Superior service and innovative products drive customer growth

Telefónica UK, the customer led, mobile first operator, today announces third quarter results for the three month period to 30^th September 2017

Q3 2017 Highlights

• 143,000 new mobile customers
• Retained position as the UK mobile network operator with the highest customer satisfaction
• New ‘flexible tariffs’ break the market convention of fixed tariff plans
• Free screen replacement ‘Oops’ proposition and Family Plan launched in the quarter
• Service revenue up 0.4 per cent year on year despite increased regulatory impact from roaming
• Continued market leading contract churn (1.0 per cent)

Mark Evans CEO for Telefónica UK commented: Telefónica UK added 143,000 new connections in the third quarter. Assisted by innovative propositions, the company’s total mobile base stood at 25.3 million customers (including giffgaff but excluding Tesco Mobile and MVNO’s) and a market leading level of contract churn was maintained at 1.0 per cent.

The company maintained its position as the UK mobile network operator with the highest customer satisfaction. The Institute of Customer Service placed O2 first among UK networks in its latest customer satisfaction index (published in the third quarter)* which echoes Ofcom’s ‘comparing service quality report’ (April 2017) where O2 was also the top network operator.

In the third quarter, O2 activated two other propositions. With O2 research showing that half of all smartphone owners have damaged their screen at least once, the company became the first UK network to launch free screen replacement cover for customers buying the latest handsets.

A next-day collection and replacement service covers those ‘Oops’ moments and ensures O2 customers are never out of touch**.  Recognising the pressure on household budgets, O2 also launched Family Plan which offers up to 50% off selected Airtime Plans on O2 Refresh, when a customer or their family takes out additional connections***.

Today O2 announces flexible tariffs, a new option for customers that breaks the market convention of fixed tariff plans. From 27^th October, customers buying the latest phones can choose a flexible Refresh tariff allowing them to move their airtime up or down on selected tariffs as their needs change****. The tariffs build on O2’s Refresh proposition (which separates airtime and handsets costs and allows customers to change their device whenever they want).

Finally, O2 Priority continued to help the company differentiate in the market with over 2.5 million Priority offers accepted and over 8 million entries made to prize draws.

Network growth and innovation

O2 continued to enhance the network experience for customers and extend 4G coverage which has now grown to cover 98 per cent of the UK population outdoors (up 5 percentage points year-on-year). The company also continued to activate innovative small cell technology delivering targeted 4G coverage while laying the foundations for a rapid deployment of 5G connectivity when it becomes available.

Network initiatives in the third quarter included a partnership with Wireless Infrastructure Group and Aberdeen City Council to activate the UK’s first fibre-connected small cell network in the City of Aberdeen. As a result, faster and higher capacity 4G services are available for customers in the area. An O2 Wifi solution for passengers on the Coca-Cola London Eye also went live becoming the world’s first free, high-density Wi-Fi network on a continually moving structure.

This month, London’s Square Mile received a welcome Wifi boost with O2 Wifi activated on a network of small cells as part of the deal announced in March 2017 with the City of London Corporation and Cornerstone Telecommunications Infrastructure Ltd (CTIL). These small cells will also carry 4G traffic by the end of the year.

Business sector growth

In the B2B market, the company strengthened its position in both the public and private sectors by gaining new business from Shop Direct, Saint Gobain, Bosch, Next, Edinburgh City Council, West London Mental Health NHS Trust and Northamptonshire Healthcare NHS Trust.

Third quarter operating highlights

Contract net additions were 93,000 (32,000 excluding M2M). O2’s mobile contract customer base now accounts for 63 per cent of the total mobile base. In Prepay, the company added 50,000 customers. Total mobile net additions for the quarter were therefore 143,000 (82,000 excluding M2M).

Telefónica UK’s mobile base stood at 25.3million of which over 12.6 million are using 4G (+9 per cent year-on-year) and driving data traffic growth (+64 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 1.0 per cent.

Total revenue reached £1,436m (+1.1 per cent year-on-year).

Mobile service revenue increased by 0.4 per cent year-on-year. Excluding regulatory impacts underlying mobile service revenue was up +3.5 per cent year-on-year.

OIBDA reached £370m (-4.7 per cent year-on-year on the back of regulatory impacts). OIBDA margin stood at 25.7per cent.

CapEx for the quarter was £153m as O2 continued to enhance the network experience for customers, extend 4G coverage and deploy innovative network solutions.

– ENDS –

*UK Customer Satisfaction Index (UKCSI) is a national measure of customer satisfaction. It assesses over 30 measures of the customer experience in 13 sectors for over 200 organisations.

**Free screen replacement offers insurance cover for accidental screen damage. One screen replacement within the term of a contract (up to 24 months). Successful claims are redeemed with a next day courier service collecting and replacing the damaged handset. Available through O2’s direct channels for the latest handsets on selected tariffs only at the point of sale. 20GB+ on iPhone X, 8 and 8Plus. 30GB+ on Samsung Galaxy S8, S8+, Note8 and OnePlus 5. Further devices may be added in the future. 

 ***Family Plan.

 ****Flexible refresh tariffs will be available to new or upgrading customers signing up to selected devices on O2 Refresh through O2’s direct channels. Customers will be able to choose from selected handsets and move up and down their tariff table once in each monthly billing cycle. This includes the option of going below the tariff they originally chose. See separate press release for more details.