UK's favourite mobile network continues to grow

Telefónica UK Limited (O2) today announces first half year results for the six month period to 30th June 2018

  • Continued customer growth and sector leading loyalty. 100,000 new contract customers and contract churn at 1.0 per cent.
  • Total revenue up 4.2 per cent year on year.
  • OIBDA up 7.2 per cent year-on-year.
  • Driven by unprecedented levels of investment of £2 billion over the last two years.
  • FTSE 100 companies offered opportunity to participate in 5G testbed trials.

Mark Evans CEO for Telefónica UK commented:

“I’m pleased to report a strong first half to the year in which we have continued to deliver growth with more customers driving increased revenues and profitability while maintaining the highest levels of loyalty in our sector. This has been driven by our relentless focus on keeping the customer at the heart of our business.

The backbone for our ongoing success is our award winning network supported by unprecedented levels of investment of £2 billion over the last two years. This has helped boost network coverage and reliability while preparing the ground for 5G. We are rolling out the new 4G airwaves we acquired in April as fast as we can so that customers right across the UK can benefit from these investments as soon as possible.

We will continue to differentiate and build for our future through unique customer experiences and propositions while driving value for our business. Our efforts are driven by a strong belief that mobile is one of the biggest opportunities this country has to strengthen the economy and support society at large. O2 is proud to be its biggest champion”

5G development

Today the company confirmed it had written to every business on the FTSE 100 index giving them an opportunity to participate in 5G testbed trials. 5G, when it becomes available, has the potential to transform every corner of life and society. By encouraging businesses to implement 5G technology early, productivity and efficiency savings can be made that will have a national impact.

The separate testbed at The O2 in Greenwich London will be activated in the autumn to enable the testing of a variety of equipment and potential use cases for 5G under live conditions.

In April, Telefónica UK successfully acquired the largest share of airwaves during Ofcom’s spectrum auction investing £523.6 million to obtain 40MHz of immediately useable 4G spectrum (2.3GHz) and 40MHz of spectrum expected to be used in the launch of 5G (3.4GHz). The new 4G spectrum was activated on 60 sites within four hours of being made available. This will increase to over 1,000 sites by the end of the year. Places already benefitting from the 4G boost include Leeds, Nottingham and London.

Also in April the company announced an agreement with Arqiva to deploy up to 300 5G ready small cells across some of London’s busiest boroughs including Hammersmith and Fulham, Richmond upon Thames, Wandsworth, Camden and Lambeth. Small cells provide enhanced mobile data capacity and coverage on 4G while laying the foundations for a rapid deployment of 5G connectivity when it becomes available. The company has already deployed small cells in The City of London and Aberdeen.

Continued Innovation

In June, the company announced a brand new partnership with Netflix offering new and upgrading customers on selected tariffs1 a free 6 or 12 months Netflix subscription as a gift from O2. In addition, O2 customers can get double data on a number of tariffs so they can make the most of all the great content that Netflix has to offer from the captivating and nostalgic Stranger Things to the award-winning Orange Is The New Black and The Crown.

Also in June, the company launched Family Plan, a brand new proposition aimed at families. It offers one simple account and bill for the entire family with up to 50% discount on additional connections plus a subscription to Qustodio, a parental control application. The application gives parents a comprehensive set of tools to help them monitor and manage their children’s online world including the ability to block inappropriate content with smart filters, balance children’s screen time across multiple devices, set time limits for specific games and apps (or block them from running altogether) and monitor time spent on social media sites. Exclusive family offers and perks via Priority are included as well as free personalised support from O2 Gurus.

Priority saved customers over £10 million in the first half of the year with around 3.1 million Priority offers accepted and over 18 million entries made to Priority prize draws. In May the company announced a tie up with Shawn Mendes exclusively offering O2 customers Priority Tickets for the multi-platinum singer/songwriter’s six 2019 UK tour dates, 48 hours ahead of general release. Following in the footsteps of other megastars including Beyoncé, Ed Sheeran and Lady Gaga, the exclusive partnership saw the artist appear in one of O2’s iconic “Walk” TV ads.

