UK telecoms market struggles to find opportunities for growth following another lacklustre year
The UK telecoms market extended its pattern of declining revenue into a fifth consecutive year in 2020, dropping a further 1.9% year-on-year. This was despite gains in subscriber numbers in some of the key growth areas of the market, particularly broadband, as well as increases in voice and data traffic brought about by the long periods of lockdown that were in force throughout the country for much of the year. Those upswings were offset by sharp drops in ARPU resulting from an increased preference for bundling, more competitive pricing, and a reduction in roaming revenue due to Covid-19-related restrictions on overseas travel.
The telco market’s gradual downward trend masks what has otherwise been a tumultuous period for UK industry in general. The full impact of the double-whammy that the country experienced with both Covid-19 and Brexit hitting at around the same time is still far from clear. The OECD found that the UK suffered far more than other G7 countries due to the combined effect of these two major events, however early economic indicators into 2021 suggest that the country has the resiliency and ability to fight back thanks, in part, to the relative success of the Covid-19 vaccination program that has allowed much of the UK population to return to work sooner than its neighbours.
The government is committed to maintaining a strong and competitive telecommunications environment. In policy and in pounds, the industry is receiving a high level of government support for rolling out broadband throughout the country. There is a particularly strong push to extend coverage into more rural and remote areas, with a national Full Fibre broadband access target in 2033. One of the additional downsides to the UK’s withdrawal from the EU, however, is that the country no longer has access to the European Regional Development Fund (ERDF), which previously provided much of the cash for the development of broadband. The UK government must instead fund its fibre-broadband initiatives using internal resources.Key Developments:
- International roaming charges to be reintroduced for travel to Europe.
- By the end of 2020, 38% of UK homes were able to get gigabit-capable broadband. Ultrafast coverage (greater than 300Mb/s) reached 61% of premises.
- Openreach will stop selling copper-based products to fibre-connected premises from September 2021.
- Eutelsat launched a UK-wide satellite broadband service in December 2020 via its Konnect satellite, offering data rates up to 100Mb/s.
- The government acquired a 45% stake in OneWeb, following the UK’s exit from the EU and the country no longer being part of Europe’s Galileo satellite positioning system.
- OneWeb launched its first set of satellites in December 2020, aiming for services to be made available across the country by the end of 2021.
- Liberty Global’s Virgin Media and Telefónica’s O2 were merged in a JV to form Virgin Media O2, in the process creating a major competitor to BT.
- Blocks of spectrum in the 700MHz and 3.6GHz bands were auctioned in March 2021, strengthening 5G deployment.
- This report includes the regulator’s market data reports to Q1 2021, telcos’ financial and operating data updates to June 2021, Telecom Maturity Index charts and analyses, assessment of the global impact of Covid-19 on the telecoms sector, and other recent market developments.
Companies mentioned in this report:
British Telecom (BT), KCom, Virgin Media O2 (VMed O2), Hutchison Three (H3), EE, Vodafone, Liberty Global, Telefónica, Ericsson, Virgin Mobile, Openreach, Eutelsat, Cable & Wireless Communications (CWC), COLT, Dixons Carphone Group/Carphone Warehouse, TalkTalk, Sky, OneWeb.