O2 UK scores decent H1 growth

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O2 UK scored significant increases in its total customer base, its revenues and it profits for the first half of 2009, ended June 30, although its growth slowed.

Its customer base was 20.7 million at the end of June, excluding the Tesco Mobile MVNO it supports, a 6.6 per cent rise annually. It added 394,021 net new customers in the first half of the year and 252,268 in the second quarter.

O2 UK said revenues for the first half of 2009 were €3.194 billion, up 5.5 per cent year-on-year. Mobile service revenues in the first half of 2009 were €2.926 billion, up five per cent, with data revenues showing an uplift of 8.7 per cent annually. It said revenue from handset sales was down as SIM-only penetrated the UK market more.

It operating income before depreciation and amortization (OIBDA) was €798 million in the first half of 2009, a 4.5 per cent year-on-year growth.
 
OIBDA margin was 25.0 per cent for the first half of the year, down 0.2 per cent year-on-year, and 25.8 per cent in the second quarter, down 0.5 per cent.

Operating cash flow for the first half was €539, up 19.8 per cent year-on-year.

O2 UK chief executive Ronan Dunne (pictured) said: “O2 is the only operator in the UK continuing to grow. We are clearly outperforming competitors again.

“UK results are negatively impacted by Euro currency conversion rates, but we have excellent postpay net adds, driven by ongoing record low levels of churn and market-leading customer satisfaction scores.”

In total, O2 UK added 312,673 net new contract customers in the second quarter, up 73.3 per cent year-on-year, and 598,940 net new contract customers in the year to June 30, up 41.8 per cent year-on-year.

Its prepay base was down, with 204,920 net disconnections registered in the first half of the year and 60,405 in the second quarter. The surge in contract connections at the expense of prepay business was down to ongoing prepay-to-contract migration and commercial activity around its Simplicity SIM-only proposition, as well as the draw of certain high-end devices such as the Apple iPhone..

Meanwhile, it added 116,016 lines to its DSL broadband service in the year, and 52,398 in the second quarter. Its total broadband base now stands at 456,882 lines.

O2 UK said churn was 1.2 per cent on contract, down 0.1 per cent in the quarter and 0.2 per cent in the year. Total churn for the quarter was 2.6 per cent, up 0.3 per cent year-on-year, and 2.7 per cent in the second quarter, up 0.1 per cent annually.

Voice ARPU was down 6.6 per cent annually in the first half of the year, and 6.9 per cent annually in the second quarter, at €15.8. O2 UK said value in its deals and less roaming revenue contributed to the decline.

Data ARPU was up 1.7 per cent year-on-year in the first half of 2009, reaching €9, and up 1.9 per cent in the second quarter, which was down principally to more customers accessing mobile internet services but was offset by decline in SMS ARPU.

Total ARPU for the first half of the year was down 3.8 per cent annually, to €24.7.

Telefónica Europe chairman and chief executive Matthew Key said: “As anticipated, Telefónica O2 UK experienced slower growth than the first quarter yet clearly outperformed the competition in a flat to declining market, with a 4.1 per cent increase in revenues and net mobile customer additions of 252,268 in the last three months. The UK’s excellent postpay net adds – up 73.3 per cent year-on-year – were driven by ongoing record low levels of churn and market-leading customer satisfaction scores. 

“Telefónica O2 UK reported yet another quarter of strong growth in data fuelled by mobile broadband and usage of smartphones. O2 has also actively expanded into new business areas, with the introduction of the Joggler and, most recently, O2 Money.”

O2 UK parent Telefónica Europe saw cash generation up 16.8 per cent to €1.130 billion in the first half of the year, compared with the same period in 2008. First half revenues increased 2.2 per cent to €6.571 billion, with OIBDA up 6.2 per cent to €1.879 billion.

Its total customer base grew 8.3 per cent year-on-year to 47.6 million, with its moile base at 42.6 million and 85 per cent of net additions in the contract segment.

Key said: “Telefónica Europe has maintained its market momentum and delivered a strong financial performance in the first six months of the year against a challenging economic backdrop.

“There is clear evidence that the rebalancing of our European business portfolio is continuing to bear fruit, especially with the performance of Telefónica O2 Germany, which has been the main contributor to our OIBDA growth in the year to date. Group revenues continued to grow in the last quarter, with a 1.8 per cent increase, excluding the effect of mobile termination rate cuts. Furthermore, we have continued to invest in the business and, at the same time, delivered a significant increase in operating cashflow.

“In the first six months of 2009, we added 1.5 million customers, bringing Telefónica Europe’s total base to 47.6 million. Telefónica has further underlined its position as the ‘home of the smartphone’ with the recent signing of the Palm Pre exclusive across Europe to add to its already impressive portfolio of high-end mobile devices.”

Dunne added: “Telefónica Europe’s half-year results show that while revenues are slowing, we are still seeing growth and our cash flow situation is looking good. The significant improvements we’ve seen in the overall balance of the Telefónica Europe portfolio will continue. We fundamentally believe that if you do the right thing by the customer – and the customer is becoming increasingly discerning as belts tighten – and deliver, you can still prosper in this environment.”

 

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