O2 and Virgin Media are merging to form BT-busting connectivity giant

Telefónica and Liberty Global have confirmed plans to merge UK operations, O2 and Virgin Media, to challenge the connectivity market leader BT.

Since the end of the Supply Chain Review, the UK telecoms market has been relatively mundane, operating as one would largely expect, however this merger throws a cat amongst the pigeons. All of a sudden, the UK has become on the most interesting markets to watch, with the promise of a second convergence connectivity business to rival market leader BT.

“Combining O2’s number one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game-changer in the UK, at a time when demand for connectivity has never been greater or more critical,” said Telefónica CEO Jose Maria Alvarez-Pallete. “We are creating a strong competitor with significant scale and financial strength to invest in UK digital infrastructure and give millions of consumer, business and public sector customers more choice and value.”

“We couldn’t be more excited about this combination,” said Mike Fries, CEO of Liberty Global. “Virgin Media has redefined broadband and entertainment in the UK with lightning fast speeds and the most innovative video platform. And O2 is widely recognized as the most reliable and admired mobile operator in the UK, always putting the customer first. With Virgin Media and O2 together, the future of convergence is here today.”

Talks emerged earlier this week, though they certainly got to the official confirmation stage quicker than many were expecting.

As part of the agreement, a 50-50 joint venture will be created, with the promise to spend more than $10 billion on network development over the next five years. Synergies are expected to be as much as £6.2 billion, with 46 million subscribers, 15 million homes passed for broadband, 99% population coverage for mobile, 18,700 employees and £11 billion in revenue.

Full details on the deal can be found on a new website, proudly proclaiming the creation of a national digital champion.

This all sounds very promising, but when the merger is complete in mid-2021, which brand will survive?


What should a merged O2/Virgin Media company be called?

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“In the long run, we believe it would be better for the JV to retain the O2 brand at the expense of Virgin Media,” said Kester Mann of CCS Insight. “Both have a strong presence, but O2’s respected customer service, highly loyal customers and sponsorship of the O2 arena mean it is impossible to drop. A multi-brand approach serves only to duplicate costs and risks confusing customers.”

For convergence to work, there can only be one brand which survives. BT’s £12.5 billion of EE has arguably not paid off to date as the two brands still exist, effectively creating two separate business units inside the same group. There might be convergence benefits from an operational perspective, but to realise the gains from a customer and commercial angle, the businesses have to be fully consolidated and coherent.

BT has never really been able to take advantage of its assets. It has the largest mobile network, the largest broadband network, the largest public wifi footprint and the largest bank accounts to throw cash at content. Its inability to evolve into a convergence-defined business has opened the door for O2 and Virgin Media. But the question is whether the duo can learn from these mistakes.

Ultimately this is a major threat to the BT business, not because this is a combination which can potentially match the scale and depth of BT services, but these are also two currently healthy businesses which are coming together.

Financial Results for O2 and Virgin Media to March 31 (UK sterling (£), millions)
O2 Virgin Media
Total Year-on-year Total Year-on-year
Revenue 1,739 2.9% 1,266 -0.6%
Profit 516 2.4% 84 >1000%

Sources: Liberty Global Investor Relations and Telefonica Investor Relations

Usually, when mergers and acquisitions are discussed, one of the parties is a significantly stronger position than the other. It can still be good news, but there is plenty of work to do during the integration stages to ensure the new company is fighting fit. This is not the case with O2 and Virgin Media.

Virgin Media might have experienced a bit of a downturn over this three-month financial period, but this could likely be attributed to dampened customer acquisition amid the COVID-19 outbreak, while O2 has demonstrated year-on-year increases once again.

While these are healthy businesses right now, some might have suggested limited success in the convergence game would have caught up eventually. This is a very encouraging move forward, getting ahead of negative impacts, though a renewed assault on TV/content is needed. Neither, despite what Virgin Media claims, have done very well in this segment.