In March, O2 introduced 27 more roaming destinations2 where customers on selected new tariffs can use their phones at no extra cost including the USA and Australia. This took the total to an industry leading 75 destinations where customers can roam at no extra cost. At the same time, the company also launched a new range of flexible tariffs giving customers even more control over their bills. Now, all O2 Refresh tariffs are flexible for new and upgrading customers across all handsets and tablets – allowing them to move their data allowance up and down each month.

First Half 2018 Operating highlights

All financials reported using the new IFRS 15 reporting standards with year on year movements on a like for like basis

Telefónica UK’s total mobile accesses including customers who use the O2 network through Tesco Mobile, Sky Mobile and Lycamobile was 32.1 million maintaining Telefónica UK’s position as the largest UK mobile network carrier.

The company’s contract base increased by 1.2% year on year with net additions for the half year of 100,000 (47,000 excluding M2M). The contract customer base now accounts for 64 per cent of the total mobile base (+2 percentage point year-on-year). In the B2B sector the company gained new business from companies such as Sainsbury’s, Transport for London, NHS England and Northumbrian Water.  Active Prepay customers grew by 58 thousand in the first half.

The company maintained its sector leading levels of loyalty with churn at just 1.0% (excluding M2M).

Total revenue reached £2,836 million for the first half of the year (+4.2 per cent year-on-year, +5.6 per cent year-on-year for the second quarter) on the back of higher handset revenues, stronger mobile service revenue trends and continuing growth in Smart Metering and ICT. Mobile service revenue grew +2.4 per cent year-on-year (3.5 per cent year-on-year for the second quarter) driven by higher subscription revenues and further MVNO growth.

OIBDA reached £773 million, up 7.2 per cent year-on-year (+8.2 per cent year-on-year for the second quarter) partially supported by a reduction in Annual Licence Fee payments. OIBDA margin for the period was therefore 27.3 per cent (27.5 percent in the second quarter). Recent changes to roaming regulation continued to have an impact.

CapEx was £351 million in the period as the company continued to enhance its network for customers, extend 4G coverage while preparing the way for 5G.

 -Ends-

1For applicable tariffs see o2.co.uk/Netflix. Netflix offer and double data available until 8 August 2018.

New Netflix customers auto opted in to Netflix after promotion using Charge to Mobile. Netflix offer only redeemable 14 days after purchase. For applicable tariffs see o2.co.uk/Netflix. Netflix offer expires 8 August 2018. Valid for [6/12] months of Netflix Service on the £7.99 (a month) “2 Screens at a Time Streaming Plan” (total value £47.94/95.88). A Netflix compatible device (manufactured and sold separately) and broadband Internet connection are required to watch instantly. Offer is not redeemable or refundable for cash, subject to applicable law, and cannot be exchanged for Netflix Gift Subscriptions. You may apply the value of the offer to a different Netflix streaming plan. Exchanges in this manner may alter the duration of the offer. Netflix Service price plans subject to change. See www.netflix.com/termsofuse.

2The extra 27 countries (O2 Travel Inclusive Zone) are: Argentina, Australia, Botswana, Canada, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Greenland, Guatemala, Guinea, Guyana, Honduras, Madagascar, Mexico, Myanmar, New Zealand, Nicaragua, Panama, Paraguay, Peru, Rwanda, United States, Uruguay, Venezuela and Yemen.

Customers with the O2 Travel Inclusive Zone Bolt-On have a daily allowance of 120 minutes, 120 texts and data.

O2’s Europe Zone includes: Austria, French Guiana, Latvia, Portugal, Azores, Germany, Liechtenstein, Reunion, Belgium, Gibraltar, Jersey, Lithuania, Romania, Bulgaria, Greece, Luxembourg, Saint Barthelemy, Canary Islands, Guadeloupe, Madeira, Saint Martin, Croatia, Guernsey, Malta, San Marino, Cyprus, Hungary, Martinique, Vatican City, Slovakia, Czech Republic, Iceland, Mayotte, Slovenia, Denmark, Ireland, Monaco, Spain, Estonia, Isle of Man, Netherlands, Sweden, Finland, Italy, Norway, Switzerland, France and Poland.