O2 UK reports increases in operating income and profit margin, but slow revenue growth and falling average-revenue-per user reflect “challenging commercial environment”
Operating income at O2 UK rose 2.1 per cent year-on-year during the firm’s second quarter ending June to £412 million, despite a 3.3 per cent fall in revenues during the quarter.
The mixed performance compares to a more rosy six-month view showing a 7.7 per cent year-on-year rise in operating income, from £776 million to £837 million, on the back of a small 0.9 per cent year-on-year rise in revenues over the six months.
Total mobile services revenues for the quarter were down 4.3 per cent to £1.32 billion, and were down by 0.4 per cent year-on-year for the six month period to £2,75 billion.
O2 UK’s operating income margin rose 1.5 per cent to 27.9 per cent during Q2, and was up 1.7 per cent year-on-year for the six month period between January and June, to hit 27.6 per cent.
O2 UK CEO Ronan Dunne said: “We have delivered a solid financial performance in spite of a very challenging commercial environment and fragile consumer confidence.
“We continued to effectively execute our strategy for profitable growth witnessed by industry leading churn, customer satisfaction and brand consideration.”
O2’s total customer base fell 0.6 per cent in Q2 to 22,142,600. This was mostly due to a 168,500 fall in prepay customers, compared to the addition of 24,700 contract customers during the quarter. Contract customers now make up 48 per cent of O2’s total customer base in the UK.
Over the six month period, O2’s contract customer base rose by 6.1 per cent year on year to hit 10,674,600. The operator’s prepay base fell by 0.7 pe cent to 11,468,000.
Despite the increase in the proportion of customers on contract at O2, average revenue per customer at O2 fell from £35.3 per month in December last year, to £32.9 per month at the end of June. Total churn was up slightly to 2.9 per cent during the six month period, while contract churn was stable at 1.2 per cent.
Falls in the number of prepay customers on O2 drove down mobile voice traffic by 7 per cent year on year during the quarter, but the firm said that voice usage from contract customers was still rising. Mobile data traffic rose by 31 per cent year-on-year during the quarter.
Across Europe, O2 parent company Telefonica reported a 5 percent increase in customers to 57.3 million. The firm said that growth in the UK and Germany contributed to organic revenue growth of 3.2 per cent, however this did not include the impact of cuts to mobile termination rates.