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Telefonica O2 financial report due tomorrow


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Old 06-11-2012, 11:18
Thine Wonk
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Just a heads up guys, O2's financial figures are released tomorrow before the US markets open (before 14:30 GMT). This will be for financial performance for the 6 months from March to September 2012.

I'm quite interested in these and we'll see if they have gained or lost customers, whether they still have industry low churn, despite the outage in the summer, and also the knock on effect of paying compensation for the summers outage both to consumers and business customers.

I think this is going to get huge coverage in the media as they all reported on the summers outage, so most media outlets are probably going to report on the top level figures.
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Old 06-11-2012, 15:19
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Media will report on it from a Telefonica debt position and the impact on the uk business
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Old 06-11-2012, 15:22
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No doubt focusing on the lazy journalist story of UK tax and how much gets legitimately written of against debt interest repayments
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Old 06-11-2012, 15:26
gardensleeper
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Jacking up of roaming charges... Flogging off stores as franchises... Repeated service outages pointing to a single point of failure...

Whilst I'm sure O2-UK is a very profitable business, it looks like the parent company are milking the business for all it is worth at the moment.

I wonder whether Telefonica's dire position will limit O2's ability to bid for 4G bands?

Interesting times.
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Old 06-11-2012, 15:35
Thine Wonk
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I'm just interested in the impact on the summer outage and whether they still have the lowest churn in the industry as a result (which unbelievably they still may do).

It'll also be interesting to see how many customers they have attracted to the network or lost, and the financials. The last time they reported a 40% drop in profits as they put loads of cash into stopping churn. We'll see what they have to deliver now.

I think this could have been the most difficult 6 months trading in history for the company, the next results in 6 months we'll see the impact of the 2nd outage and the EE launch and whether that has impacted O2. Extremely interesting times.
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Old 07-11-2012, 08:56
Thine Wonk
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The results are in.

The Company is taking action to improve the stability of the network and rebuild confidence in O2, by
removing the Central User Database provided by one of the suppliers, which has suffered two
different faults in the last few months.

Telefónica UK has also been able to bring forward the date when spectrum will be cleared for LTE use,
so that it will be available for 4G services in the first half of 2013, five months ahead of the previous
schedule.

It should be highlighted that our network sharing agreement with Vodafone was recently
cleared by the Office of Fair trading allowing us to strengthen our existing network collaboration,
broadening our coverage and laying the foundations for our 4G network.

Total access base reached 23.5 million at the end of September 2012 (+2% year-on-year)

Churn still industry low at 2.7%.

However this has come at a cost.

Voice traffic decreased 7% year-on-year
ARPU (annual revenue per user) in the first nine months decreased by 9.2% year-on-year.
Revenue down 5.6% year-on-year
Operating expenses grew 0.5% year-on-year
Operating income down 21.4% in the nine months to September

Last year they made £904M, this year it went down to £646M, that's before depreciation and taxes.

They announce 3G coverage is now 90%! whooooo catching up
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Old 07-11-2012, 11:44
Everything Goes
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Are you sure O2 aren't just making up the 90% 3G coverage stat

Other news includes:

Demand for smartphones has lead O2's contract numbers to hit an all-time high, accounting for 52% of its base. O2 said smartphone penetration increased off the back of its On & On offer, with almost 89% of contract handset sales in the yeat to date being smartphones.

Like its rivals, prepay customers continued to fall, with O2 losing 95,000 customers during the quarter, a drop of 5.1% to 10.9m. By comparison, EE's prepay numbers fell by 10% during its third quarter. The overall customer base increased slightly, up 1% to 22.5m.

http://www.mobiletoday.co.uk/News/23...ract_high.aspx
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Old 07-11-2012, 12:00
Thine Wonk
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Broadband customers down 22,500 customers, dropping the user base to 579,500.

Overall I think a good set of results on sales, but worrying financials for O2 UK and Ireland as they have had to take a big hit on revenue in order to grow those numbers. Overall the wider Telefonica has done well. Tesco UK did very well and got a mention in the highlights at the top of the report, 20% increase wow.

Extremely well done on the churn, it's amazing considering the amount of people that were "twitter leaving", all talk it seems! Of course these figures don't include the period of the 2nd outage, but I don't see that making much of a dent.
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Old 07-11-2012, 16:41
legends wear 7
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O2 Financials are a poor set of results, they must be wondering how they'll ever get back out of the slide they are in
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Old 07-11-2012, 16:47
Thine Wonk
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O2 Financials are a poor set of results, they must be wondering how they'll ever get back out of the slide they are in
Telefonica are the phone company with the biggest debt in Europe!, but they have flogged off via IPO parts of O2 Germany, China Unicom, Attento the call centre business, a travel agency they owned was sold last week, 50% of the O2 stores are being franchised, it's sell sell sell. Everything must go!

It is likely they will soon announce selling off Latin American assets next, but as a result of these sales they are less in debt than they were.

