The recovery stutters - UK broadband, telephony and pay TV trends Q4 2020 - Venture Insights
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The recovery stutters UK broadband, telephony and pay TV trends Q4 2020 30 March 2021 James Barford james.barford@endersanalysis.com Karen Egan karen.egan@endersanalysis.com Katharine Lindsay katharine.lindsay@endersanalysis.com +44 (0)20 7851 0900
Demand for broadband and
Market revenue growth sunk back Backbook pricing will improve
ultrafast looks promising, but will
to -3% in Q4 from -2% in Q3, with with numerous price increases
also take time to filter through to
further backbook pricing and announced, but these will only
revenue, with Q1 again lockdown-
lockdown effects to blame start to take effect in Q2 2021
affected
Related reports:
UK full fibre regulation: The mist clears…somewhat [2021-029]
Recovery...of sorts: UK broadband, telephony and pay TV trends Q3 2020 [2020-115]
Football and COVID-19: Avoiding meltdown [2020-032]
Winners and losers as the UK fibres up [2020-004]
If your company is an Enders Analysis subscriber and you would like to receive our research directly to your inbox, let us know at www.endersanalysis.com/subscribers
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 2Executive summary: The recovery stutters
Revenue growth • Consumer broadband, telephony and pay TV market revenue growth sunk back to -3% in Q4 2020 from -2% in Q3, largely
due to the delayed price rise at Virgin Media and Sky being hit by lockdown suppressing its pubs and clubs sports revenue
sinks back
• While there were signs of a modest continued recovery elsewhere, back book pricing pressure is still weighing heavily, with
a large proportion of the Ofcom-mandated annual best tariff notifications being sent out during the quarter
Price increases are • There is relief in site for backbook pricing pressure, with the various measures due to annualise out over 2021 and 2022,
and all four major operators implementing supra-inflationary in-contract price increases in March/April 2021, with BT and
back, but not yet TalkTalk returning to this practice
• This will however only start to take effect from Q2 2021, and the bulk of the improvements will not be felt until mid-2022,
and growth may even slow again in Q1 2021, as annual best tariff notification take effect
• Demand however does remain strong, with broadband net adds still running at a lockdown-accelerated rate, and demand
Ultrafast demand for ultrafast very encouraging, with a meaningful ARPU boost likely to result
encouraging • Adoption progress for FTTP and ultrafast will unfortunately stall in Q1 however, as Openreach suspended installations for
much of the quarter
• While medium term prospects are very positive, there looks to be at least one more quarter of pain before they start to
materialise
TalkTalk delisted from the London Stock Exchange in March 2021, and no longer publicly reports quarterly results. This report includes
estimates for TalkTalk based on its prior trends and wider industry figures. TalkTalk is about 7% of market revenue, and its broadband
figures are contained within Openreach reporting so total broadband volumes are unaffected.
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 31. Market trends and outlook
2. Appendix
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 4Subscription volume surge continues
• Broadband net adds continued to be very strong, with Q4 c.50% higher Market net additions
than the same quarter last year, although the improvement over Q3 is likely
250
largely seasonally driven, with the lockdown-driven boost being maintained 161
186
200 141 142
rather than accelerating 150
130
103
124 125
105 108
100 65 67 50
46 30 38 29
• Line rental net adds improved in lockstep, and turned back positive for the 50 14
0
first time in 2020. Comments from the operators however suggest that call -1
-50 -24
-26 -12-28
volumes are still declining as fast if not faster than in the past, as many -100
consumers have been introduced to more modern forms of communication -150 -112 -103
-141
-200
during lockdown such as video calling -250 -198
Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
• Pay TV net adds were particularly strong in Q4, turning strongly positive
after five quarters of negative net adds, with this largely driven by a solid Broadband Line rental Pay TV
performance of Sky’s NOW TV product (perhaps largely seasonal), although Broadband figures include business connections; other figures are residential only.
Figures shown are organic.
Virgin Media’s net losses continued to narrow [Source: Enders Analysis, company reports]
• Broadband growth has now accelerated to just over 2%, and while line
rental and Pay TV subscriber growth is still negative, recent performance RGU and subscriber growth
suggests that these will both turn positive during 2021, which will give a
3%
useful following wind to revenue growth
2%
1%
0%
-1%
-2%
-3%
-4%
Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
Broadband Line rental Pay TV RGUs Subscribers
Broadband figures include business connections; other figures are residential only.
