Focus on customers drives robust financial performance for the UK’s Mobile champion

Telefónica UK, the customer led, mobile first operator, today announces first half results for the six month period to 30^th June 2017

H1 2017 Highlights

• Further customer growth of 178 thousand new contract customers.
• Market leading contract churn (0.9 per cent).
• Continued network investment with capex up +15.4 per cent year-on-year.
• Service revenue up +1.3 per cent year-on-year.
• OIBDA up +2.2 per cent year-on-year

Mark Evans CEO for Telefónica UK commented: “We remain firmly focused on providing our customers with a superior mobile experience and unique propositions. Our robust first half performance demonstrates how fiercely we continue to compete, by differentiating in the market as the only true customer led mobile player. We are investing significant sums in our network and our customers are rewarding us with market leading loyalty.

Mobile is the UK’s most powerful opportunity to strengthen our economy. In doing so, we will enrich our society and, ultimately, be able to outperform on the global stage. Mobile moves the UK, and the UK must continue to move mobile. Investment, adoption and prioritisation must match the opportunity for the benefit of all.”

Telefónica UK added 178,000 new contract customers in the first half of the year growing the mobile contract customer base by 1.9 per cent year-on-year. Assisted by the appeal of O2 Refresh, the company’s total mobile base reached 25.1 million customers (including giffgaff but excluding Tesco Mobile and MVNO’s) and a market leading level of contract churn was maintained at 0.9 per cent

Figures published today by O2 show that customers on O2 Refresh are saving an average of £216 per year. O2 Refresh separates the cost of the handset from the cost of the airtime and automatically lowers customer bills once the phone plan has been paid off.

Following the announcement in the first quarter of the new deal to sponsor The O2 in London for a further 10 years, this week the company renewed its sponsorship for the iconic O2 Academy venues across the UK. The deal with Live Nation and Academy Music Group secures O2 as the naming rights partner to 19 venues in 13 cities for a further ten years and will provide O2 customers with access to double the number of Priority Tickets than previously available. O2 customers will also be able to get Priority Tickets for Live Nation promoted shows beyond Academy venues covering hundreds more venues nationwide, from the smallest of rooms all the way up to UK stadia, including many major arenas nationwide.

With Capital Expenditure up 15.4 per cent year-on-year, the company continued to enhance the network experience for customers and extend 4G coverage which has now grown to cover over 97 per cent of the UK population outdoors (up 7 percentage points year-on-year). O2’s status as the best mobile network for customer satisfaction was recognised in Ofcom’s annual service quality report published in April.

In the B2B market, the company strengthened its position in both the public and private sectors by gaining new business from Amey, Tesco Bank, Next, Mercedes Benz, The Home Office, Surrey Police and Sussex Police.

First half 2017 Operating highlights

Contract net additions in the first half of the year were 178 thousand (72 thousand excluding M2M). This drove growth of O2’s mobile contract customer base by 1.9 per cent year-on-year which now accounts for 62 per cent of the total mobile base. In Prepay, net losses were 274 thousand customers, however customers with frequent top-ups increased by 0.4 per cent year-on-year.

Telefónica UK’s mobile base was broadly stable at 25.1 million of which over 12.6 million are using 4G (+16.8 per cent year-on-year) and driving data traffic growth (+64.6 per cent year-on-year). This does not include customers who use the O2 network through Tesco Mobile, Sky Mobile or Lycamobile.

Contract churn excluding M2M remained market leading at 0.9 per cent.

Total revenue reached £2,759 million for the first half of the year (+2.3 per cent year-on-year, 2.6 per cent year-on-year for the second quarter) including mobile service revenue growth of +1.3 per cent year-on-year (1.4 per cent year-on-year for the second quarter).

OIBDA was £731 million (+2.2 per cent year-on-year, 3.9 per cent year-on-year for the second quarter). OIBDA margin for the period was therefore 26.5 percent (27.0 percent in the second quarter).

CapEx was £373 million (+15.4 per cent year-on-year, 1.7 per cent year-on-year for the second quarter).