Amid inflationary pressures, operators are looking to support consumers, although mid-contract price rises have supported top line trends
Operators discuss network investments but remain coy on M&A: Infrastructure – whether combining or deploying – was a topic of conversation this results season, with operators acknowledging ongoing speculation. For Three, this means the continued rumours of a merger with Vodafone in the UK, although it stated that its focus is currently on closing the sale of its towers to Cellnex (and divesting 1,000 sites in line with its commitment to the CMA). Vodafone also refused to be drawn into discussing a possible tie-up with Three, only confirming that there is “a lot going on behind the scenes”. Liberty Global, meanwhile, outlined its UK investment plans through its newly-formed fibre joint venture, adding that it could be open to acquiring smaller broadband providers if there was regulatory support. BT also talked up the pace of its fibre build, but warned that infrastructure competition may result in some casualties in future.
Rising energy prices are driving up costs: In addition to potential structural change, telcos described current operational and commercial headwinds, including the surging cost of energy, high inflation and greater price sensitivity among consumers. According to Vodafone, rising energy prices mean that it faces a €300m increase in costs this fiscal year, while Magyar Telekom has cut electricity consumption by 6% to help control opex. BT also highlighted the challenge of balancing inflationary and economic pressures, with its customers’ average monthly mobile usage growing 150% as prices have fallen 13%. At the same time, operators are stepping up efforts to support consumers and relieve pressure on household finances. BT stated that it continually raises awareness of its social tariffs (for which it has frozen prices this year), while Vodafone has launched a £10 per month 5G plan for individuals receiving certain benefits.
Operators conscious of the optics around mid-contract price rises: As telcos look to support customers, many have recently imposed in-contract price rises. Given that these annual uplifts are typically linked to inflation rates, the current economic environment has made for higher-than-expected increases in price. Three stated that it believes its customers seemed comfortable with the visibility and certainty of the price rises it imposed, which were not as great as some of its competitors. Nevertheless, while price rises have supported some operators’ top lines, there have been calls for regulators to tighten the rules and allow customers to walk away if they find increases unaffordable. While such intervention appears unlikely for now, policymakers will be closely monitoring operator transparency and communication so that consumers better understand how their monthly bill might evolve during the contract term.