Current subscriber numbers for O2 and Virgin Media
Mobile Broadband Content
O2 35,266,217 29,085 *
Virgin Media 3,179,500 5,271,000 3,687,400

Source: Omdia World Information Series

*Too early to tell how successful the partnership with Disney+ to add a content element to O2 bundling has been

One area which should be allocated to the risk column, though it is a very minor risk, is the prospect of regulatory intervention.

“Unlike when O2 attempted to join forces with Three in 2015 but was blocked by the European Commission, I don’t expect there to be any major hurdles to this deal going through,” said Dan Howdle, consumer telecoms analyst at Cable.co.uk. “After all, with BT’s purchase of EE given the all-clear in 2016, it’s difficult to see how a case could be made to block it.”

These are both telecoms companies, but service overlap is minimal. Core competencies lie in different segments, and while there have been attempts to launch into parallels, success has been woeful. These are complementary companies with little material service overlap.

When considering whether competition authorities will be interested, you have to ask whether the merger would make single business units stronger or is the company stronger by association with parallel services. O2’s mobile business will not be enhanced materially by Virgin Media’s MVNO proposition, and Virgin Media will not benefit from O2 at all in the fixed connectivity game. There does not seem to be any case for objection on the grounds of competition.

Aside from the direct impact for both Virgin Media and O2, the rest of the market could be spurred into action.

“Vodafone UK appears the biggest loser as the deal lays bare its weak position in the market for converged services,” said CCS Insight’s Mann. “It also looks certain to scupper its virtual network partnership struck with Virgin Media in 2019. We think this deal will trigger a ripple effect on the UK market: Vodafone, Three, Sky and TalkTalk will all be assessing their positions and further deal-making can’t be ruled out.”

This is a challenge to the industry and will create a rival to BT in mobile, broadband, convergence and enterprise. However, it is also worth remembering the ‘also rans’.

Unless the ambitions of rivals are inspired by this threat, the prospect of a tiered connectivity industry could emerge, with those offering bundled services on top and the pureplay service providers on the bottom.

The UK has quickly become one of the worlds’ most interesting telecoms markets, thanks to the permutations which could be inspired by this merger.

Tier One Tier Two Tier Three
  • BT (mobile, broadband, content)
  • O2/Virgin Media (mobile, broadband)
  • Sky (content and broadband)
  • Vodafone (mobile and broadband)
  • TalkTalk (broadband)
  • Three (mobile)
  • MVNOs
  • Alt-nets

Jio is running riot again, but more synergies (sigh) are on the horizon

The Indian telecommunications industry might be crumbling around it, but Reliance Jio is still reaping the rewards of disruption and chaos, and there is much more to come.

Although the telco is now considered a staple of the Indian connectivity diet, it is easy to forget this is a company which is only five years old. This was not the first firm to emerge as a disruptive influence on the telco industry, but few could say they have enjoyed the rip-roaring success of Reliance Jio.

But most importantly, this might only be the tip of the iceberg, after all, this is only one business unit of a wider corporation.

“Our consumer businesses further strengthened their leadership positions and recorded robust growth on all operating and financial parameters during the year,” said Mukesh Ambani, Chairman and Managing Director of Reliance Industries.

“Both Retail and Jio, continue to work towards providing superior products and services to Indian consumers. We are fully committed on our investment plans in our consumer businesses and new initiatives.

“We are at the doorsteps of a huge opportunity and our rights issue and all other equity transactions will strengthen Reliance and position us to create substantial value for all our stakeholders.”

Reliance Jio results for financial year ending March 31 (USD ($), millions)
  Total Year-on-year
Total revenue 9,038 +40.7%
Profit 1,896 +63.5%
Subscribers 387.5 +26.3%

Source: Reliance Industries Investor Relations

With all the numbers heading in the right direction, you can see why Reliance Jio is an exciting business. Interestingly enough, not only are the total subscriber numbers shooting north, the team is also maintaining ARPU at roughly $1.73, while data usage is also increasing. There has been a surge of traffic on the network during the COVID-19 crisis as Indians are placed under lockdown orders, as much as a 50% increase on normality, but the network is holding steady.

