Telefónica UK delivers its best ever first quarter for customers and shareholders

Telefónica UK Limited (O2) the UK’s largest network with 36.6 million customer  connections, announces Q1 results for the three-month period ended 31st March 2021.

Highlights

  • Highest ever Q1 profit in the history of O2 at £478m (+7.6 per cent year-on-year)
  • Record number of connections on O2’s network at 36.6 million
  • Industry leading customer satisfaction, with NPS at 37 and churn steady at 0.9 per cent.
  • O2 now the UK’s leading holder of sub-1Gb spectrum enabling broad indoor and outdoor geographic coverage and reliability in addition to 80Mhz of contiguous 5G spectrum providing optimum download speeds for customers.

Mark Evans, CEO Telefónica UK said:

We continue to lead the market in terms of trust, transparency and fairness and remain committed to high levels of investment in our award-winning network. This has established O2 as the UK’s number one mobile network operator with the most loyal customers. I’m confident that will continue under the new joint venture.

The U.K. regulator provisionally approved the combination in April and, subject to their final approval, it is expected to close in June. 

Throughout the pandemic we have maintained our market leading customer satisfaction measures and increased network connections to a record level of 36.6m. All of which has helped us drive record Q1 returns.

Q1 2021 operational highlights

Investing in connectivity

O2 continued to invest in strengthening the network experience for its customers. The company secured a significant share of airwaves in the latest Ofcom spectrum auction investing £448m to obtain 40Mhz of 3.6GHz spectrum and 20MHz of 700 MHz FDD spectrum. O2 is now the UK’s leading holder of sub-1Gb spectrum enabling broad indoor and outdoor geographic coverage and reliability. Subject to Ofcom’s approval, the company will also have 80Mhz of contiguous 5G spectrum providing optimum download speeds for customers.

O2’s customers can now benefit from 5G in areas of 180 towns and cities. The company continued to test 5G applications with businesses and consortia including an Innovate UK project led by Skyfarer, a drone logistics operator, which aims to create a new drone network for medical transport across the UK including COVID supplies.

O2 was recognised for its network coverage and reliability in the quarter with GWS ranking O2 as the most reliable UK network (now three years in a row 2021, 2020, 2019) and Uswitch naming O2 as the operator with the best network coverage (now four years in a row 2021, 2020, 2019, 2018). 

Investing in the high street

Demonstrating its commitment to the high street, the company delivered a £4.4m cash injection to its retail stores in readiness for their opening on 12th April.  £3.1m was invested in store facelifts nationwide in the quarter with plans to add a further £1.3m by mid-2021.

The new store refits make greater use of the shop space, providing a fresh look and feel which includes new store furniture.  O2 has also replaced all existing lighting with energy efficient LED lamps, as part of its work to become the UK’s first net zero mobile network. New holographic technology in the form of Bubl – O2’s loyal and reliable blue robot – was also installed at the front of Flagship stores at The O2, Manchester, Liverpool and Birmingham, helping to ensure customers have the best possible service as well as demonstrating new products.

In addition, O2 also continued to invest in its people with a comprehensive customer service programme prior to reopening to help ensure a fantastic customer experience for all shoppers. 

Putting customers first

O2 announced three new offerings for consumers in the quarter, including giving customers on any network the option to buy the latest tech at low monthly prices, without any airtime contract and with more monthly payment options for affordability. O2 also launched a new offering with Apple Music giving up to six months access to the music service on some of the latest tech, and new mobile tariffs (including a 150GB SIM only plan for just £20 a month) – making now a great time to be on O2.

Priority saved customers over £2.38 million in the Q1 2021, with over 873k Priority offers accepted and over 2.5 million entries made to prize draws. With a continued focus on things that customers could enjoy during pandemic restrictions, offers included free takeaway Caffè Nero hot drinks, six months of Disney+ and free vegan burgers from LEON. 

Helping UK businesses

O2 partnered with Leonardo the global aerospace, defence and security company to investigate several innovative applications of private 5G technology including how it could help drive next-generation factory manufacturing with high speed and secure information services. O2 will provide a secure 5G private network and a range of Industry 4.0 applications in order to evaluate how they could be used in the digital transformation of business and the end-to-end manufacturing process.

The company also strengthened its Digital Workplace portfolio, launching two new Workplace Propositions – Device as a Service, to help business owners get the latest devices already set up to use as soon as they open the box, and O2 Voice for Microsoft Teams. Organisations can get the latest devices at affordable prices financed over three years by O2 Capital, meaning that customers get the most out of their mobile package. A rapid replacement service so that lost, stolen or broken phones are replaced in as little as 24 hours, ensuring that teams can get back online as soon as possible.

