O2 builds for the future after a year of growth and innovation

Telefónica UK, the UK’s favourite network, today announces full year and fourth quarter results for the period to 31st December 2017

Full year highlights

  • Net contract mobile additions of 266,000
  • New innovative propositions (Flexible Tariffs, Free Screen Replacement Cover, Family Plan)
  • Customers favourite network with leading levels of loyalty and highest customer satisfaction
  • Service revenue up 1.0 per cent year-on-year
  • The O2 to become one of four 5G test beds

Mark Evans CEO for Telefónica UK commented: “I’m pleased to report a strong year which has been driven by our relentless focus on delivering a differentiated customer experience. In 2017 we launched a number of new, exciting propositions, made long term commitments to our customer led sponsorships and continued to invest significant sums in our network. As a result we maintained our position as the UK mobile operator with the highest customer loyalty and satisfaction. I’d like to thank all colleagues for their hard work and support in delivering this strong performance.

Looking forward, we will continue to build for our future by doing more and investing more for the benefit of our customers. Our efforts are driven by the belief that mobile is one of the biggest opportunities this country has to strengthen its economy and support society at large. We’re proud to be its biggest champion.”

The O2 to become 5G test bed

O2 today unveiled plans to install a live 5G test bed at The O2 in North Greenwich. O2 will use the network to test a variety of equipment and potential use cases for 5G under live conditions, gathering feedback from customers and partners to ensure a future high quality service. Installation will begin next month, with visitors able to enjoy the technology from the second half of 2018. The company intends to run four separate 5G trials in England, Scotland, Wales and Northern Ireland over the next 12 months, with The O2 being at the forefront.

New, innovative propositions

Maintaining its position as the UK mobile operator with the highest loyalty and customer satisfaction*, the company launched several propositions into the market in 2017.

Building on O2’s Refresh proposition (which unlike other mobile operators ensures customers are not charged for a phone they have already paid for – a practice that can cost customers up to £38 per month according to Citizen’s Advice), the company introduced Flexible tariffs in the fourth quarter, breaking the market convention of fixed tariff plans. O2 customers buying the latest phones can choose a flexible Refresh tariff (marketed as Yo-Yo) allowing them to increase or decrease the cost of their plan every billing month, depending on how much data they anticipate using*.

With O2 research showing that half of all smartphone owners have damaged their screen at least once, the company (in the third quarter) became the first UK network to launch free screen replacement cover for customers buying the latest handsets. A next-day collection and replacement service covers those ‘Oops’ moments and ensures O2 customers are never out of touch*. Recognising the pressure on household budgets, O2 also launched Family Plan which offers up to 50% off selected Airtime Plans on O2 Refresh, when a customer or their family takes out additional connections.

O2 Priority continued to help the company differentiate in the market in 2017 with at least one Priority offer or experience taken by O2 customers every second.

Network growth

The company continued to enhance the network experience for customers in 2017 and subject to confirmation from Ofcom, is confident that it has fulfilled its licence obligation to deliver 98% UK indoor population coverage and 90% geographic coverage.  Earlier this month at the annual uSwitch Awards, O2 was named through a public vote as having the best network coverage. The company continued to deploy innovative small cell technology delivering targeted 4G coverage in areas including Aberdeen and London while laying the foundations for a rapid deployment of 5G connectivity when it becomes available.

Customer led sponsorships

In 2017 O2 committed to long term partnerships with both AEG (The O2) and Live Nation / Academy Music Group (for the 19 O2 Academies across the UK). Both sponsorships were extended for 10 years while providing O2 customers with access to double the number of Priority Tickets previously available. Since The O2 opened 10 years ago, over 70 million people have visited, with over 20 million tickets sold for shows ranging from music to sport to live entertainment.

Full year and fourth quarter 2017 Operating highlights

Telefónica UK’s mobile base stood at 25 million of which 12.9 million are using 4G (+7 per cent year-on-year) and driving data traffic growth (+64 per cent year-on-year).

Total accesses including customers who use the O2 network through Tesco Mobile, Sky Mobile and Lycamobile reached 32.2 million making Telefónica UK the biggest UK mobile network carrier. The company maintained its market leading position for customer loyalty with Contract churn excluding M2M at 1.0 per cent for the year and 1.0 per cent for the quarter.

Contract net additions for the full year were 266,000 (174,000 excluding M2M) with the contract customer base now accounting for 63 per cent of the total mobile base. In the fourth quarter, contract net additions were 70,000 excluding M2M. Significant B2B account wins for the year included Amey, Tesco Bank, Next, Mercedes Benz and The Home Office.

Active Prepay net losses for the year were 169,000 (25,000 for the fourth quarter).

Total Revenue for the year reached £5,728 million (+2.2 per cent year-on-year) on the back of higher handset revenues, stronger mobile service revenue trends and continuing growth in Smart Metering and ICT solution non-mobile revenues. Total Revenue for the fourth quarter reached £1,533 million (+3.2 per cent year-on-year).  Mobile service revenue for the year grew +1.0 per cent year-on-year (+1.1 per cent in the fourth quarter) due to higher subscription revenues and further growth in MVNO, and despite the continuing year-on-year impact of roaming regulation.

OIBDA for the year reached £1,435 million, up 2.9 per cent year-on-year on a reported basis and +0.7 per cent year-on-year on an adjusted basis. In the fourth quarter OIBDA reached £335 million  (up +3.7 per cent year-on-year on an adjusted basis*).

OIBDA margin for the full year stood at 25.1 per cent.

CapEx for the full year was £724 million (£198 million in the fourth quarter) as the company continued to enhance its network for customers and extend 4G coverage.

– ENDS –

*O2 ranked first among UK networks in the UK through The Institute of Customer Service ‘UK Customer Satisfaction Index (UKCSI) published in the third quarter 2017. The index is a national measure of customer satisfaction. It assesses over 30 measures of the customer experience in 13 sectors for over 200 organisations.

Flexible refresh tariffs available to new or upgrading customers signing up to selected devices on O2 Refresh through O2’s direct channels. Customers able to choose from selected handsets and move up and down their tariff table once in each monthly billing cycle. Includes the option of going below the tariff they originally chose.

Free screen replacement offers insurance cover for accidental screen damage. One screen replacement within the term of a contract (up to 24 months). Successful claims are redeemed with a next day courier service collecting and replacing the damaged handset. Available through O2’s direct channels for the latest handsets on selected tariffs only at the point of sale. 20GB+ on iPhone X, 8 and 8Plus. 30GB+ on Samsung Galaxy S8, S8+, Note8 and OnePlus 5. Further devices may be added in the future. 

Adjusted OIBDA for full year and fourth quarter reflects a one off charge for restructuring in Q4 2016.