Netflix doubles profit but Wall Street not very happy

Netflix has increased its annual revenues by 35% and doubled profits over the course of 2018, but that didn’t prevent a 3.8% share price drop in overnight trading.

Total revenue across the 12-month period stood at $15.7 billion, though growth does seem to be slowing. Year-on-year revenue increases for the final three months were 27.4%, with 21.4% for the first quarter of 2019, though this compares to 40.4%, 40.3% and 34% in Q1, Q2 and Q3 respectively. However, when you consider the size, scale and breadth of Netflix nowadays this should hardly be considered surprising.

“For 20 years, we’ve been trying to please our members and it’s really the same focus year-after-year,” said CEO Reed Hastings during the earnings call.

“We’ve got all these ways to try to figure out, which shows work best, which product features work best, we’re a learning organization and it’s the same virtuous cycle, improve the service for our members. We grow. That gives us more money to invest. So, it’s the same things we’ve always been doing at just greater scale.”

This is perhaps the reason Netflix has succeeded in such a glorious manner where others have succumbed to mediocrity or failure. Investments have been massive to build out the breadth of content, while the team has not been afraid to alter its business or invest in content which others might snub. Bird Box is a classic example of a movie some might dismiss, whereas we find it difficult many competitors would have given the greenlight to the original Stranger Things pitch.

On the content side of things, investments over the last twelve months totalled $7.5 billion and Hastings promises this will increase in 2019. Perhaps we will not see the same growth trajectory, as despite the ambitions of the team, another objective for Netflix pays homage to the investors on Wall Street. Operating margin increased to 10% during 2018, up from 4% a couple of years back, though the team plan on upping this to 13% across 2019.

Content is where Netflix has crowned itself king over the last few years, aggressively pursuing a varied and deep port-folio, though it will be pushing the envelope further with interactive story-telling.

“I would just say there’s been a few false starts on interactive storytelling in the last couple of decades,” said Chief Content Officer, Ted Sarandos. “And I would tell you that this one has got storyteller salivating about the possibilities.

“So we’ve been talking to a lot of folks about it and we’re trying to figure it out too meaning is it novel, does it fit so perfectly in the Black Mirror world that it doesn’t – it isn’t a great indicator for how to do it, but we’ve got a hunch that it works across all kinds of storytelling and some of the greatest storytellers in the world are excited to dig into it.”

The team are attempting to figure out what works and what doesn’t for the interactive-story segment, but this is one of the reasons why people are attracted to Netflix. The team are exploring what is capable, brushing the dust away from the niche corners and experimenting with experience. They aren’t afraid of doing something new, and the audience is reacting well the this.

Looking at the numbers, Netflix added 8.8 million paid subscribers over the final three months of 2018, 1.5 million in the US and 7.3 million internationally, taking the total number of net additions to 29 million across the year. This compares to 22 million across 2017, while the team exceeded all forecasts.

However, this is where the problem lies for Netflix; can it continue to succeed when it is not diversifying its revenues?

According to independent telco, tech and media Analyst Paolo Pescatore, the Netflix team need to consider new avenues if they are to continue the exciting growth which we have seen over the last couple of years. New ideas are needed, partnerships with telcos is one but we’ll come back to that in a minute, some of which might be branching out into new segments.

This is perhaps most apparent in the US market, as while there is still potentially room for growth, this is a space which is currently saturated with more offerings lurking on the horizon. Over the next couple of months, Disney and AT&T are going to launching new streaming services, while T-Mobile US have been promising its own version for what seems like years. If Netflix is to continue to grow revenues, it needs to appeal to additional users, while also adding bolt on services to the core platform.

What could these bolt-on services look like remains to be seen, though Pescatore thinks a sensible route for the firm to take would be into gaming and eSports. These are two blossoming segments, as you can see from the Entertainment Retailers Association statistics here, which lend themselves well to the Netflix platform and business model. Another area could be music streaming, though as this market is dominating by Spotify and iTunes, as well one with low margins, it might not be considered an attractive diversification.

