Continued focus on customers drives growth

Telefónica UK Limited (O2), the UK’s favourite network, today announces Q1 results for the three month period to 31 March 2019.

Highlights

  • Continued revenue growth. Total revenue up 5.3 per cent year-on-year
  • Further OIBDA growth to £440 million, up 3.4 per cent year-on-year
  • Continued customer growth and sector leading loyalty
    • Market leading contract churn at 0.9 per cent
    • Total base increase to 32.7 million (up 2.3 per cent year-on-year)
  • Continuing investment of over £2 million a day in award winning network; further progress made in preparation for 5G launch
  • Multi-million pound network investment in high footfall public spaces announced today

Mark Evans, CEO, Telefónica UK commented:

“This is another good set of results building on our momentum from 2018. We have delivered further revenue and customer growth underpinned by our award-winning network and market-leading loyalty. We are committed to making every day better, providing customers with compelling reasons to join and stay with us through attractive propositions such as O2 Custom Plans.

“2019 is an exciting year for O2. In addition to progressing our 5G plans, we are working to establish an industry-led shared rural network for the benefit of consumers and businesses across the UK. This demonstrates our commitment to invest for the future with mobile connectivity one of the UK’s most powerful opportunities to strengthen the economy and improve the lives of British people.”

Ongoing network investment

Today, O2 announced a multi-million pound network investment in high footfall public spaces including stadiums and shopping centres with Wireless Infrastructure Group (WIG).  Sports venues such as Liverpool FC’s Anfield Stadium and Lord’s cricket ground have all benefitted from the installation of new mobile infrastructure designed to improve coverage and capacity installation for customers.  Several major UK shopping centres are benefitting from new or upgraded infrastructure – completed sites include Bluewater in Kent, Meadowhall in Sheffield and Manchester Arndale. The investment comes as O2 gets its network 5G-ready in preparation for launch later this year.

O2 announced in February that it will bring 5G to the UK in 2019, commencing the rollout of next-generation mobile services in the four corners of the UK. Belfast, Cardiff, Edinburgh and London will be the first to benefit from O2’s 5G network. Other areas of the UK will enjoy rollout from 2020 onwards to coincide with the wider availability of 5G handsets.

Following demand from its FTSE 100 5G testbed callout, O2 is working with leading British businesses to harness the possibilities of the new technology. To help build a 5G Economy, O2 is also creating 5G innovation spaces across the country including in its Wayra accelerator hubs. The spaces will provide 5G services to start-ups and scale-ups alongside national launch.

O2 also recently announced that it will be the public and private network provider of 5G connectivity for the testing and development of connected and autonomous vehicles (CAVs) technology at Millbrook Proving Ground in Bedfordshire.  O2 will enable 5G connectivity to Millbrook testing facilities from June 2019, using its 2.3 GHz and 3.4GHz spectrum in advance of the first phase of its 5G rollout.

In January 2019, O2 announced its intention to extend its existing network sharing partnership with Vodafone to include 5G.  This will enable O2 to offer 5G services to more customers over a wider geographic area, and at a lower cost.  The plans, which remain subject to regulatory approval, will also enable O2 to exercise greater network autonomy in a number of larger cities, providing it greater flexibility to meet the needs of its customers.

O2 will also be stocking the latest flagship 5G smartphone from Samsung, the Galaxy S10 5G, when it launches later this year. The Galaxy S10 5G will introduce hyper-fast streaming and download speeds, 4K video calling and an elevated mobile gaming experience.

For the second year in a row, O2 was awarded uSwitch’s 2019 award for Best Network Coverage, as voted by the public.

Q1 Highlights

O2’s revolutionary Custom Plans, launched in Q3 2018, continues to be a key differentiator for the company.  This quarter O2 launched a new advertising campaign to demonstrate how Custom Plans can move to the ‘rhythm of life’. The campaign focuses on the many benefits of a custom plan; being able to spread the cost of the phone plan for a lower monthly bill, flexing data up or down each month, as well as upgrading whenever needed so customers don’t have to wait to get the latest handsets.

Working with its partner NSPCC, O2 launched the Parents vs Kids quiz on mobile, tablet and desktop in the quarter.  The quiz is designed to trigger family conversations about the digital world and help inform on topics such as internet safety, online slang and social networks.  Parents vs Kids was recently awarded a prestigious 2019 Webby Award, the leading international awards recognising excellence on the internet.

O2 Business continues to grow, serving customers from large global Enterprises through to smaller, scaling businesses.  O2’s focus on helping its customers achieve business outcomes, offering solutions to real problems and delivering a great service experience has led to O2 leading the market for Enterprise customer satisfaction, with SMB customer satisfaction also at its highest level since 2013.  This quarter, O2 delivered a particularly strong performance in the Medium Business market and has a strong pipeline of acquisition deals signed for delivery in Q2.

Priority saved customers around £5 million in the quarter with nearly 2 million Priority offers accepted and over 11 million entries made to prize draws, while music and sports lovers took advantage of Priority Ticket opportunities such as O2’s collaboration gigs with War Child, now in their 10th year, including Jess Glynne, The 1975 and Jake Bugg, and England Six Nations Rugby games at Twickenham.

Following the close of the quarter, O2 announced in April that it had extended its paid paternity leave to 14 weeks for all permanent employees.  The extended paternity policy covers heterosexual and same-sex couples, as well as adoptive and surrogate partners and forms part of O2’s commitment to promoting a diverse, balanced and inclusive culture.

Q1 2019 Financial highlights

All financials reported using the new IFRS 16 reporting standards with year-on-year movements on a like for like basis

Relevance: Total accesses, including customers who use the O2 network through giffgaff, Tesco Mobile, Sky Mobile and Lycamobile, reached 32.7 million, with Telefónica UK remaining the largest UK mobile network carrier.  Telefónica UK’s mobile base stands at 25.1 million.  The company maintained its market-leading position for customer loyalty with contract churn excluding M2M at 0.9 per cent in the first quarter.

Contract net additions for the quarter were 13,000 (220,000 including M2M) with the contract customer base now accounting for 66 per cent of the total mobile base. Active Prepay net additions for the quarter were54,000.

Revenues: Total Revenue for the quarter reached £1,475 million (+5.3 per cent year-on-year).  The revenue increase was mainly driven by the continued success of innovative tariffs such as Custom Plans, higher value handset sales, as well as ongoing growth in the Smart Metering Implementation Programme (SMIP), MVNO and Business ICT.

Returns: OIBDA for the quarter reached £440 million (+3.4 per cent year-on-year).

OIBDA margin for the first quarter stood at 29.8 per cent.  CapEx for the quarter was £162 million as the company continued to invest in its network for customers.

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