These numbers are impressive, especially compared to the woes of competitors during this period, but Reliance Jio is still primarily a wireless business. Now it has established dominance in the mobile arena, the potential to lean into other areas is exciting. This means broadband and content, but also ventures into parallel industries.

It is a dreaded word, but there are synergies throughout the Reliance Industries portfolio.

The Reliance Industries business brought in revenues of roughly $87 billion through the last 12 months, with the business growing 5% year-on-year. The group has access to markets in 108 countries with operations in energy, petrochemicals, textiles, natural resources and retail, as well as telecoms.

Split of revenues by business unit for Reliance Industries (USD ($), millions)
Business unit Total revenue Year-on-year
Telecoms 9,038 +40.7%
Retail 21,510 +24.8%
Refining 51,159 -1.6%
Petrochemicals 19,177 -15.6%
Oil and Gas 423 -35.8%
Media 707 +4.7%

Every telco in the world wants to develop new products and services for enterprise customers and co-create new business ventures to marry connectivity and traditional business, while forward-looking enterprise organisations want to embrace connectivity. Cross-pollination within an existing corporation to meet these objectives creates a very exciting opportunity to Reliance Industries to become an industrial giant with connectivity at the core.

Part of this expansion into the novel and unknown is already being demonstrated with Reliance Jio’s partnership with Facebook.

In recent weeks, Facebook was announced a new investor in the digital business unit, taking a 9.9% stake for $5.7 billion. As part of this transaction, Facebook entered into a partnership with the digital and retail business units to create a digital payments platform, with WhatsApp playing a significant role, for a society which largely lacks traditional banking infrastructure.

This is a new venture for Reliance Industries, bringing in a third-party to help bridge the gap between two already successful business units. Many people talk about innovation, but this is a genuine example, creating new revenues without cannibalising existing units with the help of an industry partner. It is a case of 1+1+1=4.

As you can see from the image above, Reliance Jio is much more than a telecoms company nowadays. It is spreading its wings to various different technologies, segments and concepts, all of which can be developed into different revenue streams. This creates a significant amount of diversification in the TMT segments, but when combined with the different units of the Reliance Industries parent company it creates almost countless new opportunities.

Reliance Jio has been a very interesting company to keep an eye on over the last few years, but with the gaps between business units being bridged, and the eclectic mix of existing ventures, the opportunities for the wider Reliance Industries are very exciting.

BT finally unveils its reimagined TV proposition

The aggregator model has taken centre-stage at BT, leveraging its existing capabilities instead of trying to beat the content industry at its own game.

Under Gavin Patterson, BT tried to do something which almost looked impossible. It attempted to disrupt the content industry by not only owning the delivery model for content, but the content itself. It attempted to muscle into an established segment and compete with companies which were built for the content world. It was expensive, complicated and messy, and it failed spectacularly.

BT has not given up on content under new leadership, but it is taking a seemingly more pragmatic and strategic approach. Aside from its own content, Now TV will also be embedded in the BT interface, meaning that customers can now watch, pause, rewind and record premium Sky Entertainment and Sky Sports content. Customers will also be able to integrate Amazon Prime Video and Netflix onto their BT bill, while each element of the bundle can be scaled-up or -down month-by-month.

It is making best use of its assets, and it looks to be a comprehensive and sensible pillar of the convergence strategy.

“Life doesn’t stand still from month to month, so we don’t believe our customers’ TV should either. Our new range of TV packs bring together the best premium services, fully loaded with a wide range of award-winning shows, the best live sports in stunning 4K and the latest must-see films – all with the flexibility to change packs every month – with  quick and easy search to find what you want to watch,” said Marc Allera, CEO of BT’s Consumer division.

BT will ‘own’ some content, it still has the UEFA Champions League broadcast rights after all, but it is picking its battles. The BT TV proposition failed in years gone because it tried to go it alone, but without the broad range of content genres, it looked like a poor attempt to compete with the likes of Sky. In reality, it didn’t need to.