The other area which might is proving to be a success for the business are partnerships with telcos.

“It’s sort of been this March from integration on devices and just makes that a point to engage with the service to doing things like billing, on behalf of or we do billing integration,” said Greg Peters, Chief Product Officer.

“And now the latest sort of iteration that we’re working with is, is bundling model, right. And so, we’re early on in that process, but I would say we’re quite excited by the results that we’re seeing.”

This is a relatively small acquisition channel in comparison to others, but it is opening up the brand to new markets in the international space, a key long-term objective, and allowing the team to engage previously unreachable customers. This is an area which we should expect to grow and flourish.

The partnerships side of the business is one which might also add to the revenue streams and depth of content. Pescatore feels this is another area where Netflix can generate more revenue, as the team could potentially offer additional third-party content, hosting on its platform for users to rent or purchase. Referral fees could be an interesting way to raise some cash and Netflix certainly has the relationships with the right people.

Netflix has long been the darling of Wall Street, but it might not be for much longer. The streaming video segment is becoming increasingly congested, while the astronomical growth Netflix has experienced might come to a glass ceiling over the next couple of years. The businesses revenues are reliant on how quickly the customer base grows; such a narrow focus is not healthy. Everyone else is driving towards diversification, and Netflix will need to make sure it considers it sooner rather than later.

Google, Alibaba and Apple erode Amazon’s smart speaker dominance

Research firm Strategy Analytics has published its latest numbers on the global smart speaker market and they reveal rapid growth and diversification.

Amazon, of course, was the first mover in this market with its Alexa-driven speakers sold aggressively through its own dominant retail channel. As you can see from the table below it pretty much owned the smart speaker market a year ago, but the situation is very different today. With Google, Alibaba and Apple among the tech giants to have made their move in that time.

“Amazon and Google accounted for a dominant 70% share of global smart speaker shipments in Q1 2018 although their combined share has fallen from 84% in Q4 2017 and 94% in the year ago quarter,” said David Watkins of SA. “This is partly as a result of strong growth in the Chinese market for smart speakers where both Amazon and Google are currently absent. Alibaba and Xiaomi are leading the way in China and their strength in the domestic market alone is proving enough to propel them into the global top five.”

“Further strong growth in smart speaker sales confirms our view that this new market is far more than just a flash in the pan,” said David Mercer of SA. “Today’s smart speakers are by no means the finished article but they have captured the consumer imagination and we will see rapid evolution in design, functionality and associated use cases over the coming years. We are clearly heading towards to a time in the not too distant future when voice becomes a standard mode of technology interaction alongside established approaches like keyboard, mouse and touchscreen.”

Mercer is spot on about the voice UI, although it could end up being most important in cars and wearables, rather than the living room. It’s also worth juxtaposing this market with smartphones, which amounted to 345 million units in Q1 2018. While the young smart speaker market is growing rapidly, it’s still a faction of the size of smartphones and is unlikely to ever achieve those kinds of volumes because of its relatively limited utility.

Global Smart Speaker Market by Vendor: Q1 2018 (Shipments in Millions of Units)
Vendor Q1 ’18 Shipments Q1 ’18 Market Share Q1 ’17 Shipments Q1 ’17 Market Share Growth Y/Y
Amazon 4.0 43.6% 2.0 81.8% 102%
Google 2.4 26.5% 0.3 12.4% 709%
Alibaba 0.7 7.6% 0.0 0.0% ~
Apple 0.6 6.0% 0.0 0.0% ~
Xiaomi 0.2 2.4% 0.0 0.0% ~
Others 1.3 13.9% 0.1 5.8% 806%
Totals 9.2 100.0% 2.4 100.0% 278%
Source: Strategy Analytics Smart Speaker service

Western European smartphone market nosedives – Canalys

Market researcher Canalys has published its Q1 2018 smartphone numbers for Europe and they indicate a severe contraction in its richest markets.