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 5Revenue growth stutters, and will continue to in the short term
• Market revenue growth dipped back to -3% from -2% in the previous RGU ARPU, volume and revenue growth
quarter—a disappointing stutter although not as bad as the -6%
3% 2.6%
experienced in Q2
2% 1.0%
0.6%
• The main drivers were increased lockdowns hitting Sky’s pubs and clubs 1% -0.2%
sports channel revenue, and a delayed price rise hitting Virgin Media. 0%
0.2%
-1%
Although these are both temporary effects, they will be maintained into Q1
-2% -2.3%
2021, and at least part of Q2 for the pubs and clubs weakness, with full re- -1.9%
-3%
opening not due until 17 May -4%
-3.1%
-5%
• There are some following winds ahead, with the improved market volume -5.5%
-6%
growth slowly feeding through, the various backbook pricing ‘fairness Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
agenda’ effects annualising out towards the end of 2021 and early 2022, RGU ARPU Average RGUs Revenue
backbook pricing receiving a positive boost from April with new/enhanced Based on different accounting standards for TalkTalk prior to June 2018.
price rises from BT and TalkTalk (combined with more regular ones from Based on BT Consumer, Virgin Media, Sky, TalkTalk.
[Source: Enders Analysis, company reports]
Virgin Media and Sky), and ultrafast pricing premia likely to start helping
new customer ARPU from late 2021
Subscriber ARPU, volume, and revenue growth
• However, early 2021 will still be challenging, and growth may even slow in 3% 2.6%
Q1, as the drags are still present and some backbook effects (such as the 2% 1.0%
0.6%
annual best tariff notifications, discussed later) will worsen before they 1% -0.2%
improve 0%
0.2%
-1%
-2% -2.3%
-1.9%
-3%
-4% -3.1%
-5%
-6% -5.5%
Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
Sub ARPU Average subs Revenue
Based on different accounting standards for TalkTalk prior to June 2018.
Based on BT Consumer, Virgin Media, Sky, TalkTalk.
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 6A degree of convergence in revenue growth across the operators
• Revenue growth across the Big 4 operators converged somewhat, as the Average RGU growth by operator
previous leaders, Sky and Virgin Media, slowed, and BT and TalkTalk
accelerated: 6%
5%
⎻ BT‘s revenue growth improved a little, predominantly due to recent 4%
improvements in broadband net adds flowing through, but it remains 3%
low at -7%, hit by backbook pricing and ‘fairness agenda’ drags, with 2%
1%
significant improvement not likely until late 2021 and 2022 when its 0%
new in-contract price increase, ultrafast price premia and -1%
annualization of ‘fairness agenda’ drags should take effect -2%
-3%
⎻ Virgin Media’s revenue growth was hit by its postponed 2020 price -4%
rise, and will not recover from this until the rescheduled March 2021 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
price rise takes full effect in Q2 2021 BT Consumer Virgin Media Sky TalkTalk Total
⎻ Sky’s revenue growth was hit by lockdown returning for part of Total based on BT Consumer, Virgin Media, Sky, TalkTalk.
quarter, with this hitting its ‘pubs and clubs’ sports subscription [Source: Enders Analysis, company reports]
revenue base, an effect likely to be even more pronounced in Q1
2021 given the full lockdown in force for the vast majority of the Consumer revenue growth by operator
quarter. Underlying growth however looks relatively healthy, with 6%
Sky less exposed to backbook pricing pressure than it peers 4%
⎻ TalkTalk’s has not reported for the quarter; we assume that its recent 2%
ARPU improvement has continued. It remains under backbook 0%
pricing pressure, but has recently introduced annual in-contract price -2%
increases which will help ease this in 2021 and 2022 -4%
-6%
• None of the operators are thus likely to start 2021 well, but should recover
-8%
during the year as pricing recovers from the various hits suffered during
-10%
2020 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
BT Consumer Virgin Media Sky TalkTalk
Based on different accounting standards for TalkTalk prior to June 2018.
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 7Falling ARPU for all
• ARPU growth was negative for all of the Big 4 operators, with modest Subscriber ARPU growth
improvements at BT and TalkTalk more than offset by substantial declines
at Virgin Media and Sky 4%
2%
• The latter two were hit by temporary factors, i.e. a postponed price rise and
lockdown hit to pubs and clubs respectively, but these effects will both be 0%
sustained through Q1 2021
-2%
-4%
-6%
-8%
BT Consumer Virgin Media Sky TalkTalk on-net Total
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
[Source: Enders Analysis, company reports]
RGU ARPU growth
4%
2%
0%
-2%
-4%
-6%
-8%
BT Consumer Virgin Media Sky TalkTalk on-net Total
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 8New customer pricing reasonably firm, and converging to high speed as standard
• Broadband pricing has been fairly firm overall, although entry level pricing Broadband entry level pricing, new customers (£/month)
has been drifting up as operators equalise pricing across entry level and
high speed. This is likely in part to drive high speed adoption (to maintain 35
Openreach discounts) and partly to prepare for full fibre migration (with 30
Openreach’s full fibre wholesale offering only offering high speed tiers). 25 £25
Average high speed pricing has been roughly stable in 2020 and into early
20
2021, although at a lower level than 2019
15
• BT has sustained a slightly more competitive level in the latter half of 2020 10
and early 2021, moving to be slightly cheaper than Virgin Media and only a
5
little more expensive than Sky
0
• TalkTalk has got more aggressive into 2021, and now it is clearly the Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
cheapest of the Big 4 main brands, with the others in a fairly tight band. We BT Virgin Media Sky TalkTalk Average
would note that both BT and Sky are more competitive on their discount Prices are snapshots taken approximately in the middle of each labelled quarter.
