Big five European telco Q1 results demonstrate early crisis stage resilience in B2C market

Q1 results for Vodafone, Telefonica, Deutsche Telekom, Orange and BT indicate an encouraging degree of business resilience in the European telecommunications industry at large, with few surprises in the B2C market, says GlobalData, a leading data and analytics company.

While all five telcos flagged losses in roaming revenues due to lockdown measures implemented in the final weeks of the quarter, several confirmed a positive or stable mobile contract churn development for the quarter overall – with little to no disruption impact on ongoing business restructuring projects, or 5G strategies. More importantly, all were able demonstrate, to some extent, the way the COVID-19 crisis is accelerating ongoing digital customer experience initiatives. Others were able to point to a small but encouraging growth in service revenues.

Emma Mohr-McClune, Service Director at GlobalData, comments: “At this point, we see different degrees of cautious optimism. Some telcos such as Deutsche Telekom and Orange are so encouraged by their Q1 results they have indicated that they do not expect a significant deviation from their financial objectives for this fiscal year. Others like BT and Telefonica have articulated a more circumspect  approach in withdrawing their FY 2020/21 guidance altogether.”

Nevertheless, at this early stage in the crisis, several of the key performance index (KPI) signals are good. Beyond the categories surveyed here, BT, Orange, Vodafone and Deutsche Telekom all flagged improvements in net promoter score (NPS) over the quarter, and both Deutsche Telekom and Orange highlighted ongoing increases in the penetration of converged service customers within the same period. Furthermore, COVID-19 is serving to heighten operators’ focus on digitalizing customer sales and support channels. Many indicated that the crisis is producing a faster-paced migration of customer care to automated channels – a critical component of all telco strategies to improve the digital/retail sales and support mix.

Mohr-McClune continues: “All telcos throughout Europe and beyond should view the COVID-19 crisis as a golden opportunity to push customers towards digital channels for all their service and support inquiries, and drive retail channel traffic down to an all-time low. All operators worldwide should aim to be the fastest to recover from the COVID-19 downturn, positioning themselves now to adapt to the ‘new normal’. We’re already seeing plenty of evidence of this line of thinking.”

To be sure, all five operators used their Q1 2020 results as an opportunity to restate their views regarding the importance of quality communications services, in terms of guaranteeing economic and societal functioning. Some used the results timing to coincide with new network investment priority statements: BT will accelerate its FTTP build with a target of 20 million premises passed by the mid- to late-2020s. For its part, Deutsche Telekom flagged an accelerated plan to cover half of Germany with 5G by the end of the year.

Mohr-McClune notes: “Certainly, the crisis has been the trigger for 5G spectrum auction delays in many countries. It is also the case that 5G has played a minor role in telcos’ COVID-19 response programs to date. Still, it appears many operators do not yet feel the need to revise their mid-term 5G strategies just yet. 5G will be an important element of the ‘new normal’ adaptation strategy.”

Lastly, there is no evidence that the COVID-19 crisis significantly disrupted the planning and execution of some of the largest M&A and structural separation pipeline projects that were being agreed and completed within the quarter: T-Mobile’s acquisition of Sprint in the U.S. (completed April 1, 2020), the planned JV merger between Telefonica’s O2 UK and Virgin Media (announced May 7, 2020). Various TowerCo-like restructuring or tower sharing projects continued without apparent disruption throughout the quarter.

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