Overall European smartphone shipments fell 6.3% year-on-year according to Canalys’ research, but it was very much a game of two halves, with Eastern Europe growing by 12.3%, driven largely by Russia, while Western Europe fell off a cliff, down 13.9% annually. The overall drop for the continent was the biggest ever for a single quarter.

“This is a new era for smartphones in Europe,” said Ben Stanton of Canalys. “The few remaining growth markets are not enough to offset the saturated ones. We are moving from a growth era to a cyclical era. This presents a brand-new challenge to the incumbents, and we expect several smaller brands to leave the market in the coming years.”

Canalys Europe smartphone Q1 2018 1

This would appear to mirror the broader global trend of consolidation in the smartphone market, with the top vendors gaining market share at the expense of the long tail. Samsung is the number one vendor but is having its own long tail attacked by Huawei and Xiaomi as cheaper phones increasingly offer much of the performance as flagship ones.

“It is not all gloom for the smaller players,” said Lucio Chen of Canalys. “Xiaomi and Nokia, under HMD Global, are both relatively new entrants to the European market, but have stormed to fourth and fifth place.

“Xiaomi is working closely with distributors, such as Ingram Micro and ABC Data, to drive products into retail stores. HMD has taken a different approach, using its operator relationships on the feature phone side to get its new smartphones ranged across Europe. But both Xiaomi and HMD Global have the benefit of being privately owned.

“As Xiaomi has shown, private companies have an incentive to operate at a substantial net loss to drive smartphone shipments, boosting market capitalization before IPO. But this is not sustainable in the long term, and both Xiaomi and HMD Global will eventually have to shift their revenue and cost structures, as the top three have now done, toward profitability.”

Canalys Europe smartphone Q1 2018 2

The nature of the component manufacturing business means that what used to be premium specs have become commoditised, which is the main reason for the shift towards cheaper phones even in rich countries. Now you can get a phone with a quality screen, camera, processor, etc for far less than the price of an iPhone X or whatever.

“Dual-SIM is also a growing specification trend in Europe,” said Vincent Thielke of Canalys. “It has taken longer to take hold than elsewhere in the world, because operators are paranoid about ranging dual-SIM phones, as it opens up the opportunity for competitors to sell lines into their installed base. But due to the growth of dual-SIM through retail channels, especially through brands such as Huawei and Wiko, operators are being forced to re-evaluate their portfolios and consider dual-SIM. Vendors are reacting too, and Samsung has made an explicit push to bring dual-SIM to more of its devices in more of its channels in 2018.”

Canalys Europe smartphone Q1 2018 3

The one vendor that seems to be impervious to the eddies and currents of smartphone fashion is Apple. While its brand is peerless, the fact that Apple has its own platform is probably the main reason it’s so much more resistant to commoditisation. When comparing Android devices specs are likely to be a more significant consideration then when choosing between Apple and Android. This is probably the main reason why Apple’s margins are so much higher too.

Apple sold 16 million iPhone X in Q1 – far more than any other smartphone model

Research firm Strategy Analytics reckons Apple managed to shift 16 million units of its flagship smartphone last quarter, defying pessimistic reports.

At the start of this week we reported on a rumour that Apple had significantly cut order for the X with its manufacturers because it was struggling to shift what it already had. That rumour turned out to be pretty much rubbish when Apple announced solid numbers a couple of days later and SA’s estimate serve to reinforce that impression.

“We estimate the Apple iPhone X shipped 16.0 million units and captured 5 percent market share worldwide in Q1 2018,” said Juha Winter of SA. “For the second quarter running, the iPhone X remains the world’s most popular smartphone model overall, due to a blend of good design, sophisticated camera, extensive apps, and widespread retail presence for the device.

“Apple has now shifted almost 50 million iPhone X units worldwide since commercial launch in November 2017. The Apple iPhone 8 and iPhone 8 Plus shipped 12.5 and 8.3 million units, respectively, for second and third place. The previous-generation iPhone 7 shipped a respectable 5.6 million units for fourth place. Combined together, Apple today accounts for four of the world’s six most popular smartphone models.”