The telcos have a significant advantage over many content companies around the world; they have an existing and trusted billing relationship with the customer. According to the Ovum World Information Series, EE has 30.6 million mobile subscribers and BT has 9.1 million broadband customers. These relationships can be leveraged through the partnership model to realise new profits in a low-risk manner.

BT is in a position of strength. The streaming wars are raging, and the service providers will do almost anything to gain the attention of the consumer, as well as build credibility in the brand. By bundling services into the BT, the OTTs are leveraging the trust which the customer has in the telco billing relationship and gaining eyeballs on the service itself. All they have to do is offer BT a small slice of the profits.

This is the symbiotic relationship in practice. The OTTs gain traction with customers, while BT can complete the convergence objective in a low-risk manner through the aggregator model.

That said, it is somewhat of a retreat from its previous content ambitions.

“This well long overdue move feels like a last-ditch effort to be successful in TV,” said Paolo Pescatore, founder of PP Foresight.

“Aggregation is the holy grail. BT has done a superb job of introducing some novel features and bringing together key services all in one place. This will strongly resonate with users. However, it is unlikely to pose a considerable threat to Sky who in turn will be able to bundle BT Sport into its own packages. In the future expect this new TV platform to be bundled with BT Halo which will further strengthen its premium convergent offering.”

Convergence is a strategy which should be fully embraced by the BT business. Not only has it been proven in other European markets, see Orange in France and Spain, but the depth and breadth of BT’s assets should position it as a clear market leader. With mobile, broadband, public wifi hotspots and content tied into a single bill, as well as partnerships to bolster the experience, BT is heading down the right path. If it can start to build service products on top, such as security, this could start to look like a very competent digital business.

The issue which remains is one of price. The Halo bundle is one few can compete with, but if it is not priced correctly it will not be a success. This does seem to be the issue with the BT consumer business right now, it is pricing itself out of the competition. Convergence is attractive to customers when it is convenient and makes financial sense, but right now it doesn’t seem to.

BT is slowly heading in the right direction. It might have taken years, but it is slowly creating a proposition for the consumer which few should theoretically be able to compete with. If it can merge the business into a single brand and sort out the pricing of its products, it should recapture the market leader position.

Google Go goes global

The stripped-down version of Google’s mobile search engine is now available on all Android phones.

Google Go describes itself as ‘a lighter, faster way to search, with search results optimised to save up to 40% data.’ The reason you might want such an alternative is that you have a rubbish mobile data service and/or a low-specced phone that struggles to support full-fat Google. The app also supports things like voice UI, text-to-speech and translation.

“Google Go helps you use less storage on your device and keeps an unreliable connection from slowing you down,” announced Google Go Product Manager Bibo Xu on a blog post. “At just over 7MB, Google Go helps make sure your phone stays speedy when you’re traversing the web.

“It also puts web versions of your favourite apps at your fingertips, giving you the option of downloading fewer apps on your phone. And if you lose connectivity when you using Google Go, it will remember your place and even retrieve your search results for you once you’re back online.”

The Silicon Valley giants have had their eye on ‘the next billion users’ for some time, certainly ever since it became clear that western markets for their products and services had become saturated. Facebook is constantly trying to find ways to get people in developing regions onto its platform and Google Go feels like a similar initiative.

Convergence may well pay off for Virgin Media

It might not be setting the world on fire, but Virgin Media is proving the slow, steady approach to business is certainly worth paying attention to.

On the financial side of the business, total revenues grew marginally by 0.4% to £1.279 billion for the second quarter. Broadband customer acquisitions bolstered the financials, though these gains were mainly offset by customer losses in TV and mobile. This doesn’t seem to be the most attractive of statements, though the management team doesn’t seem to be worried as the convergence mentality becomes more prominent.

“Our disciplined and balanced approach to customer acquisition and capital expenditure has seen a return to growth in our sector-leading cable ARPU and strong free cash flow generation,” said Lutz Schüler, CEO of Virgin Media.