[Source: Enders Analysis, company websites]
sub-brands (Plusnet and NOW respectively), which compete with TalkTalk
in discount-focused channels
Broadband high speed pricing, new customers (£/month)
35
30
25 £26
20
15
10
5
0
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
BT Virgin Media Sky TalkTalk Average
Prices are snapshots taken approximately in the middle of each labelled quarter.
[Source: Enders Analysis, company websites]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 9Backbook pricing pressure partly driven by Ofcom-mandated notifications
• From 15 February 2020 (with some interruption due to the lockdown) Contract status of customers by provider, September 2019
operators have been obliged to send soon-to-be out-of-contract broadband
subscribers a notification outlining their alternatives (End of Contract 100%
Notification—EOCN), including re-contracting and/or switching to another 90% 24% 25%
30%
provider, and giving ‘best price’ details including prices available to new 80% 42% 42%
70% 61%
customers only
60%
48%
• This will have stimulated some churn and some re-contracting to cheaper 50% 49%
31%
options, and it will be an increasing effect as contracts expire, building over 40% 55%
39%
one to two years as the base cycles through 30% 23%
20%
• Operators are also obliged to send annual notifications with similar 10%
29% 28% 26%
14% 19% 16%
information to all those out-of-contract (Annual Best Tariff Notification— 0%
ABTN), with this having to be done before 15 February 2021 (and annually BT EE Plusnet Sky TalkTalk Virgin Media
thereafter). Most of the operators have delayed this towards the end of the New contract Re-contracted Out-of-contract [Source: Enders Analysis, Ofcom]
period, with most likely to having been sent in late Q4 2020 and early Q1
2021
Proportion of revenue at risk if OOC customers switched to ...
• All of the operators have some exposure to out-of-contract customer being 18%
on higher tariffs than new customers, although this does vary considerably 16%
15.5%
by operator as shown in the chart opposite. This analysis is sourced from 14% 13.2%
Ofcom figures from September 2019; we note that the exposure has likely 12%
fallen at all operators since then, partly due to reduced out-of-contract 10%
pricing, and partly due to increased new customer pricing 8% 7.1%
6.4%
5.5%
6%
• We expect the overall industry impact of the notifications to be modest 3.5%
4% 2.9%
(Price rises return in force
• Although a mere six months ago it looked like bumper annual price rises for • TalkTalk has moved back to annual rises even for in-contract customers,
existing customers was a legacy policy, forgoing this practice has proven to with most subject to a £2 per month rise from 1 April 2021, and then an
not be popular enough with consumers to counteract the very significant annual CPI+3.7% rise from April 2022
lost financial benefits, resulting in BT and TalkTalk both returning to supra-
• Virgin Media implemented its delayed 2020 price rise on 1 March 2021,
inflationary annual increases, albeit with more transparency than was the
with most of the impact to be felt in Q2 2021
case before
• Sky is also implementing a price rise from April, with a range of increases
• BT has moved to a policy of RPI+3.9% increases from April 2021, albeit only
across broadband, call packages and pay TV, with the overall increase
applied to those that have signed up or re-contracted after the
capped at £6 a month for each customer
announcement in September (for whom the rise is embedded in their
contract), ensuring that the rises are not unexpected
• Further details of pricing changes are shown in the Appendix
Existing customer pricing changes
Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21
Inflation-linked rise only
1 March 2020
31 March 2021
1 September 2019
1 March 2021
1 April 2020
1 April 2021
1 April 2021
BT Virgin Media Sky TalkTalk [Source: Enders Analysis, company websites]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 11Full fibre regulation: The mist clears…somewhat
• On 18 March 2021 Ofcom published its long awaited Ofcom’s copper and full fibre new regulation summary
final statement on the regulation of Openreach’s
Area 2 Area 3
wholesale rates for the next five years from 1 April
2021 At least one planned full fibre or
Definition No planned competitor
cable competitor
• The statement is of course in line with various
previous consultations, adding detail in various areas, % of premises 70% 30%
with the general picture being that of considerable MPF Flat prices in real terms (currently
forbearance on Openreach’s pricing to allow a return (copper) £7)
to be made on full fibre roll-out Same as Area 2 given current
Flat prices in real terms (currently
FTTC 40/10 (anchor) Openreach build-out
• There are two areas where the detail is of particular £5 in addition to MPF—total £12)
importance—‘fair bet’ return and Openreach’s commitments
FTTC (all other
