challenger ‘altnet’ in the broadband game perhaps makes it a worrying situation. Progress has been sluggish (putting it politely) when compared to the Vodafone/CityFibre partnership which is tearing up roads left, right and centre to add cities to the growing list of gigacities, targeting 5 million connections over the next eight years.

Of course bringing Vodafone into the conversation is entirely appropriate considering the acquisition announcement which has recently been made. Aside from Liberty Global’s German and Eastern European assets, Virgin Media is also a name which has been whispered in the dark corners of the rumour mill, though this does not look like a bit of business which will be hitting the headlines any time soon.

“Virgin Media is not on the agenda,” said Vodafone CEO Vittorio Coloa during a briefing on the wider acquisition. The UK business is laser-focused on the development of its own convergence objectives, a worrying sign for Virgin Media.

Looking at the figures, Virgin Media currently has just over 5 million subscribers, bringing on an extra 32,000 over the quarter. This is a respectable number, but for this to continue upwards in the long-term, Project Lightening will have to start proving it is worth the paper it is written on.

On the mobile side of things, the message is slightly better. Although the number of prepaid subscribers declined by 44,000, 69,000 were acquired for the more lucrative postpaid subscriptions. The total number of mobile subscriptions now stands at just over 3 million.

Virgin Media isn’t doing badly, but it is hardly setting the world on fire. The broadband business might have been able to position itself as the alternative to Openreach in years gone, but with Vodafone about to turn the lights on in its own gigacities, the team will have to prove it is more than just an alternative for alternatives sake. At the moment it is doing its own ‘Gap Yah’ impression. Momentum is gathering for Vodafone and it looks to be a threat to the sluggish mainstays of the broadband world.