“Underpinning this is the continued success of our network expansion, new initiatives to improve sales and customer service and our fixed-mobile Oomph bundles which have already seen a doubling of customers attaching a mobile SIM to their package with meaningfully higher ARPU.”

An important aspect to always consider when discussing convergence is the incremental nature; this is a strategy which casts an eye to the horizon. Quarter-on-quarter you might not see the benefits, but in a few years’ time, a few will look back and wonder how they got by without such a considered approach to customer management, acquisition and retention.

Looking at the business objectives, there are four strategic pillars; converged customer contracts, increased sales efficiencies, improvement in base management and digital transformation. None of these strategies are a silver-bullet to find the next billion, but this is looking like a business which is in a healthy position, posed for growth in the next era of connectivity.

In the broadband business, Protect Lightning (the fibre buildout programme) now passes 1.8 million premises throughout the UK. Subscriptions increased by 5,000 across the period, taking the total to 14.7 million. Video cable subscriptions are down, though with a new bundle offering launched focused on sport, this could be an interesting area of growth for the business.

Over the next couple of weeks, we strongly suspect there will be an aggressive advertising campaign to glorify the benefits of Virgin Media’s TV subscriptions. Bundling together Sky Sports, BT Sport and Amazon (separate subscription) into a single aggregated content platform might be attractive to numerous sports fans, and at a cheaper price than competitors, it has the potential to cause disruption.

This has been a pain-point for Virgin Media for the last few years. Speaking from experience, your correspondent can detail the inadequacies of the TV package, though industry analysts are increasingly confident this new approach from Virgin Media is much more comprehensive. The management team are also putting a brave face on the loss of TV subscriptions, suggesting the strategy is to move away from entry-level customers, focusing on higher-end, higher-value targets.

These are two of the convergence prongs at Virgin Media, with mobile being the final. This is another area where subscriptions declined, primarily pre-paid, though as Virgin Media is currently an ‘also-ran’ in the mobile segment there is significant room for growth if the proposition is fairly priced in.

Working with EE/BT, the opportunity is certainly there to create an effective mobile proposition. EE/BT regularly has the highest rated network in terms of overall performance, though perhaps Virgin Media’s ability to offer 5G tariffs will play a notable role here. We’re not too sure what the agreement is between the two parties, though should it be able to offer 5G services over the EE/BT network sooner rather than later, the convergence strategy may well receive a boost.

Looking at the benefits of convergence, many point to higher ARPU, though perhaps the more significant, longer-term advantage is customer retention. Virgin Media experienced 15% customer churn at the end of 12-month contracts, though many accept churn rates decrease for converged customers. Considering the cost of acquiring new customers in a saturated market like the UK, anything which can be done to improve retention is a massive bonus.

In terms of convergence, the number of fixed-mobile converged customers has improved to 19.9%, as the proportion of new customers taking mobile with cable services doubled post launch. We have asked for more details on the number of converged customers as a percentage of the total, churn rates in comparison between the two and differences in ARPU, and at the time of writing Virgin Media is yet to respond.

We suspect the numbers will be positive, though nothing that will stop the world from spinning. That said, that is not a bad thing. Convergence is about incremental gain, the slow and steady approach to business improvement.

Convergence is about setting goals a few years in the future, it’s a gradual gander forward. You might not see the benefits, but looking back, you’ll wonder how you operated without such a considered approach to business. Virgin Media is looking like it is in a healthy position.

Loyalty penalties for broadband, mobile and TV finally tackled

Ofcom has introduced rules which will aim to tackle ‘penalties’ imposed on renewing customers by broadband, mobile and content providers.

As part of the new rules, providers will have to inform customers 10 to 40 days prior to the end of the customers contract, the period where financial penalties would be applied for changing providers. In the notification, customers will be told the end date of the contract, differences in contract pricing moving forward, termination conditions and availability of cheaper deals.

Although customers will still have to be proactive in contacting rival competitors for better deals on the market, the hope is a more transparent approach with spur consumers into finding the best possible option. Telcos will have a year to ensure the right business processes and technologies are in place to action the rules.