discount pricing plan flexibility— but here Ofcom left No charge control
bandwidths)
considerable uncertainty (see UK full fibre
regulation: The mist clears…somewhat [2021-029]) FTTP 40/10 FTTC 40/10 plus a fibre premium FTTC 40/10 plus a fibre premium
(anchor) of £1.70 (total £14) of £1.70 (total £14)
• BT has responded positively to the increased
certainty on the bulk of the regulation though, and FTTP (all other
No charge control No charge control
has officially confirmed its 20 million premises bandwidths)
passed with full fibre target by the mid- to late-2020s Leased lines Flat prices in real terms Flat prices in real terms
• It further stated that the regulation allows them to Dark fibre No requirement to supply Cost-based charge control
ramp up roll-out to 3 million premises passed a year
(or 750k/quarter), up from 550k/quarter in Q4 2020, Duct and pole access Cost-based charge control Cost-based charge control
which would enable them to hit the 20 million target No requirement to offer new copper services where fibre is available
in 2026 once 75% coverage is reached within an exchange area. Once full
Withdrawal of copper coverage is reached in that exchange area and two years have passed
• It may yet announce a further acceleration and/or since 75% coverage was reached, charge controls on copper will be
target extension, with 20 million (or roughly two removed, effectively allowing copper withdrawal
thirds coverage) unlikely to be the long term limit of Prices are per month.
their coverage ambitions [Source: Ofcom]
The recovery stutters: UK broadband, telephony and pay TV trends Q4
12
2020 [2021-033]Full fibre and ultrafast adoption tracking: strong trends, but will stall next quarter
• The overall Openreach FTTP adoption rate rose slightly in Q4, as the Openreach full fibre adoption where available
adoption rate by non-BT providers rose following product launches in the
latter stages of 2020, although BT does still dominate overall adoption 35%
30%
• The adoption rate had been declining due a mix effect, as much of
Openreach’s early FTTP roll-out was to rural areas as part of BDUK 25%
(Building Digital UK), and in new housing developments; FTTP is the only 20%
option in these areas (and often BT the only service provider), with 15%
Openreach offering standard speeds at standard pricing but over FTTP,
10%
resulting in high initial penetration. Openreach’s current roll-out is largely
done on an overlay basis, with existing customers retaining their copper 5%
connections, although most new ones will be over FTTP due to current 0%
‘special offer’ incentives Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
• The more important metric of ultrafast adoption (i.e. consumers actually BT Consumer Other [Source: Enders Analysis, company reports]
paying a premium for 100Mbps+ speeds) is rising much more firmly, and has
now hit 20% at BT Consumer despite the rapid ongoing expansion in the
BT Consumer ultrafast (>100Mbps) adoption where available
addressable base, which is very encouraging at this early stage. Given the
high premia currently charged for ultrafast speeds—£13 to £33 a month—if 25%
adoption settles at 20% this would give BT an ARPU boost of around 5- 20%
20% 17%
15%, a very attractive prospect
• Adoption of both FTTP and ultrafast will unfortunately likely stall in Q1 15% 12% 13% 12%
11%
2021, as Openreach suspended new FTTP installations for much of the 9%
10%
quarter due to the CV-19 spike early in the year 7% 7%
5%
0%
Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
Estimated by dividing BT Consumer’s ultrafast penetration by Openreach’s ultrafast coverage.
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 13Q4 2020 trends: broadband net adds still strong
• Market broadband net adds were gain strong, with an improvement on (the Broadband organic net adds (000)
very strong) Q3, although this sequential improvement is likely seasonally
driven 200 186
150
• The lockdown-driven boost is thus continuing, with working-from-home
encouraging previously ‘smartphone-only’ households to reassess this 100 68
48 55
decision 50 38
10
• Virgin Media continued to lead the market in net adds terms, but it will be 0
hit in Q1 2021 by the announcement and execution of its price increase,
-50 -32
bring its net adds down to close to zero, albeit only temporarily
-100
• BT’s renaissance continued, helped by improving customer service and BT retail* Virgin Sky TalkTalk Vodafone Other Total
(slightly) cheaper pricing Media
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 *Includes EE.
• Sky and TalkTalk have not reported figures, but we expect that Sky [Source: Enders Analysis, company reports]
continued to recover from its Q2 issues, and that TalkTalk also improved,
and the latter may improve further into Q1 2021 given its more aggressive Broadband organic subscriber growth
pricing
7%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
BT retail* Virgin Media Sky TalkTalk Total
*Includes EE.
