A year of continued growth. Sponsorship of The O2 extended for a further 10 years.

Telefónica UK, the customer led, mobile first operator, today announces full year and fourth quarter results for the period to 31st December 2016

 Full year highlights

  • Full year net contract mobile additions of 584,000 and market leading contract churn of 0.9 per cent
  • Full year service revenue up 1.2 per cent year-on-year on a like-for-like basis (ex-O2 Refresh)
  • Full year profit up 1.7 per cent year-on-year*
  • New deal signed with AEG to sponsor The O2 for a further 10 years and partnership with the RFU and England Rugby extended to 2021

Mark Evans CEO for Telefónica UK commented: “We are committed to making every day better for our customers through experiences that count and we continue to provide them with compelling reasons to join and stay with us through attractive propositions such as O2 Refresh and O2 Priority. Coupled with the unprecedented investment we are making in our network, this is driving continued growth and high levels of loyalty which gives us confidence that our strategy is working.”

Ten year extension deal signed to sponsor The O2

Today, the company also announced the signing of a new deal with AEG to sponsor The O2 in London for a further 10 years. Under the new deal, Priority Tickets for shows at The O2 will double providing even more O2 customers with access to tickets for some of the biggest names in music and entertainment 48-hours before general release. A proud sponsor for 10 years, O2 together with AEG, has helped transform The O2 into the world’s most successful entertainment venue. In 2016 over 800,000 Priority Tickets were sold for events at The O2, the 19 O2 Academy music venues across the UK and England Rugby matches at Twickenham. Tickets for Drake, Beyoncé, and Take That were among the most popular shows available via Priority in 2016.

The deal with AEG complements O2’s renewed partnership with the RFU and England Rugby (agreed in the third quarter of 2016). With the RBS 6 Nations tournament in full flow, the new agreement has been bringing more exclusive behind the scenes video content to fans than ever before through O2 Inside Line, with live broadcasts featuring England Rugby players direct from training camp, and Twickenham on match days. The partnership has also produced an interactive CGI virtual reality playing experience allowing fans to have a ‘virtual training session’ with the England Rugby team, available in O2 stores.

Business sector wins

The company strengthened its position in both the public and private sectors in 2016 with notable account wins such as Mercedes Benz, Admiral, Kier Group and the Home Office. In the fourth quarter the company gained new business from BAE, SSE, and Avon & Wiltshire NHS Trust. O2 now has a 40 per cent share of accounts in local and central government and is a provider to over 50 per cent of UK police forces. In the small business market O2’s suite of digital applications continued to perform well throughout the year with over 400,000 customers now paying for these services every month.

Continued improvement in Customer Service

Having been named as the mobile operator with the highest customer service satisfaction for the past seven years, the company continued to improve and invest in its customer service experience during 2016. For example, O2 Gurus (expert advisors of technology and services) helped customers over 8 million times in 2016, representing an increase of 177 per cent year-on-year as more customers seek to get more from their technology and services through O2. The company was awarded Best Customer Care at the Mobile Choice 2016 awards and, for the third year in a row, UK consumers voted O2’s customer facing website as Website of the Year.

Stronger network

Full year and fourth quarter 2016 Operating highlights

Contract net additions for the full year were 584,000 (421,000 excluding M2M). This drove growth in Telefónica UK’s mobile contract customer base by 9 per cent year-on-year which now accounts for 62 per cent of the total mobile base. In the fourth quarter, the company added 135,000 contract net additions (119,000 excluding M2M).

Total mobile net additions for the year were 444,000 (281,000 excluding M2M).

Telefonica UK’s total mobile base stands at 25.5 million customers (up 1.8 per cent year-on-year) of which over 10.4 million are using 4G (up 36.1 per cent year on year) and driving data traffic growth (up 63% year-on-year). This does not include customers who use the O2 network through Tesco Mobile or MVNO’s such as Sky, Lycamobile and TalkTalk.

Contract churn excluding M2M remained market leading at 0.9 per cent for the year and 1.0 per cent for the quarter.

Mobile service revenue for the year grew +1.2 per cent year-on-year excluding O2 Refresh (+1.5 per cent in the fourth quarter) due to higher subscription revenues and out of bundle revenues for both contract and prepay customers.

Revenue in the fourth quarter reached £1,486 million (+2.4 per cent year-on-year) on the back of stronger mobile service revenue trends. This represents an improving growth trend (-2.1 per cent in third quarter and -4.4 per cent in second quarter. Revenue for the full year at £5,602 declined by 1.5 per cent.

OIBDA* for the quarter was £324million up 4.1 percent year on year and was £1,425 million for the full year up 1.7 percent year on year. OIBDA margin for the quarter was therefore 21.8 percent up 0.6 percentage points year on year and for the full year was 25.4 percent, up 0.8 percentage points year on year.

CapEx for the quarter grew to £237 million and to £760 million for the full year (+ 18.7 per cent year-on-year) as the company continued to enhance its network for customers and extend 4G coverage.

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*OIBDA excludes one-off restructuring costs.