“We’re making sure customers are treated fairly, by making companies give them the information they need, when they need it,” said Lindsey Fussell, Ofcom’s Consumer Group Director.

“This will put power in the hands of millions of people who’re paying more than necessary when they’re no longer tied to a contract.”

The initial idea was put forward back in December, with the belief as many as 20 million UK consumers have passed their initial contract period and could be paying more than necessary. The Department of Digital, Culture, Media and Sport escalated the issue in February with a public consultation aimed at moving the industry towards a position where loyalty was rewarded, ending aggressive cultures towards customer acquisition.

In September last year, the UK Citizens Advice Bureau (CAB) launched a super-complaint with the Competition and Markets Authority (CMA) suggesting service providers over-charging renewing customers to bring in an extra £4.1 billion a year. Research commissioned by Broadband Genie has found many over 55s could be paying too much for their broadband service but lack the knowledge or confidence to choose a new package.

“Pre-emptive alerts and information about broadband and TV contract periods are good news for consumers since many have in effect been paying a premium for their loyalty once out of contract,” said Adrian Baschnonga, EY’s Telecoms Lead Analyst. “Today’s rules pave the way for a more proactive dialogue between service providers and their customers, which can unlock higher levels of satisfaction in the long term.”

While it will certainly take some work to bed in, such rules have the potential to move attitudes in the industry to prioritise customer retention over acquisition to meet profitability objectives. Much research points to this being a more rewarding approach to business, though few in the telco space practice this theory.

“uSwitch’s research found that the aggregate cost of out-of-contract charges to telecoms consumers is £41 a second,” said Richard Neudegg, Head of Regulation at uSwitch.com. “This is why time is of the essence – everyday spent waiting for these notifications to be rolled out, another £3.5 million is overspent on these services – meaning that more than £350 million has already been wasted since the consultation closed in February.

“While it has been a long time coming, this is an important step by the regulator to address what has long been a clearly unacceptable gap in the rules, penalising consumers to the tune of millions.”

This is a step in the right direction, but it will take more to ensure telcos shift their culture. The idea of customer acquisition over retention is deeply engrained in every aspect of the business and will define how the business operates. That said, progress is progress.

UK mobile lobby group bemoans inactivity from local councils

Perhaps the preached proactivity of central government will mean little towards the UK’s connected dream if local authorities and councils are creating a mobile bottleneck.

While it is hardly a surprise to see the lobby group representing the major UKs MNOs complaining the world is not being fair to the multi-billion-pound corporations, it would hardly come as a surprise local councils are not up-to-speed. Firstly, you have to consider the age-old stereotype of slow-moving tides in the public sector, and secondly, there is also a lot on the table for these councillors to be considering.

“Mobile connectivity has transformed our daily lives, and 5G is expected to take us even further, but we must ensure that at all levels of government we are equally prepared,” said Gareth Elliot, Head of Policy and Communications for Mobile UK.

“Councils have a vital role, yet while many are working towards a connected future, our research has found that there is still a lag in fully prioritising mobile connectivity. With launch plans announced for 5G now is the time to take the opportunity to work with industry to break down barriers and champion mobile connectivity, to ensure the next generation of mobile infrastructure can be deployed quickly and effectively.”

According to the telco’s lobbyist in its Councils and Connectivity report, a very minor percentage of local authorities are doing all they can to secure the foundations for the £164 billion opportunity presented to the UK economy through 5G by 2030. Again, you have to take the following numbers with a pinch of salt considering where they are coming from.

Mobile UK suggests only 28% of the plans set forward by the local authorities refer to mobile connectivity, though the majority do see the importance of fixed broadband. Only 13% of the councils have audited their assets for the suitability to host digital infrastructure, though we are not too sure the civil servants should shoulder all the blame here. The telcos have a responsibility to identify and secure assets for their own infrastructure, hence changes to the Electronic Communications Code (ECC) to grant more powers.