Continued roll out of national plan to connect society’s most vulnerable

O2 continued to roll out its mobile device donation scheme supporting vulnerable people who are digitally disconnected from others. In partnership with charity Hubbub, the scheme is on target to donate 10,000 devices complete with free minutes and data across the UK. The latest city to benefit is Glasgow and comes after the successful roll out of the campaign in London, Manchester, Leeds, Bristol, Cardiff and Swansea, with businesses so far contributing 3,500 phones. Customers can join the drive by donating their old devices.

Helping the NHS through the pandemic

O2 continued to support over 1,600 vaccine centres across the country with connectivity alongside its long-standing relationship with the NHS to offer thousands of connected devices provided to clinicians across the UK. O2 offered additional mobile data, voice calls and texts to all NHS frontline staff who were existing customers at no extra cost on personal mobiles used for work purposes and increased that offer to 50GB as a bolt on for nearly 100,000 NHS staff who are O2 customers.

Q1 2021 Financial Information

Relevance: Total connections, including customers who use the O2 network through giffgaff, Tesco Mobile, Sky Mobile and Lycamobile, grew to 36.6 million at 31st March (+5.1 per cent year-on-year) with Telefónica UK remaining the largest UK mobile network carrier. The company also maintained its market-leading position for customer loyalty with contract churn at 0.9 per cent in the quarter.

Revenues: Total Revenue in the quarter reached £1,356 million (-9.4 per cent year-on-year) due to the adverse impact of the country-wide lockdown in the quarter compared with just two weeks of Q1 20. This resulted in the majority of the stores being closed for the first three months of the year, negatively affecting hardware sales although this was partially offset by an increase in online trading.

Returns: OIBDA in the quarter reached £478 million (+7.6 per cent year-on-year). OIBDA margin in the quarter was 35.2 per cent (+5.6 percentage points year on year). CapEx (excluding spectrum) for the quarter was    £223 million (+17 per cent year-on-year) reflecting a commitment to areas of growth such as 5G. 

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 Notes to Editors 

About Telefónica UK / O2

O2 is the principal commercial brand of Telefónica UK Limited, part of the global telecommunications group Telefónica S.A, headquartered in Spain and operating in Europe, and North, Central and South America.

O2 is the UK’s largest network with more than 36million connections, providing 2G, 3G, 4G and 5G services while operating a nationwide O2 Wifi service.

O2’s coverage and reliability are industry recognised, with GWS ranking O2 as the most reliable UK network, three years in a row – 2021, 2020, 2019). For four consecutive years O2 has won Best Network Coverage provider at the publicly voted Uswitch Awards (2021202020182019). It also won Best Network Performance at the Mobile News Awards in both 2020 and 2019.

The company is the network of choice for mobile virtual network operators giffgaff, Sky Mobile and Lycamobile and manages a 50:50 joint venture with Tesco for Tesco Mobile.

O2 has led the industry with its commitment to Customer Fairness. Since 2013 O2 Refresh has split airtime and device costs so customers never pay for a handset they already own, and the evolution of customisable plansgives customers true flexibility over how they pay for their mobile phone. From exclusive Priority Ticketswhich provide customers with pre-sale tickets for The O2 and O2 Academy venues, 48 hours before everyone else, to England Rugby matches – who O2 have proudly been sponsors of since 1995.

O2 strives to do the right thing as a business and for its customers.  It has committed to becoming net zero by 2025 and to working with supply chain partners to reduce carbon emissions by 30%  in the next five years. The O2 Recycle scheme encourages customers to dispose of old devices responsibly and was named Best Recycle Service at the Mobile Industry Awards.  In 2019 O2 was one of only three companies globally to be recertified at the highest level by the Carbon Trust Standardfor reducing supply chain emissions.   Since 2015 O2 has worked in partnership with the NSPCC, helping parents to keep their kids safe online with advice and tools like Net Aware. In 2020 it became the only UK mobile network to sign up to The Conscious Advertising Network (CAN), a voluntary coalition of organisations set up to ensure that industry ethics catches up with the technology of modern advertising.

O2 has 6,500 employees across three main office sites and more than 440 retail stores, and was named a Best Place To Work in Glassdoor’s 2018, 2019 and 2020 Employee’s Choice Awards.  Championing a fair, inclusive and ethical business from the inside, O2 has industry-leading inclusive policies that have seen it recognised with a National Inclusion Standard accreditation, and awarded the first ever People and Culture Award at the Mobile Industry Awards 2020. The company offers 14 weeks’ paid paternity leave for heterosexual and same-sex couples, and  launched a toolkit for employees considering transitioning at work.  It is the only teleco named in the Social Mobility Employer Index for three consecutive years.

Telefónica UK Limited is registered in England and Wales. Registration number: 1743099.  Its registered office is at: 260 Bath Road, Slough, Berkshire, SL1 4DX, United Kingdom.