You might expect the rest of the list to be occupied by the Samsung but you would be sorely mistaken. The fifth best-selling smartphone model globally was the Xiaomi Redmi 5A, which is not a bad effort considering that’s mainly direct (as opposed to operator-subsidised) sales. Let’s see if Xiaomi’s strategic alliance with Hutchison helps it climb the table further. Then, finally, comes the Samsung Galaxy S9 Plus which, to be fair, hasn’t been shipping for long.

Linda Sui, Director at Strategy Analytics, added, “Xiaomi has become wildly popular across India and China,” Said SA’s Linda Sui. “Xiaomi is selling a huge volume of smartphones through online channels, with key retail partners including Flipkart and JD.”

“Samsung’s new flagships, Galaxy S9 and S9 Plus, only started shipping toward the end of the first quarter, but shipments are already off to a very good start,” said SA’s Woody Oh. “We expect the S9 Plus to become the best-selling Android smartphone globally in the second quarter of 2018.”

Global Smartphone Shipments by Model (Millions of Units) Q1 ’17 Q1 ’18
1.  Apple iPhone X 0.0 16.0
2.  Apple iPhone 8 0.0 12.5
3.  Apple iPhone 8 Plus 0.0 8.3
4.  Apple iPhone 7 21.5 5.6
5.  Xiaomi Redmi 5A 0.0 5.4
6.  Samsung Galaxy S9 Plus 0.0 5.3
Rest of Total Market 332.3 292.3
Total 353.8 345.4
Global Smartphone Marketshare by Model (% of Total) Q1 ’17 Q1 ’18
1.  Apple iPhone X 0.0% 4.6%
2.  Apple iPhone 8 0.0% 3.6%
3.  Apple iPhone 8 Plus 0.0% 2.4%
4.  Apple iPhone 7 6.1% 1.6%
5.  Xiaomi Redmi 5A 0.0% 1.6%
6.  Samsung Galaxy S9 Plus 0.0% 1.5%
Rest of Total Market 93.9% 84.6%
Total 100.0% 100.0%
Total Growth YoY (%) 6.2% -2.4%
Source: Strategy Analytics


SA is having a busy week, having published its Q1 2018 tablet shipment numbers too. Apple is doing nicely in that area too, shifting almost twice as many units as second-placed Samsung in a declining market.

“Leading vendors are bouncing back with new hardware and value-added features such as improved stylus capabilities, AR, and digital assistants to support new use cases and double down on their appeal consumer and enterprise markets,” said SA’s Chirag Upadhyay. “Our interactions with computing devices are rapidly changing and companies like Apple, Amazon, and Huawei are staying ahead of the curve with targeted product improvements.”

SA tablets Q1 2018

Smartphone market Q1 2018: Apple is doing just fine

Amid rumours that sales of its flagship smartphone have disappointed, Apple posted yet another set of impressive numbers.

The past few weeks saw a bunch of stories all claiming to have insight into the Apple supply chain, suggesting that the flagship iPhone X hasn’t been selling in anything near the volumes Apple was hoping for. Apparently it’s too expensive and the screen is too fragile.

Well Apple’s Q1 2018 numbers pretty much contradict those rumours, with Apple shifting 52.2 million iPhones in the quarter, a 3% increase on the year-ago quarter. Apple doesn’t publish splits by model, but iPhone revenues were up were up 14% annually, indicating an increased average selling price, which seems likely to be due to the X.

“Apple iPhone shipments have grown year-on-year in three of the past 4 quarters,” said Neil Mawston of Strategy Analytics, from whom we derive much of the data in our smartphone shipment table. Apple’s ultra-premium iPhone X is proving relatively popular in some markets like China and the US, while there remains scope for additional expansion in emerging regions such as India and Africa.”

The other story of the quarter is the continued overall decline of the global smartphone market, with shipments falling by 2%, having fallen a fair bit in the previous quarter too. A lot of the reason for this will be China, which everyone seems to agree is in relatively steep decline, but it looks like replacement cycles are lengthening in developed markets too.

