Report Overview

UK broadband, telephony and pay TV trends Q2 2016

Volumes slow, but revenue robust

• UK residential communications market revenue growth was broadly unchanged at 5% in Q2, despite volume growth continuing to slow across all products, with pricing and fibre adoption helping to boost ARPU

• Virgin Media continued to gain momentum on the back of its Project Lightning network extension, and this impact is likely to continue to grow as the roll-out continues. Its ARPU was quite weak, hit by promotional discounting and other temporary factors, and this should recover in time, helped by its early price increase schedules for November

• The combination of weakening market growth and an accelerating Virgin Media is putting pressure on the other operators, all of which were weak in subscriber terms. However, firm pricing allowed BT and Sky to maintain/improve their strong revenue growth, with TalkTalk suffering more from the squeeze

• These factors bode for a competitive Q3, with the marketing battle at the start of the football season resulting in very aggressive offers and extensive advertising from the major players. Underlying price still however looks firm, with BT having already implemented an early price rise and Virgin Media scheduling one, with Sky and TalkTalk expected to respond in Q4