O2 invests over £1 billion to drive growth

 Telefónica UK Limited (O2), the UK’s favourite network, today announces Q4 and full year results for the 12 month period to 31 December 2018. 

Full year highlights

  • Strong customer growth with continued sector leading loyalty
    • 501,000 contract net additions (282,000 excluding M2M)
    • Market leading contract churn at 1.0 per cent
    • Total base stands at 32.6 million
  • Total revenue growth of 5.4 per cent year-on-year – now ten consecutive quarters of mobile service revenue growth
  • Further OIBDA expansion to £1.65 billion, up 11.8 per cent year-on-year
  • Investing over £1 billion for customers
  • O2 confirms 5G network to launch in 2019

Mark Evans, CEO, Telefónica UK commented:
“I’m pleased to report another strong set of full year results including half a million contract net additions and our tenth consecutive quarter of mobile service revenue growth, as we delivered another year of growth in revenues and profitability.  In 2018, we focused on delivering against our mobile-first, customer-led strategy, launching stand-out propositions, winning landmark business accounts and investing over £1 billion for our customers.                                                                                                       

“We also continue to work hard to pave the way for 5G.  Our work through our FTSE 100 trials will now be expanded to our Wayra accelerator hubs, to encompass start-ups and scale-ups.  We are excited to work with UK companies, big and small, to build the 5G Economy.  This is critically important as mobile is one of the UK’s most powerful opportunities to strengthen our economy and improve the lives of British people.” 

5G development
O2 today announces it will bring 5G to the UK this year, 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 to coincide with the wider availability of 5G handsets.

Following demand from its FTSE 100 5G testbed callout, O2 is working closely 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 announced in January 2019, its intention to extend its existing network sharing partnership to include 5G.  This will enable O2 to offer 5G services to more customers over a wider geographic area, and to do so at a lower cost.  The announcement also included O2’s plan to extend greater network autonomy in a number of larger cities, providing it greater flexibility to meet the needs of its customers.  In addition, the plans which remain subject to regulatory approval, include the intention to upgrade transmission networks with higher capacity optical fibre cables, to facilitate an enhanced 5G experience.

Operational highlights
The most significant launch for O2 in 2018 was custom plans, which has delivered good commercial traction since it was launched in August.  Custom plans is an innovative and market leading way for customers to pay for their devices, giving the freedom to tailor a plan to suit individual needs and lifestyle.  On O2’s custom plans customers can purchase the latest phone

and choose to pay nothing upfront with 0% APR (from 3 to 36 months).

Custom plans also gives customers the flexibility to choose which airtime tariff suits them best regardless of their contract length and they will never pay for a device they already own, proving once more that O2 is the true customer champion as the only UK mobile network operator to offer this level of flexibility and transparency.

In March, O2 introduced 27 more roaming destinations where customers on selected new tariffs can use their phones at no extra cost including the USA and Australia. This took the total to 75 destinations where customers can now roam at no extra cost. 

In June, O2 launched family plan, a brand new proposition aimed at families. It offers one simple account and bill for the entire family with a maximum discount of 50% on additional connections plus a subscription to Qustodio, a parental control application.

Priority continues to inspire customers to ‘breathe it all in’ by rewarding them with great offers, tickets and experiences, as well as access to the best in entertainment.  Priority saved customers over £26.7 million, with over 8 million Priority offers accepted and over 42 million entries made to prize draws. In October, O2 launched a new loyalty programme to reward tenure through the Priority app.

O2 continues to grow its B2B business, where it serves businesses ranging from large global Enterprise customers to the SMB market.  O2’s focus on service experience while partnering with customers to build business solutions won new business from companies such as Galliford Try, NHS England, Northumbrian Water and Sainsbury’s.  In the first year of working with Sainsbury’s, O2 was awarded Sainsbury’s Supplier Award for delivery of ICT and mobile services, evidencing the value of its approach.  October saw the launch of the ‘We Get People’ campaign from O2 Business.  The lead campaign message was O2’s customer-led approach, the key differentiator for the company in the market.

Full year and fourth quarter 2018 Financial highlights
All financials reported using the new IFRS 15 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 32.6 million, with Telefónica UK remaining the largest UK mobile network carrier.  Telefónica UK’s mobile base stands at 25 million with 13.5 million using 4G (+4.7 per cent year-on-year).  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 501,000 (282,000 excluding M2M) with the contract customer base now accounting for 65 per cent of the total mobile base. In the fourth quarter, contract net additions were 284,000 (114,000 excluding M2M). Active Prepay net additions for the year were 141,000 (46,000 for the fourth quarter).

Revenues: Total Revenue for the year reached £6,007 million (+5.4 per cent year-on-year).  This revenue increase was mainly driven by higher value smartphone sales, increased customer spending, including the success of innovative tariffs such as Custom Plans, as well as continuing growth in MVNO and SMIP revenues. Total Revenue for the fourth quarter reached £1,636 million (+5.3 per cent year-on-year).  Mobile service revenue for the year grew +2.8 per cent year-on-year (+2.9 per cent in the fourth quarter) due to higher subscription revenues and further growth in MVNO.

Returns: OIBDA for the year reached £1,650 million (+11.8 per cent year-on-year). In the fourth quarter OIBDA reached £463million (+23.9 per cent year-on-year, +16.1 per cent year-on-year excluding non-recurrent events).

OIBDA margin for the full year stood at 27.5 per cent.  CapEx for the full year was £775 million (£233 million in the fourth quarter) as the company continued to invest in its network for customers.