O2 contract additions almost double in Q4

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Operator adds 175,000 contract customers in the final quarter of last year, but loses 220,900 prepay customers as revenue and ARPU falls

O2 added 175,000 contract customers in Q4 2011, an increase of 93 per cent from the previous quarter and its highest number of contract customer additions in a quarter last year.

The operator said this was due to it maintaining momentum on the back of the continued popularity of new smartphone tariffs and the launch of new high-end devices from October. Its contract customer base now stands at 10.94 million subscribers.

Smartphone upgrades grew 35 per cent year-on-year against a decrease of 17 per cent in the previous nine month period.

As a result O2’s mobile contract base increased four per cent year-on-year to account for 49 per cent of the total mobile customer base, which stood at 22.2 million at the end of the year. This was broadly flat year-on-year.

O2’s total customer base stood at 23 million at the end of 2011, unchanged from 2010, which the operator said reflected a flat performance in mobile, as well as positive fixed telephony growth that compensated a marginal year-on-year decline in retail broadband fixed internet accesses.

However O2 lost 220,900 prepay customers in the quarter, with its base totalling 11.2 million at the end of the year.

Smartphone penetration increased to 38 per cent at the end of 2011 compared to 29 per cent in 2010 and 36 per cent at the end of the third quarter. O2 said over 95 per cent of handset sales during Q4 in the consumer contract segment were smartphones.

Revenues were down 2.7 per cent year-on-year to £5.87 billion in 2011. O2 said that excluding the impact from mobile termination rates, revenues would have increased 0.3 per cent year-on-year.

Mobile service revenues reached £5.25 billion in 2011, which was down 3.7 per cent year-on-year.

O2 said that excluding the impact of regulation, mobile service revenues declined 0.4 per cent year-on-year in 2011, mainly as a result of the ARPU performance.

Total ARPU declined 6.6 per cent year-on-year in 2011 and 9.5 per cent in the fourth quarter to stand at £19.40 at the end of the three month period. O2 said that excluding the impact of regulation, total ARPU in the year would have declined 3.5 per cent.

Contract ARPU was down from £31.70 in Q3 to £30.68 in Q4. This was compared to contract ARPU of £33.94 in Q4 2010.

Prepay ARPU remained flat at £8.56 in Q4 2011 but down 15.8 per cent from a year earlier.

The Tesco Mobile joint venture added 153,000 customers in Q4 2011 to reach a total of 2.9 million customers by the end of the year. This was an increase of 15 per cent year-on-year and more than 50 per cent compared to Q3.

O2 UK CEO Ronan Dunne said: “Against a backdrop of difficult economic conditions we remain firmly committed to our strategy which quite simply is about building a business for the future that goes way beyond our core mobile services.

“This is coupled with placing huge focus on looking after our existing customers with genuine, long-term value and experiences they won’t find elsewhere.”

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