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 14High speed broadband adoption continues apace
• High speed net adds had another strong quarter, with penetration rates High speed net adds (000)
continuing to rise across all operators
800
• Pricing is now similar for entry level broadband and the lowest tier of high
speed broadband for all of the Big 4 main brands, but non-high speed is still 600 526
offered at a reduced price from smaller discount providers and the discount
brands of the big providers, and thus there may be a residual base of entry 400
level speed customers who will have to move to a higher priced product as 200
200 127 140
full fibre is rolled out and copper withdrawn, although that is not for some 62 41 18
years yet 0
BT retail* Virgin Sky TalkTalk Vodafone Other Total
Media
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 *Includes EE.
Sky figures are estimates.
Virgin Media is 30Mbps+ and others are all fibre connections.
[Source: Enders Analysis, company reports]
High speed penetration of broadband bases
100%
80%
60%
40%
20%
0%
BT retail* Virgin Media Sky TalkTalk Vodafone
*Includes EE.
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 15Q4 2020 trends: line rental nets add turn back positive, in spite of themselves
• Line rental net adds continued to improve, returning to positive figures for Line rental net additions (000)
both BT and the market as a whole
120
• While line rental volumes have recovered, it is still mostly taken as part of a 100
72
broadband package for the purpose of broadband, with improved 80
60
broadband volumes driving the improvement in line rental. Indeed, the 40
decline in BT’s line rental only base continues to be steady and in line with 20 5
recent quarters 0
-20 -2 -7
• Comments from the operators suggest that call volumes are still declining -40 -29
-60
as fast if not faster than in the past, as many consumers have been -80 -58
introduced to more modern forms of communication during lockdown such BT retail* Virgin Media Sky TalkTalk Other Total
as video calling for work purposes, and continued using these for personal
*Includes EE.
purposes Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Organic net adds.
Figures are residential only.
[Source: Enders Analysis, company reports]
Line rental subscriber growth
1.2%
1.0%
1.0%
0.8% 0.7% 0.7%
0.7%
0.6% 0.6%
0.6% 0.5%
0.4%
0.2% 0.1% 0.1%
0.0%
0.0%
-0.2% -0.1% -0.1% -0.1%
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 16Q4 2020 trends: pay TV bounces back, outlook positive for 2021
• Pay TV net adds had a very strong quarter, largely due to a strong Pay TV net additions (000)
performance at Sky, which was in turn largely driven by NOW TV
200 150
• The NOW TV performance may be partly seasonal, and is in any case 150 108
unlikely to repeat every quarter, but we believe that the overall trend in 100
2021 will be better than 2020, with Virgin Media having launched its new 50
‘Virgin TV 360’ platform and all providers offering multiple SVODs 0
-50 -10 -5
incorporated into their platforms either fully bundled or available as an -28
-100
add-on
-150
-200
BT retail* Virgin Media† Sky TalkTalk Total
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 *Includes EE.
†Virgin Media net adds include free ‘M’ tier subscribers not taking TiVo.
Organic net adds.
[Source: Enders Analysis, company reports]
Pay TV subscriber growth
6%
4%
2%
0%
-2%
-4%
-6%
-8%
Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
BT retail* Virgin Media Sky TalkTalk Total
*Includes EE.
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 171. Market trends and outlook
2. Appendix
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 18Broadband subscribers
Broadband subscribers and net adds
Subscribers (000) Net adds (000)
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
BT retail* 9,131 9,116 9,117 9,115 9,203 -13 -14 1 38 48
Virgin Media† 5,271 5,279 5,318 5,365 5,420 2 8 39 47 55
Sky** 6,105 6,104 6,036 6,037 6,047 27 0 -68 0 10
TalkTalk 4,241 4,248 4,228 4,176 4,144 -35 7 -20 -52 -32
Vodafone 687 751 793 838 876 20 64 74 45 38
Others 1,771 1,831 1,943 2,025 2,093 123 60 80 82 68
Total 27,205 27,330 27,435 27,596 27,782 124 125 105 161 186
Organic net adds.
*BT retail includes EE.
†Virgin Media cable households only.
**Excludes Ireland; Ireland subscribers estimated in latest quarter, otherwise reported by ComReg.
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 19Consumer revenue
Consumer revenue and revenue growth
Consumer revenue (£m) Growth
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
BT retail* 1,114 1,103 1,047 1,037 1,035 -5.4% -4.1% -6.1% -7.9% -7.1%
Virgin Media† 869 860 837 850 852 1.8% 1.1% -1.8% -0.1% -2.0%
Sky** 1,948 1,854 1,819 1,981 1,929 2.5% -1.7% -6.5% 0.5% -1.0%
TalkTalk‡ 313 309 295 296 299 -1.9% -3.7% -7.8% -5.1% -4.4%
Total 4,244 4,127 3,999 4,162 4,114 -0.2% -1.9% -5.6% -2.3% -3.1%
*Includes BT Sport direct revenue.