Perhaps the more damning statistics are 74% of councils have yet to apply for funding to improve digital connectivity, while only 44% have a have a cabinet member with

specific responsibility for digital issues. In terms of the funding, it is there and available from central government, while DCMS has also supported calls from Mobile UK for local authorities to delegate digital responsibilities to a single committee or digital champion. These are necessarily and clear steps forward, and a lack of progress is either stubborn, negligible or ignorant; none of which are favourable adjectives.

From Mobile UKs perspective, the answer is relatively simple; having a pro-active conversation with the telcos and identifying the barriers to entry. Some of these might be opening up more authority owned assets to mobile infrastructure or aiding the installation of fibre ducting for backhaul from street furniture. For those less-progressive councils, simply identifying mobile and writing specific objectives in plans is a step in the right direction. The Greater Lincolnshire Local Enterprise Partnership might not be the most advanced, but Mobile UK points out that in the latest Strategic Economic Plan there is plenty of attention given to both mobile and fixed connectivity.

Although Mobile UK will be attempting to make a mountain out of a molehill, it is its job to make life easier, quicker and cheaper for the telcos after all, we strongly suspect there is more than an element of truth to this report. And in the instance of this truth, there will be negative outcomes.

For all the work which the telcos and central government is doing to facilitate improvements in 4G connectivity and the deployment of a 5G network, it means very little if there are bottlenecks in the process. There will of course be proactive councils and local authorities, who should be applauded, though the staggering nature of others will only direct the rewards of the 5G economy elsewhere, potentially creating a digital divide.

While report should almost certainly be read in context, as there will be a risk of exaggeration, inactivity from the local authorities will almost certainly present consequences. Much of the attention from a legislation and policy perspective has been directed towards DCMS and other government departments in recent years, though the ability for local authorities to action these initiatives is just as critical a factor to success.

EE takes step towards content aggregator model

Content is a tricky topic to discuss around EE and BT, such is the scale of the disaster over the last few years, but a tie up with Amazon Prime and MTV Play is a step in the right direction.

The new content offer will see EE customers receive six-month memberships to both Amazon’s Prime Video service and MTV Play. The news starts to make a more comprehensive content platform for the MNO, with customers already able to access Apple Music and BT Sport, all of which is covered under the EE Video Data Pass, a zero-rating initiative available to all customers.

“It’s our ambition to offer our customers unrivalled choice, with the best content, smartest devices, and the latest technology through working with the world’s best content providers,” said Marc Allera, CEO of BT’s Consumer division.

“In offering all EE pay monthly mobile customers Prime Video and MTV Play access, in addition to BT Sport and Apple Music – we’re providing them with a wealth of great entertainment they can experience in more places thanks to our superfast 4G network, and soon to be launched 5G service. So, if they want music on a Monday, telly on a Tuesday, films on a Friday or sport on a Saturday, we’ve got something for them.”

While the content play over the last couple of years have been pretty dismal this is an approach to content and diversification which we like. It allows the telco to leverage the scale of their customer bases, while also adding value to the existing relationship with said customers.

Content fragmentation is an irk for many customers, not only because of the various apps which need to be installed, but also the number of different bills. EE doesn’t seem to be addressing the first issue but consolidating bills to a single provider might well be of interest to some customers. It also has the advantage of making EE a ‘stickier’ provider, perhaps having a positive impact on churn.

“Content is a key differentiator for telcos,” said Paolo Pescatore of PP Foresight. “However, consumers are now spoilt for choice resulting in too much fragmentation. Telcos are very well placed to aggregate content, integrate billing and provide universal search. Whoever achieves this first will have a significant advantage over their rivals.”

Sky is one of the companies which has had a good crack at addressing the fragmentation challenge, Sky and Netflix content is available on the same platform and through the same universal search function, though EE’s push on the mobile side would certainly attract attention. Consumers no-longer consider entertainment as simply for the living room, new trends show more preference for on-the-go content.