Q1 2018 smartphone table

What do you think?

Would a Huawei ban on US technology impact your decision to buy a Huawei Smartphone or wearable device?

Loading ... Loading ...

Chinese smartphone market is shrinking but we can’t agree on how much

A slew of Chinese smartphone numbers have been churned out by leading educated-guessers and the only thing they agree on is that it’s declining.

Counterpoint reckons Q1 2018 Chinese smartphone shipments declined 8% annually, but Canalys has a much bigger decline of 21%, while GfK is going for a more modest 6% decline. Counterpoint and Canalys will derive their intelligence from the supply-side – i.e. manufacturers, supply chain, etc, while GfK uses point-of-sale terminals to get a demand-side picture.

Regardless of the method there will be a fair bit of extrapolation, conjecture and intuition in all the numbers, which explains why they can sometimes be so far apart.

“2018 started on a slower note for the world’s largest smartphone market,” said James Yan of Counterpoint. “The slowdown can be attributed to lengthening smartphone replacement cycle for the Chinese consumers. Additionally, lack of product launches in Q1 2018 with OEMs focusing on inventory clearance, especially for non-bezel-less display devices, were other key factors impacting shipment volumes. Bezel-less devices are now popular in China and more OEMs are expected to launch sub-1000 RMB (~US$160) bezel-less portfolio to differentiate their offerings in the mid segment.”

“The level of competition has forced every vendor to imitate the others’ product portfolios and go-to-market strategies,” said Mo Jia of Canalys. “But the costs of marketing and channel management in a country as big as China are huge, and only vendors that have reached a certain size can cope. While Huawei, Oppo, Vivo and Xiaomi must contend with a shrinking Chinese market, they can take comfort from the fact that it will continue to consolidate, and that their size will help them last longer than other smaller players.”

“We start the year with a very different picture to the final quarter of 2017, when smartphone demand records were broken,” said GfK’s Arndt Polifke, commenting on the global picture. “In the first quarter of 2018 by comparison, there was a year-on-year decline in global smartphone demand. It’s perhaps no surprise as we hit saturation point in more markets. On the other hand, consumers are tending to choose higher-priced models as they embrace the latest innovations offered by smartphone brands. As a result, the average sales price grew by an astonishing 21 percent year-on-year to USD 374. This led to 18 percent revenue growth globally, which is exceptional for a maturing industry.”

GfK is the only one of the three to talk about value as well, and in its released confirms this global trend is playing out in China. Smartphone revenues there grew by 14% to $41.1 billion in spite of the volume decline. This seems to be down to the growing strength of the big smartphone brands, including Apple, and their ability to persuade Chinese punters to upgrade to more expensive devices.

Counterpoint China Q1 2018


Canalys China Q1 2018

Nokia shares plunge on weak Q1 2018 numbers

Finnish networking vendor Nokia had a disappointing Q1, with profits sinking year-on-year, resulting in a 7% share price decline at time of writing.

Revenues at Nokia’s core networks business declined 12% YoY, but were only down 3% once its accountants had finished working their currency magic. The problem was that only yielded an operating margin of 4.8%, down from 6.3% a year ago, resulting in a YoY operating profit plunge of 87% for networks. Total group operating profit fell well short of analyst expectations.

Since the ‘other’ category continues to run at a loss, the only reason Nokia made any operating profit at all in the quarter was a 48% jump in revenues for the technologies division which, since it mainly deals with intellectual property licensing, is much higher margin and thus saw its operating profit jump by 136%.

“We see strong momentum building for the full year despite a slow start in Networks,” said Nokia CEO Rajeev Suri. “I have considerable confidence that Nokia is well-positioned to out-perform a strengthening Networks market and meet our full-year 2018 guidance.