**Virgin Media UK cable, includes SOHO revenue.
†Includes UK and Ireland.
‡Includes wholesale and business revenue but excludes corporate revenue.
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 20In/out-of-contract and existing/new customer pricing
• The charts opposite show the pricing differential for customers who are in Unlimited entry level broadband, in/out-of-contract pricing
contract versus customers who are out of contract, based on current new
customer pricing and current list pricing for those out-of-contract £60
£51.00
£50
£40 £36.99
£30.00
£27.99 £27.99 £27.00
£30 £25.00
£22.95
£20
£10
£0
BT retail Virgin Media Sky TalkTalk
Pricing includes line rental.
In-contract price Out-of-contract price BT and Virgin Media include free weekend calls.
Prices valid on 30 November 2020.
[Source: Enders Analysis, company websites]
Unlimited high-speed broadband, in/out-of-contract pricing
£60
£51.00
£50
£36.99
£40
£32.00
£29.95
£27.99 £27.99
£30 £26.00
£23.50
£20
£10
£0
BT retail Virgin Media Sky TalkTalk
In-contract price Out-of-contract price Pricing includes line rental.
BT and Virgin Media include free weekend calls.
Prices valid on 30 November 2020.
[Source: Enders Analysis, company websites]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 21Front/backbook pricing differential from Ofcom
• The chart opposite shows the pricing differential between out-of-contract September 2019 pricing differential figures (£/month)
and new customers and out-of-contract and re-contracted customers by
broadband provider in September 2019, based on actual average prices £16
£14.08
paid within the customer bases £14
£12.00
£11.42
£12
£9.33 £9.33 £9.33
£10 £8.50
£7.50 £8.00
£8
£6.17 £6.17
£6
£4.25
£4
£2
£0
BT EE Plusnet Sky TalkTalk Virgin Media
Out-of-contract to new contract Out-of-contract to re-contracted
[Source: Enders Analysis, Ofcom]
• The chart opposite shows the pricing differential between out-of-contract November 2018 pricing differential figures (£/month)
and new customers and out-of-contract and re-contracted customers by
£12 £11.42
broadband provider in November 2018, based on actual average prices £10.58 £10.58
paid within the customer bases £10
£7.83 £7.75
£8
£6.25 £6.25 £6.75
£5.92 £5.75
£6 £5.42
£4.58
£4
£2
£0
BT EE Plusnet Sky TalkTalk Virgin Media
Out-of-contract to new contract Out-of-contract to re-contracted
[Source: Enders Analysis, Ofcom]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 22Wholesale price control and Openreach’s new discounted pricing
• From 1 April 2018 Openreach’s 40/10 FTTC-based product was price Openreach wholesale pricing (£/month, excluding VAT)
regulated for the first time, reducing its cost to £5.80 a month, and with
other charges remaining unchanged the 80/20 premium increased to £4.15 £20
£16.98 £17.07
£18
a month
£16 £2.55
£4.15 £13.11
• Openreach’s volume discount offer, discussed in more detail in BT Q1 £14
£1.00
£12
2018/19 results: On target in the short term, making progress for the long £7.40
£10 £5.80 £4.99
term [2018-074], further reduces these premia to £4.99 and £1.00 £8
Products
under
respectively if the full discount is achieved £6 price
£4 £7.03 £7.12 £7.12
£2
£0
Before price control After price control After Openreach's
volume discount
Copper access FTTC 40/10 Premium for FTTC 80/20
[Source: Enders Analysis, BT]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 23Subscriber and subscriber ARPU growth
• The chart opposite shows year-on-year growth rates of subscribers (i.e. Average subscriber growth by operator
household subscriptions to any product) for the Big 4 fixed line operators in
the UK 5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
BT Consumer Virgin Media Sky TalkTalk
Growth is not adjusted to be organic.
[Source: Enders Analysis, company reports]
• The chart opposite shows the average revenue per subscriber year-on-year Subscriber ARPU growth by operator
growth for the Big 4 fixed line operators in the UK, including a line for BT
Consumer excluding BT Sport direct revenue 6%
4%
2%
0%
-2%
-4%
-6%
-8%
Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
BT Consumer Virgin Media Sky TalkTalk
BT financials prior to June 2017 quarter are based on different accounting standards.
*Excludes estimated direct revenue impact of BT Sport.
[Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 24Big 4 versus smaller player broadband growth
• Four years ago, broadband market subscriber growth very closely mirrored Broadband net adds (000)
that of the Big 4 players, both of which were growing at a very healthy 3-4%
800
• Since then, market growth has slowed, and the gap between the top four
player growth and the market has grown considerably due to a number of 600
factors:
400
⎻ Vodafone has become a much more significant player in the market,
and, although it slowed slightly in 2019, it has been pushing harder 200
than ever in early 2020
⎻ ‘Other DSL’, i.e. smaller ISPs who source connectivity at least in part 0
directly from Openreach (not via TalkTalk), has been becoming
-200
increasingly significant, with a number of providers becoming high
Big 4 Vodafone Other DSL Other Total
speed-only, thus removing the requirement to use
complex/messy/fault-prone local loop unbundling products 2016 2017 2018 2019 2020
[Source: Enders Analysis, company reports]
(MPF/SMPF)
⎻ The growth of alternative ‘full fibre’ providers has also taken some Broadband subscriber growth
share from the market. Although many remain very small, and all have
struggled to achieve strong take-up, in a slow growth market they are 4%
nonetheless significant 3%
2%
1%
0%
-1%
Big 4 Total [Source: Enders Analysis, company reports]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 25Ofcom broadband complaints
Broadband complaints per 100,000 customers
50
45
40
35
30
25
20
15
10
5
0
Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20
BT Sky TalkTalk Virgin Media EE Plusnet Industry average
[Source: Ofcom, Enders Analysis]
The recovery stutters: UK broadband, telephony and pay TV trends Q4
26
2020 [2021-033]Pricing outside the ‘top four’
• The chart below compares unlimited broadband prices from a wider
selection of operators
• The cheapest available unlimited broadband packages offered on the
operator websites are shown, with differing ‘free calls’ packages illustrated
with colours if available
Unlimited broadband dual-play, new customer pricing (£/month)
£28.99
£30 £27.99 £27.99
£25.00
£25 £22.00
£22.95 £23.00
£21.50
£19.99 £20.00
£18.90 £18.95 £18.99 £18.99
£20 £18.00
£15
£10
£5
£0
No bundled calls Free weekend calls Free weekend & evening calls
Includes line rental, excludes all temporary price reductions.
Prices are lowest available unlimited broadband on each brand as of 29 March 2021.
[Source: Enders Analysis, company websites]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 27New customer pricing outside the ‘top four’
• The chart opposite shows new customer pricing at providers outside the
top four over the last two years Pricing outside the ‘top four’ (£/month), lowest price available
35
30
25
20
15
10
5
0
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
Post Office DirectSave Origin
POP Plusnet John Lewis
SSE Vodafone Utility Warehouse
Average
March 2021 prices as at 29 March 2021.
[Source: Enders Analysis, company websites]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 28‘Top four’ ultrafast broadband pricing for new customers
• The chart opposite and table below show pricing for ultrafast broadband Ultrafast offers and pricing by provider, £ per month
packages for new customers at the ‘top four’ providers
70
60
50
40
30
20
10
0
BT Virgin Media Sky TalkTalk
100Mbps-150Mbps 200Mbps 300Mbps-350Mbps
500Mbps 900Mbps-1Gbps Prices on 29 March 2021.
[Source: Enders Analysis, company websites]
Ultrafast broadband pricing by provider
100Mbps 150Mbps 200Mbps 250Mbps 300Mpbs 350Mbps 500Mbps 900Mbps 1Gbps
BT £39.99 £49.99 £59.99
Virgin Media £27.99 £33.99 £39.99 £45.99 £66
Sky £35
TalkTalk £29.95 £40
Prices on 29 March 2021.
[Source: Enders Analysis, company websites]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 29Summary of recent price rises
2021 price rises
Product line Date effective Price change details
BT
Broadband and line rental March 2021 - Price rise of CPI + 3.9%
Sky
Broadband 1 April 2021 - Sky Broadband Essential (11Mbps package) to rise in price by £3 per month, a 14% rise for in-contract customers
TV - Sky Broadband Superfast price will rise by £1 per month, a 4% increase for in-contract customers
- Sky Signature TV price will rise by £1/month, a 4% increase for in-contract customers
- Sky TV Multiscreen to rise in price by £1 per month, an 7% rise for in-contract customers
- Sky HDTV price will rise by £1 per month, a 17% increase for in-contract customers
Calls 1 May 2021 - Sky Talk Anytime Extra price will rise by £2 per month, a 20% increase for in-contract customers
- Sky Talk International Extra price will rise by £2 per month, a 17% increase for in-contract customers
Virgin Media
All customers March 2021 - Average price increase of £3.63 per month, or 4%, with most between £2.50-4.50
TalkTalk
Broadband 1 April 2021 - Broadband customers who contracted before 10 November 2020, excluding those in ‘Fixed Price Plus’ tariffs and
vulnerable customers, will see prices rise by £2/month
