Focus on customers drives strong financial performance

Telefónica UK, the customer led, mobile first operator, today announces first quarter results for the three month period to 31^st March 2018 

Highlights

• UK’s leading mobile network carrier with total mobile base standing at 32 million
• Largest new share of airwaves acquired in latest mobile spectrum auction
• Market leading loyalty maintained with contract churn at 1.0 per cent
• Continued strong financial performance:
  • Total Revenue up 2.9 per cent year-on-year
  • Service revenue up 1.2 per cent year-on-year
  • OIBDA up 6.1 per cent year-on-year

Patricia Cobian CFO for Telefónica UK commented:

“We have delivered another solid quarter driven by our relentless focus on customers. We are growing top and bottom line in a very competitive market while maintaining the highest levels of customer loyalty and satisfaction in our sector.

Our newly acquired mobile spectrum allows us to further strengthen our award winning network, enhancing our connectivity for our customers while boosting the economy and laying the foundations for 5G in Britain”

Ongoing network investment and deployment

The company successfully acquired the largest share of airwaves in Ofcom’s latest 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). Ensuring the spectrum acquired is effectively deployed for customers is a central element of O2’s strategy. Ofcom confirmed in the quarter that the company had fulfilled its commitment to deliver 98% UK indoor population coverage and 90% geographic coverage for its existing 4G spectrum.

Today, the company announced that it will deploy the new 4G spectrum at over 1,000 sites across the UK by the end of 2018. Places to benefit include Leeds, Nottingham and London with 60 sites in the capital already utilising the new airwaves after the spectrum was activated within 24 hours of Ofcom making them available for use.

The allocation of 3.4GHz spectrum is expected to be one of the first bands available for 5G from 2020. In February the company unveiled plans to install a live 5G test bed at The O2 in North Greenwich, London. The network will be used to test a variety of equipment and potential use cases for 5G under live conditions, gathering feedback from customers and partners to ensure a future high quality service. The company intends to run four separate 5G trials in England, Scotland, Wales and Northern Ireland over the next 12 months.

This month, the company announced plans to work with Arqiva to deploy up to 300 small cells across some of London’s busiest boroughs including Hammersmith and Fulham, Richmond upon Thames, Wandsworth, Camden and Lambeth. The small cells, once installed, will 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.

The company continues to invest £2 million every day enhancing the network experience for customers. In line with its customer led approach, it was named through a public vote at the annual uSwitch Awards as having the best network coverage.

Continued innovation

O2 introduced 27 more roaming destinations (1) 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 (2).

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 airtime bills up and down each month.

O2 Priority saved customers over £5.8 million in the quarter with around 1.8 million Priority offers accepted such as free chocolate treats during Easter from Thorntons, early access to the Virgin Trains ticket sale and free hot drinks at Caffè Nero. Over 9 million entries were also made to Priority prize draws in the last quarter. O2 Priority customers were also able to access Priority Ticket offers as part of War Child BRITs Week to see leading artists such as Ed Sheeran, Rag ‘n’ Bone Man, and Wolf Alice in intimate venues across London and Manchester, helping raise £649k for children affected by conflict.

First quarter 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 32.0 million maintaining Telefónica UK’s position as the biggest UK mobile network carrier.

The company’s contract base increased by 1.2% year on year with net additions for the quarter of 16,000 (5,000 excluding M2M). The contract customer base now accounts for 64 per cent of the total mobile base (+1.3 percentage point year-on-year)]. In the B2B sector the company gained new business from companies such as Sainsbury’s, NHS England and Northumbrian Water.   

Contract churn excluding M2M was 1.0 per cent for the quarter maintaining Telefónica UK’s market leading position for customer loyalty.

Active Prepay customers reduced by 78 thousand in line with market trends.

Total Revenue reached £1,401 million (+2.9 per cent year-on-year) on the back of higher handset revenues, stronger mobile service revenue trends and continuing growth in Smart Metering and ICT solution non-mobile revenues. Mobile service revenue grew +1.2 per cent year-on-year driven by higher subscription revenues and further growth in MVNO.

OIBDA reached £379 million, up 6.1 per cent year-on-year, supported by a reduction in Annual Licence Fee payments, with OIBDA margin standing at 27.1 per cent. Recent changes to roaming regulation continued to have an impact.

CapEx was £161 million in the quarter as the company continued to enhance its network for customers and extend 4G coverage.

-Ends-

 Telefónica UK Contact: Dave Massey 07730 426222 (dave.massey@telefonica.com)  

Notes to Editors

(1) The 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. 

(2) 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.