“Our confidence is based on strong order intake and backlog in Q1; our end-to-end strategy is resonating with customers, resulting in strong cross-sell activity and a year-on-year doubling of the multi-business group pipeline; we have clear visibility to 5G deals for large-scale commercial rollouts in United States in the second half of the year; and are successfully executing our diversification strategy, with consistent double-digit profitable growth with enterprise and webscale customers.

“While our Networks gross margin in Q1 decreased on a year-on-year basis, the primary underlying reasons for that – regional and product mix – are largely temporary in nature and expected to improve in the second half of 2018. It is also important to understand that we did not see significant degradation of margins at the overall product level. We remain on track to deliver on our EUR 1.2 billion cost savings commitment.”

It looks like North America softened, so Nokia ended up selling a higher than usual proportion of low-margin stuff, such as optical networking gear rather than software, to less affluent regions. Nonetheless Suri made a point of sounding bullish about the second half of this year and seems to think the 5G cash is already coming in, which is pleasantly surprising.

We’ll leave you with some selected slides below and finish (no pun intended) by contrasting Nokia’s numbers with Ericsson’s, which seemed to indicate a turning for the corner and were rewarded with a big share price jump that has been sustained. What a difference a quarter makes.

Nokia Q12018 1

Nokia Q12018 2

Nokia Q12018 3

Nokia Q12018 5

Nokia Q12018 6

Nokia Q12018 4

Ericsson continues its search for silver linings

Swedish networking giant Ericsson reported continued sales declines in Q1 2018 but feels the grand plan is starting to show some positive results.

Reported sales were down 9% year-on-year to SEK 43.4 billion, but only down 2% when the usual handy currency adjustments kick in. While it’s a shame to see yet another quarter of decline, it was more or less expected and Ericsson has previously stated its immediate priority is profitability rather than growth.Helena Norman

To get a bit more insight into the results spoke to Helena Norrman, SVP and Head of Marketing and Corporate Relations at Ericsson (pictured). In line with the above strategy Norman was keen to highlight Ericsson’s trend of improving gross margin, which jumped to 34% in Q1 2018, up from 16% a year ago.

She explained that the like-for-like jump isn’t quite as dramatic as that, thanks to a bunch of exceptional items and IFRS changes and pointed us towards the slide from Ericsson’s presentation below, which shows that the adjusted gross margin for this quarter was 36% and was 31% a year ago. Either way Gross Margin, which is probably Ericsson’s number one priority right now, seems to be headed in the right direction, for which Norman expressed satisfaction.

Ericsson Q1 2018 gross margin

The reasons for this improvement are fairly well-known. Norman advised that around half of it is down to the streamlining process that has been underway for some time now. The rest of it is down to getting out of bad contracts and, on a more positive note, increased sales of Ericsson Radio System.

Norman, and every other Ericsson exec we’ve spoken to in the past few quarters, are quick to admit there’s still a long way to go. Of course the trend of revenue declines needs to reverse, but the cunning plan is to stop losing money first, which is reasonable, and datapoint trends like improving gross margin are viable causes for muted celebration.

Ericsson has gone through a few years to facing up to its own corporate dysfunction and is trying to build a robust platform from which to rebuild. When we asked Norman if she was feeling optimism she confessed to a degree of “Scandinavian optimism”, which seems to be of the quiet, cautious variety. As in the UK, spring has finally arrived in Sweden and Ericsson may allow itself a cheeky glass of aquavit in the sun this weekend, before rolling its sleeves up once more on Monday.

Here are some other selected slides from the Ericsson Q1 2018 presentation.

Ericsson Q1 2018 sales

Ericsson Q1 2018 regions

Ericsson Q1 2018 networks

Ericsson Q1 2018 digital services

Ericsson Q1 2018 managed services

Ericsson Q1 2018 other

Samsung beats profit expectations for Q1

Samsung has announced its Q1 2018 earnings guidance and its profit is set to be significantly higher than analysts were expecting.