While this is a step in the right direction for EE, this is only one step. The content options need to offer more depth to meet the demands of the user, while streamlining all the content into a single app would be a strong step forward. It would certainly be difficult to convince partners to hand over customer experience to a third-party, Netflix has shown much resistance to this idea making the Sky tie-up all the more impressive, though whoever nails this aspect of the aggregator model would certainly leap to the front.

We’re all excited about VR but don’t forget about normal gaming

The gaming segment of the entertainment industry is one which is often overlooked, but it is quickly turning into an incredibly profitable one which could be a pain for the telcos.

The Entertainment Retailers Association (ERA) has compiled the figures for the various segments across the last 12 months in the UK, and to say than digital is taking over would be the understatement of the year (albeit we’re only three days in).

Driven by the adoption of services such as Netflix and Amazon, as well as streaming games through mobile and PC devices, digital accounted for roughly 76% of entertainment sales value in 2018. Looking at the broader segments, digital generated 80.1% of games revenues, 72.3% of video and 71.3% of music.

“On a market level these figures are a stunning testament to the investment and innovation of digital services who have transformed the fortunes of an entertainment industry many had thought was doomed by the internet and piracy,” said ERA CEO Kim Bayley.

Starting with music, streaming subscription revenues accounted for £829.1 million, an increase of 37%, compared to the £383.2 million generated in physical sales and £122.6 million in downloads. For video, streaming revenues increased by 26% to £1.6 billion, while both the physical rental and purchase market unsurprisingly declined.

Looking at the gaming side of things, digital sales grew an impressive 12.5% to £3.8 billion, while the physical gaming market declining 11.4% to £1.8 billion. Gaming now accounts for just over 51% of the three segments in the entertainment world, doubling in revenues since 2007.

“The games industry has been incredibly effective in taking advantage of the potential of digital technology to offer new and compelling forms of entertainment,” said Bayley. “Despite being the youngest of our three sectors, it is now by far the biggest.”

While this is a niche in the world of telecommunications, it is certainly one which is worth keeping an eye on. On the traditional gaming side, the content is becoming much larger and more immersive, with more of a focus on real-time online gaming against other players around the world. This in itself has the potential to cause stress to the network, but also grounds for irritated customers; buffering will not be accepted here.

The other growing sub-segment here is mobile gaming. The launch of Niantic’s Pokémon Go demonstrated the potential of mobile gaming when done correctly, and with data becoming cheaper every single day, more consumers will be encouraged to play these games on the go. Just to emphasise this point, research from Tappable last September claims 42% of gamers now consider smartphones to be their first choice for gaming, mostly down to the convenience of the devices.

Gaming is often an aspect of the connectivity ecosystem which is overlooked, but it is increasingly becoming more prominent in the lives of consumers. It is certainly an area which should be taken into consideration moving forward.

UK telecoms complaints at an all time low

The latest complaints data shared by UK telecoms regulator Ofcom reveals the level of moaning are at their lowest since it started collating them.

Ofcom has been logging consumer complaints about landline, broadband, mobile and pay TV services since 2010. The fact that they are at their lowest level ever would appear to indicate UK CSPs are doing a great job. Of course people could have just given up, or have become steadily more apathetic, or have found more effective ways to punish errant telcos than moaning to Ofcom, but let’s give them the benefit of the doubt.

“Although we’re encouraged that complaints are at their lowest levels since we started shining a light on this, some telecoms and TV companies are still falling short,” said Jane Rumble, Ofcom’s Director of Consumer Policy. “We expect those providers to up their game and deliver better service to all their customers.”

In the tables below you can see first the historical totals for the four categories of complaints and then the most recent ones for broadband, mobile and pay TV. We haven’t bothered with the landline ones because we figure nobody cares anymore. Now that Vodafone has got its act together there are no outstanding poor performers in mobile and similarly BT seems to have sorted out its pay TV operations.

Ofcom Q2 18 complaints historical

Broadband

Ofcom Q2 18 complaints broadband

Mobile

Ofcom Q2 18 complaints mobile

Pay TV

Ofcom Q2 18 complaints pay TV