[Source: Enders Analysis, company websites]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 30Summary of recent price rises
2020 price rises
Product line Date effective Price change details
BT
Broadband and line rental March 2020 - CPI-linked price rise of 1.3% for customers who signed up or re-contracted between 11 January 2019 and 16
January 2020
Sky
Broadband 1 April 2020 - Sky Broadband Essential (11Mbps package) to rise in price by £2 per month, a 10% rise for in-contract customers
TV - Sky Entertainment price will rise by £2 per month, a 9% increase for in-contract customers
- Sky TV Multiscreen to rise in price by £1 per month, an 8% rise for in-contract customers
- Sky HDTV price will rise by £1 per month, a 20% increase for in-contract customers
Virgin Media
All customers n/a - Delayed its 2020 price rise due to the pandemic
TalkTalk
Calls January 2020 - Unlimited calls boost price rise of £2, a 20% increase
[Source: Enders Analysis, company websites]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 31Summary of recent price rises
2019 price rises
Product line Date effective Price change details
BT
All customers - No price rises in 2019
Sky
Broadband 1 April 2019 - Broadband to increase £1.00, Fibre to increase £2.00 across all packages
Calls - Talk Evening and Weekends to increase £1.00, Anytime to increase £2.00
TV - £2.00 increase for Entertainment, Cinema increases £1.00 for those out of contract
- Q Multiscreen to increase £1.00
Virgin Media
All customers September 2019 - Average price increase of 4.9% across customers or £3.30 more
Broadband solus - £3.50 increase
TalkTalk
Broadband 1 August 2019 - Simply broadband increased 6% to £32.95
TV - Essentials TV increased 4% to £34.95
Calls 1 June 2019 - Unlimited calls boost increased 18% to £10.00, customers on fixed low price plans also affected
Broadband (incl. line rental) - Fast broadband increased 11% to £30.00
- Faster fibre increased 7% to £36.00
[Source: Enders Analysis, company websites]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 32Summary of recent price rises
2018 price rises
Product line Date effective Price change details
BT
Broadband (incl. line rental) 16 September 2018 - 4-7% increase
Line rental - £1.00 increase for BT line rental customers with broadband from another operator
Calls - 5-12% increase
TV - Between £1.00 and £2.00 increase to all packages
Sport - £2.50 increase for BT TV customers to £6.00
- For non-BT broadband customers, 8% increase to £27.99
- For BT broadband customers, 20% increase to £12.00
Broadband (incl. line rental) 7 January 2018 - 5-6% increase
Calls - 5-8% increase to calls ppm and call set-up fee
Sport - For non-BT broadband customers increased by 13% to £25.99
- For BT broadband customers increased by 33% to £10.00
Sky
Broadband (incl. line rental) 1 April 2018 - 4% increase for customers on unlimited ADSL broadband and limited fibre (38Mbps)
TV - £1.50 increase for customers on legacy TV packages
- £0.50 increase for Sky Sports
Virgin Media
All customers November 2018 - Average price increase of 4.5% across customers
Triple and dual-play - £3.49 increase
Broadband solus - £2.99 increase
TalkTalk
Broadband (incl. line rental) July 2018 - Simply broadband increased 5% to £31.20
TV - Plus TV increased 3% to £43.95
- Essentials TV increased 5% to £33.70
- Unlimited calls boost increased 18% to £10.00, customers on fixed low price plans also affected
[Source: Enders Analysis, company websites]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 33Summary of recent price rises
2017 price rises
Product line Date effective Price change details
BT
Broadband (incl. line rental) 2 April 2017 - Up to 5-6% price increase for existing customers
Calls - Up to 6-11% increase to calls ppm and call set-up fee
Sport - Sport for non-BT broadband customers increased by 5% to £22.99
- For BT broadband customers Sport increased by 25% to £7.50
1 August 2017 - BT TV customers started being charged £3.50 for BT Sport
Sky
Broadband 1 March 2017 - Majority of existing customers’ prices increased 33% to £10.00
Line rental - Line rental increased by 9% to £18.99
TV - £1.00-£3.00 increase for customers on legacy TV pricing
Calls 1 April 2017 - 12% increase to call connection fee
- 9% increase to UK calling out-of-bundle
- 68% increase daytime calls to mobile
Virgin Media
Bundles 1 November 2017 - Average price increase of 4.7% across customers
- Triple-play and dual-play broadband and phone bundles increased by between £1.99 and £3.99
Broadband solus - Broadband-only customers pay either £1.99 or £2.99 extra
TalkTalk
Broadband (incl. line rental) 1 August 2017 - Simply broadband increased 6% to £29.70
- Essentials broadband & TV increased 6% to £32.20
- Plus broadband & TV increased 4% to £42.20
Calls - 11% increase to standard call connection fee and 40% increase to premium connection fee
- 8% increase to UK calling out-of-bundle
[Source: Enders Analysis, company websites]
The recovery stutters: UK broadband, telephony and pay TV trends Q4 2020 [2021-033] 34Disclaimer
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