VodafoneThree's launch incorporates a number of swift and astute commercial decisions, which is particularly welcome given the challenging balancing act that the company needs to perform

The network upside will be felt quite quickly for Three customers primarily, with protection for Vodafone customers built in. Longer-term, the Government policy shift towards better coverage may require investment beyond the committed £11bn plan 

We view some moves as helpful to prospects in the broadband market, others less so, and continue to have question marks about the attractiveness of this segment for VodafoneThree

On 3 June 2025, Enders Analysis co-hosted the annual Media and Telecoms 2025 & Beyond Conference with Deloitte, sponsored by Adobe, Barclays, Salesforce, Financial Times and SAS.

With over 700 attendees and more than 50 speakers from the TMT sector, including leading executives and industry experts, the conference focused on how new technologies, regulation, and infrastructure will impact the future of the industry.

This is the edited transcript of Session Three, covering: Vodafone’s strategy; BT’s strategy; the future of fibre; and challenges and opportunities for telcos.

BT hit its FY25 guidance of a modest revenue decline coupled with modest EBITDA growth, and expects more of the same in FY26.

The highlight of the results was consumer broadband returning to subscriber growth despite the altnet onslaught; the lowlight was an increasing decline in Openreach broadband subscribers thanks to other Openreach customers (e.g. TalkTalk) not doing so well.

BT’s longer-term outlook and prospects for a dramatic cashflow turnaround remain strong, with Openreach net losses much more likely to improve than worsen over the next year, and further steps taken to divest/isolate erratic non-UK business segments.
 

Germany suffered a sizeable EBITDA decline in the 2H of FY25, and guidance for European EBITDA next year implies another tough year in FY26 with an underlying 5% decline for Europe as a whole excluding 1&1.

Elsewhere, the UK had a very solid FY25 and is a good news story for the Group with the merger with Three in prospect, but the Rest of World’s contribution is likely to diminish from here.

Various one-offs will support the outlook for next year, but operational execution is at the core of Vodafone’s raison d’être. Beyond some encouraging KPIs, investors continue to await meaningful evidence of such.

The slowdown in telecoms traffic volume growth post-pandemic has persisted for far longer than a simple hangover effect would imply, and has spread from fixed broadband to mobile in many markets

The eventual emergence of the metaverse and/or AI-generated traffic may mitigate this trend, but it is hard to see growth ever returning to a sustained 30%+ per annum level, with around 10-15% likely to prove the new normal

While far from disastrous for telcos, it does have important implications, such as the need to structure pricing more carefully, focus on network quality over capacity, and be more wary of the threat (or opportunity) from MVNOs, FWA and satellite

VMO2 reported solid financials in Q1, with revenue and EBITDA growth both improving and both (just) ahead of full year guidance.

Subscriber momentum however was poor across fixed and mobile, despite customer service improving, with broadband in particular likely to get worse as network buildout slows.

Meeting full year guidance is still achievable, but will likely require a significant altnet slowdown sooner rather than later in the year.

Most regulations within the TAR26 condoc were continuations of the previous pro-investment regulations, albeit with little progress made on copper withdrawal, no extra help for the struggling altnets and a number of unexpected twists at the margin. 

Within the detail, the most significant hit is the return of cost-based price controls to some leased line charges, and across all of the proposed changes, Openreach has on balance fared worse than retail ISPs, albeit at a scale that is manageable within the BT Group.

Ofcom showed no inclination to offer any extra help to the struggling altnet industry, regarding its inefficiencies as being its own (and its investors’) problem, with consolidation the only sensible path forward for most.

The ‘big 4’ ISPs’ combined revenue remained in decline in Q4 2024 at -0.4%, partly due to a BT accounting quirk but mainly due to altnets gaining share

ARPU growth of 2% is roughly compensating for subscriber declines of 2%, but this ARPU growth is likely to weaken in 2025 as various boosts drop out

A recovery will come as the altnets slow in H2 2025 (if not before) due to their restrained expansion, which cannot come soon enough for the big ISPs

CityFibre has reported positive EBITDA in 2024, albeit at a slim 4% margin, and still needs further scale—and to successfully onboard its new wholesale customer Sky—to drive decent investment returns.

CityFibre’s organic build rate is dropping sharply as it (sensibly) looks set to rely on consolidation to achieve the required scale, with its organic build focused on Project Gigabit areas.

CityFibre remains well-positioned for consolidation, but this may take some time yet, with the altnet sector set to slow organic progress anyway in the interim.

BT had a solid-but-mixed Q3, with revenue growth slightly weaker than expected, EBITDA growth slightly stronger, and subscriber net adds a touch weak across broadband, mobile and Openreach 

The outlook is buoyed by a likely altnet slowdown at some point in FY26, with this set to help subscriber numbers at Consumer/Openreach and pricing at Consumer

The main cloud is the potential effect of a merged Vodafone-Three challenging BT/EE for best network and boosting MVNOs, a challenge we feel is real but manageable for BT