O2 delivers continued customer and revenue growth

** **O2 delivers continued customer and revenue growth

Telefónica UK Limited (O2), the UK’s favourite network, today announces H1 results for the six month period to 30 June 2019.

Highlights

• Continued total revenue growth, up 5.1 per cent year-on-year
• Further OIBDA growth to £919 million, up 6.4 per cent year-on-year

• Continued customer growth and sector leading loyalty

• Total base increase to 33.3 million, up 3.6 per cent year-on-year

• Market leading contract churn at 0.9 per cent

• Investment of over £2 million a day in award winning network

• 5G network switch-on confirmed for October 2019
• O2 5G will go live in 20 towns and cities this year and 50 towns and cities by Summer 2020

Mark Evans, CEO, Telefónica UK commented:

“I’m pleased to report a good first half performance. We continue to deliver further customer, top-line and bottom-line growth underpinned by our award-winning network and market-leading loyalty. C ustom plans has proven to be a key differentiator for O2, with the launch of Apple Watch demonstrating the power of this proposition in the market. We are announcing today that O2 customers will benefit from 5G connectivity from October this year, with rollout extending our 5G presence to 50 towns and cities by Summer 2020.

“5G rollout will be prioritised in the areas where customers need the network the most, such as transport hubs and venues. Alongside O2’s work to build a 5G economy in partnership with British industry, we continue to focus on improving 4G mobile network connectivity as one of the UK’s most powerful opportunities to strengthen the economy and improve the lives of British people. The Government’s support for an industry-led shared rural network for the benefit of consumers and businesses is a critical step forward for the UK”.

O2 confirms October 5G launch

O2 will launch its 5G network in October this year, starting in Belfast, Cardiff, Edinburgh, London, Slough and Leeds. Following launch, O2’s rollout will deliver a 5G presence in 20 towns and cities in 2019 and, by Summer 2020, O2’s 5G presence will extend to 50 towns and cities.

5G will radically improve capacity and reliability in key locations allowing customers to access super-fast speeds even during peak periods. In line with its customer-led strategy, O2 will begin its rollout in the areas where customers need the network most, with busy train stations (including from launch London Waterloo, Kings Cross, Slough, Leeds and Belfast), key business areas (including from launch the City of London) and entertainment and sports venues (including from launch The O2, Emirates Stadium and Twickenham Stadium) set to receive 5G first. O2’s commitment to roll out 5G where customers need it most has been driven by customer data and insight and ensures that customers will be making the best use of the power of 5G.

On 24 July, O2 announced it had extended its existing network sharing arrangement with Vodafone. The agreement will mean more people will get 5G more quickly, helping to build a competitive digital economy and encouraging innovative new services that use 5G’s speed and greater reliability. Network sharing reaps the benefits of 5G but with fewer masts which reduces the impact on the environment, while lower costs allow more investment in customers and services.

H1 2019 Highlights

On 14 June, O2 extended its industry-leading custom plans with the launch of Apple Watch. In extending custom plans to Apple Watch, O2 gives customers greater choice on how they structure their Apple Watch device and airtime plans. Customers can choose how much they want to pay for the device upfront (from a minimum of £20), and have the ability to spread the remaining cost between 3 and 36 months (in one-month increments) at 0% APR, allowing them to access smart tech on their terms and according to their budget. Once customers have paid for Apple Watch their bills will immediately and automatically reduce with only the cost of a £5 per month Apple Watch Airtime Plan continuing (adjusted annually for RPI).

O2 continued its drive for more transparent billing with the launch of the Overpayment Estimator at the end of June, providing consumers with a quick and easy way to see whether they are being overcharged on other operators after the expiry of their contract’s minimum term. The Overpayment Estimator was supported by an engaging advertising campaign, ‘Ouch!’, as well as creative content reinforcing O2’s customer champion position.

In April, O2 Business launched the O2 Health Tariff, a unique connectivity package exclusively for health organisations. Designed to provide healthcare professionals the connectivity they need at an affordable price, the tariff helps organisations meet the NHS goal of being paper free at point of care by 2020.

Priority saved customers around £10 million in the first half of the year with over 3.5 million Priority offers accepted and 19 million entries made to prize draws. Following the close of the half, a brand-new Priority campaign was launched in early July – “Catch some stardust” – highlighting the exclusive experiences made available to customers every day including invites from Merlin, Move GB, Secret Cinema presents Stranger Things and Tutankhamun: Treasures of the Golden Pharaoh.

In June, Telefónica UK achieved recertification to the Carbon Trust Standard for Supply Chain at level 3, the highest possible level. The standard is the world’s first independent certification for recognising organisations that are measuring, managing and reducing greenhouse gas emissions within their supply chains, and that are demonstrating leadership in their industry by making real progress year-on-year.

H1 2019 Financial highlights

All financials reported using the new IFRS 16 reporting standards with year-on-year movements on a like for like basis

Relevance : Total accesses, including customers who use the O2 network through giffgaff, Tesco Mobile, Sky Mobile and Lycamobile, reached 33.3 million at 30 June, with Telefónica UK remaining the largest UK mobile network carrier. Telefónica UK’s mobile base stands at 25.4 million . The company maintained its market-leading position for customer loyalty with contract churn excluding M2M at 0.9 per cent in the first half.

Contract net additions for the first half were 41,000 (612,000 including M2M) with the contract customer base now accounting for 67 per cent of the total mobile base. Active Prepay net additions for the first half were 45,000.

Revenues : Total Revenue for the first half reached £2,979 million (+5.1 per cent year-on-year for the first half, +4.8 per cent year-on-year for the second quarter). The revenue increase was mainly driven by the continued success of innovative tariffs such as custom plans, higher value handset sales, as well as ongoing growth in the Smart Metering Implementation Programme (SMIP) and MVNO.

Returns : OIBDA for the first half reached £919 million (+6.4 per cent year-on-year for the first half, +9.3 per cent year-on-year for the second quarter).

OIBDA margin for the first half grew 0.3 ppts year-on-year. CapEx for the first half was £358 million as the company continued to invest in its network for customers.