Markets were advised that Samsung brought in around 60 trillion won ($56.4 billion) in sales and 15.6 trillion won ($14.7 billion). According to Reuters analysts were expecting profits closer to 14.5 trillion won, but Samsung’s share price still declined a bit because people seem to think this quarter is an exception and semiconductor sales are set to decline in the mid-term.

Samsung is a very diversified company and its recent financial good fortunes have been attributed more to its semiconductor division than devices or whatever. This was certainly the case in the previous quarter and for the whole of 2017. Samsung is especially strong in the DRAM and NAND markets and is is a pretty handy processor fab too. Of course it also provides Exynos processors for Samsung phones in many markets.

One of the external factors probably contributing to slight pessimism about Samsung’s future numbers is Apple’s desire to use it less and its general desire to outsource as little of its device components as possible. This pessimism needs to be put in perspective, however, as Samsung will still make obscene amounts of money, just not quite as much as some city boys might previously have expected.

O2 plugs 5G but will it be more false promises?

O2 might be lagging behind when it comes to 4G performance, but its hoping to get ahead of the pack with the launch of a 5G test bed at The O2 in North Greenwich later this year.

Earlier this week RootMetrics condemned O2’s performance over the UK, ranking it as the worst of the four major players in the UK, but with 5G revolution just around the corner there is an opportunity to wipe the slate clean and wow customers. The launch of the 5G test bed will aim to put the technology in ‘the hands of the British public’ using the popular music and sports venue as a showroom to boast about 5G capabilities.

“The arrival of 5G technology, and the range of unprecedented benefits it will bring, will play a key role in keeping our society and the British economy moving for years to come,” said Mark Evans, CEO of O2.

“That’s why we are delighted to announce our plans to launch a 5G test bed at The O2 later this year. At O2, we are obsessive about always delivering for our customers, and this test bed is a further example of our pioneering attitude to putting our customers first and backing the importance of mobile for Britain’s future.”

Should the team be able to nail the 5G experience at the O2, it could prove to be a very good move. The O2 is one of the country’s most popular entertainment venues hosting a variety of events including the ATP World Tour Finals in tennis, Def Leppard and Professor Noel Fitzpatrick, ‘The Supervet’. Considering the number of visitors the venue brings in each year, it could work as a very effective shop window for the brand.

The test bed will be delivered using Multi-access Edge Computing (MEC) technology, a term which is set to become very prominent over the next 12 months, configured for virtualisation of core 5G network technologies. The venue will partly be used to stress test new technologies, but also usecases ahead of a wider scale launch over the coming years.

O2 might be looking to give a better showing in the 5G world than it is currently doing in the 4G one, but that doesn’t seem to be having a massive negative impact on the business overall in the UK. Over the last 12 months, the business collected total revenues of £5.728 billion, a year-on-year increase of 2.2%, with mobile service revenues up 1% and net customer additional standing at 174,000. The number of net additions increases to 266,000 when you add in M2M.

Perhaps a reason for the poor network performance is the traffic. Aside from having 25 million customers, 12.9 million of which are using 4G, O2 also has MVNO deals with Tesco Mobile, Sky Mobile and Lycamobile. In total, 32.2 million people are using the network, with the team claiming it is the biggest UK mobile network carrier. But in all fairness to O2, it is spending money on the network to improve the performance.

Over the final quarter, £198 million was spent on improving performance and coverage, while the total across the year was £724 million. Over the final quarter of the year, EE spent £122 million by comparison. That said, Orange spent €7.209 billion. Admittedly, Orange is in a broader number of markets (fixed, wireless etc.) and regions, but as a percentage, CAPEX takes 12.6% of total revenues at O2 in the UK while it stands at 17.5% across the Orange group. Orange is looking like one of the strongest telcos in Europe because it is doing more to future-proof its network, the CAPEX numbers demonstrate this very effectively.

These quarterly results suggest O2 is in a decent position to tackle the 5G euphoria, but let’s not get too carried away. Telcos are generally still acting too conservatively when it comes to network investment. The 5G riches will be reserved for the bold and as D-Day approaches some telcos are starting to look like startled deer.