In response to ongoing external challenges, some operators have stepped up energy efficiency initiatives to reduce consumption and save money
Energy represents a real commercial headwind: Energy prices were a key talking point in operators’ latest financial results, with many pointing to the implications for both their costs and profitability. A1 (Telekom Austria Group) has seen the first signs of a “dynamic increase” in opex and expects its total electricity bill to rise 45% (around €45m) this year. According to Nordic and Baltic operator Tele2, energy costs rose SEK80m (€7.4m) across the group in Q3 2022, partially offsetting growth in underlying EBITDAaL. Similarly, Telia reported a SEK300m (€27.6m) increase in group-wide energy expenses this quarter, rising to SEK500m (€46.1m) overall for the past nine months. Had energy costs not increased, Telia’s EBITDA would have grown by 4.9% in the most recent quarter, rather than 1%. Given significantly higher energy costs and inflation than previously envisaged, BT will take “additional action” to maintain the cash flow needed to support planned network investments.
The challenging external environment focuses minds on saving energy: Not all telcos have been equally affected, with Elisa’s “systematic, long-term way of operating” – including a hedging policy for electricity purchases – enabling the Finland-based firm to mitigate higher energy prices. However, with most seemingly impacted to some degree and the potential raised for blackouts this winter, attention has turned to accelerating energy efficiency initiatives. SoftBank, which is anticipating a JPY2.1bn (€14.3m) rise in its Japanese telco's electricity bill for 2022, is introducing energy efficient equipment into its network and is trying to cut electricity consumption by powering down base stations during low traffic periods. In addition, Proximus is seeking greater gas and electricity savings through new investments in energy optimisation within its buildings, data centres and infrastructure in Belgium. Like Proximus, French operators have joined a national effort to combat a looming energy crisis by cutting consumption across their operations.
Operators revise performance outlook upwards: As operators contend with the difficulties presented by the macroeconomic climate, several also cited the labour market as a drag on their financial and/or operational performance in the most recent quarter. BT claimed it saw a 40,000 hit to Openreach’s broadband base due to industrial action, while A1 reported workforce costs as another major driver of opex pressure for the group. However, amid the focus on (energy and employment) costs, there were some bright spots this results season. Orange saw Spanish revenues finally make a return to positive territory in Q3 2022, while Proximus raised its full-year outlook for Belgian revenue and EBITDA growth having outperformed its original guidance. Meanwhile, Telefónica has confirmed its 2022 guidance for group revenue and OIBDA (revised upwards in the previous quarter), with mobile underpinning continued revenue expansion in Germany and Virgin Media O2 having now reached 1m Volt converged customers in the UK.
