O2 UK revenues up 8.5pc in Q3

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Telefónica O2 UK reports strong performance in the third quarter, ended September 30, with revenues up 8.5 per cent and its customer base up by 352,000

Telefónica O2 UK increased its revenues by 8.5 per cent to €1.9 billion in local currency in the third quarter of 2010, ended September 30. Service revenue was up 6.3 per cent at €1.714 billion.

Quarterly profit (OIBDA) was up 9.4 per cent over the same period in 2009 in local currency. Profit was €481 million at September 30.

It’s profit margin was 25.3 per cent, up from 25.1 per cent.

O2 UK’s total base stood at 22.621 million, up 5.3 per cent year-on-year from 22.256 million. The figure includes M2M customers. It said it was the leading UK commercial brand, serving more paying customers than any other brand, having overtaken BT already during the second quarter, it reckons.

It claims 22 million O2 UK customers at September 30, 2010, up 4.8 per cent year-on-year, having added 352,000 customers to its base in the quarter and 658,000 in the first nine months of 2010.

It added 236,000 contract customers and, bucking the recent trend of shedding prepay numbers, it also added 115,000 prepay customers.

It said total ARPU for the first nine months of 2010 showed a 2.7 per cent year-on-year decline in local currency to €25.1 euros, with a slightly improved performance in the third quarter. ARPU increased by 1.4 per cent year-on-year for the first nine months of 2010 in local currency, excluding the impact of mobile termination rate cuts.

O2 UK pointed to its retention strategy and focus on customer experience. It explained its growth as a result of careful investment in acquisition and retention of customers, and “extending the cycles between retention activities”. It also cited, again, increased sales of smartphones, with nearly 70 per cent of new customers on contract taking such devices.

Capital expenditure was down and operating cash flow was up, the company said.

Telefónica Europe chairman and chief executive Matthew Key (pictured) said: “Telefónica O2 UK continued to outperform its peers by focusing on delivering the best customer experience in an increasingly competitive arena – evidenced by O2 retaining its market-leading customer retention rates with contract churn of just 1.2 per cent in the quarter.

“Revenue growth accelerated to 8.5 per cent year-on-year in local currency in the third quarter to stand at €5.32 billion for the nine months to September. This was driven largely by the increasing demand for high-end smartphones, with 20 per cent of our total base and more than 40 per cent of our postpay customers now using mobile broadband devices.”

Telefónica Europe saw its customer numbers hit 55 million across its territories in the third quarter, an increase of 14 per cent. It said revenues increased 13.7 per cent in the period, with organic revenue growth of 3.7 per cent driven by performances of Germany and UK businesses chiefly.

Key said: “Telefónica Europe has delivered robust financial results in very competitive markets. An unprecedented demand for mobile data usage, together with the explosive adoption of smartphones, has seen our mobile broadband customer base increase 46 per cent year-on-year.

“We are in a particularly strong position to accelerate data growth thanks to our network investment, superior range of smart devices and our heritage in mobile internet. Telefónica Europe’s total mobile customer base increased 5.5 per cent year-on-year to 45.9 million at the end of September 2010. The contract customer base – boosted by several successful campaigns in UK and Germany – increased 8.7 per cent year-on-year and now represents 48.2 per cent of the total customer base.”

Key said: “The UK and Germany continued to drive revenue growth for the Group, offsetting challenging market conditions in Czech Republic and Ireland, so reflecting the value of our diversified asset portfolio.

Key said the company’s recent acquisitions, HanseNet and Jajah, contributed €582 million to revenues in the nine months to September.

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