It’s that time again for us to line up the telcos and judge. Here we’ll be having a look at how Telefonica UK, Orange and AT&T measured up over the last three months.

O2 spending needs to continue to consolidate top spot

Telefonica’s UK business continued writing cheques through the last quarter to correct a pretty poor record to date, which does seem to be paying off. Aside from capturing the top-spot when it comes to market share, total revenues increased 2.9% year-on-year to $1.4 billion, while service revenues were up 1.2%.

“We have delivered another solid quarter driven by our relentless focus on customers,” said Patricia Cobian CFO for Telefónica UK. “We are growing top and bottom line in a very competitive market while maintaining the highest levels of customer loyalty and satisfaction in our sector. Our newly acquired mobile spectrum allows us to further strengthen our award winning network, enhancing our connectivity for our customers while boosting the economy and laying the foundations for 5G in Britain.”

Low customer churn is key for a successful telco, and to lower churn a positive customer experience is needed. O2 has regularly lagged at the bottom of the performance rankings in the UK, though investing £523.6 million to obtain 40MHz of immediately useable 4G spectrum (2.3GHz) and 40MHz of 3.4GHz spectrum for 5G certainly puts it in a promising position. Alongside the earnings, O2 has also announced it will deploy the new 4G spectrum at over 1,000 sites across the UK by the end of 2018, with Leeds and Nottingham on the list. These sites will add to the 60 sites in London already using the new airwaves, after the spectrum was activated within 24 hours of Ofcom making them available for use.

The bells and whistles O2 offers through its priority moments proposition will only get the telco so far; to be relevant in the future experience has to be at the highest levels. CAPEX over the last quarter was £161 million, which at 8.6% of total revenues is pretty low compared to some. The telcos who are in the best position moving forwards are the ones who are spending big on improving network performance, the Orange group spent 15.2% of revenues this quarter, while even Three, notorious for being cheap, spent 19.1% during Q1.

Customers are not very forgiving. O2 has been making some positive steps forward, but unless it continues to correct network inadequacies it will lose the number one spot soon enough.

Convergence leads the way for revenue boost at Orange

The Orange group has reported a 2% year-on-year boost for total revenues, taking the total for the quarter to €10.1 billion, with the management team pointing towards the convergence as the big winner.

“In this first quarter we successfully built on the positive momentum from 2017, with growth in revenues of 2.0%, adjusted EBITDA growth of 3.8% and a strong commercial performance across all our geographies,” said CEO Stephane Richard.

“In this pivotal time for the Group, these strong results continue to demonstrate the relevance of our strategy and in particular, our efforts to differentiate ourselves through excellent networks and customer relations. Over 90% of the population across our European countries now have access to 4G, this includes 97% coverage in France. Having maintained a steady rhythm of deployment, we remain the European leader in fibre, bringing connectivity to 27.7 million households.”

Convergence is king here, with 10,541 million customers as of 31 March, a 10.4% year-on-year with revenues tied to convergent customers up 14.1% in the first quarter. Convergence is a golden egg sought by almost every telco on the planet, but few are making it work as effectively as Orange.

Looking at total subscriber numbers, the group is looking in a very healthy position. 4G subscribers now stand at 48 million customers, up 45% year-on-year with an additional 15 million customers, while fibre brought in an additional 130,000 net sales in France, 169,000 in Spain and 34,000 in Poland. Unlike other telcos across the continent, BT for example, the focus on improving customer experience as opposed to shiny content offerings seems to be paying off considerably.

Media business is growing, but AT&T ambitions hang in balance

The AT&T wireless business is a monster, but the future has been pegged on entertainment. DirecTV Now is progressing well, with an additional 312,000 subscribers this quarter, but the battle with the Department of Justice could decide fortunes here.

“We’re off to a good start in 2018, both in growing our customer base and in building the world’s premier gigabit network,” said Randall Stephenson, AT&T CEO. “Our investment in customer growth and our integrated service offerings helped drive solid first-quarter subscriber gains across our wireless, video and broadband businesses.”

Total revenues for the quarter were $38 billion, down 3.4% year-on-year, missing analyst expectations of $39.3 billion, but most of this news has seemingly taken a backseat in the last couple of weeks. If you look at the rest of the business, the company is doing okay and does seem to be progressing towards the 5G world at a steady pace, however the court case has been hogging the headlines.

To compete against the tech giants, who are only leaving crumbs of profits to fall down to the communications providers at the bottom of the totem pole, AT&T needs to enhance its media offering. We’re not necessarily sure content is going to be the silver bullet to save telcos, look at the disaster BT got itself in with its sports ventures, but for those who have chosen the content path it can’t be done half-heartedly; winning the case against the Department of Justice to merge with Time Warner is critically important.

The slowdown in profitability in the postpaid space, as well as increased competition, make the idea of bundling content services an attractive prospect. AT&T lost 22,000 of the attractive postpaid customers, which was offset by the acquisition of prepaid subscribers, executives will have their eye on reversing this trend with bundling offerings. The signs seems to be positive for AT&T in the court case, however it is far too early to make predictions.