O2 UK and Ireland hasn't done well on the financial side, but on customer numbers and churn they have done very well. The challenge will be getting declining revenues to turn around if they don't they could be in trouble in years to come. They have stopped handset subsidies in several EU markets and I wonder when they will do this in the UK.

The 90% 3G is big news, it's a milestone for them. Just as we're all talking about 4G O2 has reached a low milestone in the last gen technology!

FALLING SALES

Telefonica's European businesses, the largest of which are Spain, Britain and the newly-listed German unit, registered a third quarter revenue decline of 6.8 percent to 7.44 billion euros.

In Spain, which accounts for about one quarter of group revenues, total customers in fixed and mobile were down by 7.5 percent in the third quarter. Telefonica is now the only player in Spain not offering cut-price phones after rival Vodafone (VOD.L) reintroduced subsidies this week.
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Old 07-11-2012, 16:49
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Revenues falling = lack of capital to invest

And boy do those revenues continue to fall
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Old 07-11-2012, 17:42
moox
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The 90% 3G is big news, it's a milestone for them. Just as we're all talking about 4G O2 has reached a low milestone in the last gen technology!
I was only told, just yesterday in another thread, that all of the networks are "much the same". I was struggling to find an accurate O2 coverage figure, but now we have one.

90% is laughable in 2012 when there are networks approaching 99% 3G coverage.

It is clear that there is indeed much of a difference between some networks - ones that invest and ones that don't.
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Old 07-11-2012, 18:00
Thine Wonk
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I was only told, just yesterday in another thread, that all of the networks are "much the same". I was struggling to find an accurate O2 coverage figure, but now we have one.

90% is laughable in 2012 when there are networks approaching 99% 3G coverage.

It is clear that there is indeed much of a difference between some networks - ones that invest and ones that don't.
Yeah they are not much the same at all, that 10% is millions of customers without 3G, also geographically, rather than population the situation is worse.

The problem is consumers *think* there isn't much difference and they think all 3G coverage is bad, not just their network. They don't realise that some networks have invested a lot in the last few years and are unaware of the difference. They don't test or try 3G coverage they just buy based on the big TV ads and the brand and then assume that's what all networks are like.
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Old 07-11-2012, 18:11
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O2 are still THE most successful UK based mobile network by a mile. Despite all the negative postings on here they continue to prosper with 22.5 milllion customers of their own and another 3.3 million with their Tesco mobile joint venture. Smartphone penetration has never been greater and demand for their srvices remains very strong despite being more expensive than other operators and MVNOs. O2's network must be good enough to satisfy it's customers as their subscriber base continues to grow and O2 do not sell on price. O2 has been a tortoise and others have been hares developing UK UMTS networks but from a business standpoint the tortoise appears to be winning the race for customer loyalty and growth. It's astonishing that anyone actually believes that O2's network is so much worse than others. How are they able to fool so many people for so long and manage to convince more to join their service. The service is so bad O2 keeps coming out with very low ratings for customer dissatisfaction, another mystery.

Revenues have dropped, not just for O2 but for all UK operators due to further EU price caps and reduced UK termination rates.

O2 have solid growth, a premium brand and some excellent prospects that will deliver more value in the future. The franchising of their stores will deliver results as owners with a stake in their own businesses will perform better than employees. The merger of O2 and Vodafone's network operatons will substantailly improve the rollout of UMTS and LTE and will deliver big cost savings in the coming years.

There will be a few very dissapointed regulars on this forum at the continued success of O2 and I'm sure some will continue to post negativity about the UK company and it's Spanish parent at every available opportunity but the paying public seem to have a very different opinion of the company and it's services which is very good news for the 1000s employed by O2 in the UK who should have confidence working for such a successful business.
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Old 07-11-2012, 18:28
Thine Wonk
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Anyone can sell to a lot of customers and not make much money though, yes they had a 2% growth in customer numbers, but with revenues down quarter on quarter they are effectively buying customers.

As I have said they have done well to put on customers, Tesco in particular have done extremely well, but the revenue drops are serious for them. So whilst they attracted 2% more customers, their customers are spending 10% less than they were. O2's issue is revenue lost on calls and texts is not being replaced by data revenue, which is powering competitors.

6.8% revenue drop
ARPU down 9.2% year-on-year
Voice traffic down 7% (not sufficiently replaced by data revenue)
Operating expenses up up 0.5%
Operating income down 21.4% in the nine months to September

If this were a line / trend graph they have 30 months before the company is making a loss and by the end of 2015 they would have over £100M in losses.

I have plotted it on a graph so you can see what I mean Wavejock.

http://oi47.tinypic.com/14cunwp.jpg
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Old 07-11-2012, 19:22
legends wear 7
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I'd like to point out again Wavey my lad that Vodafone are the most successful operator by the only key metric. REVENUE in fact vodafone are the world leader ( ignoring China mobile as market analysts do)

Also it's wrong to suggest ALL networks have seen revenue reduce as for Qtr after Qtr Vodafone UK have reported Reveune growth.


O2 have not reported "steady" growth for well over a year now. Customer numbers mean didly squat if your revenue is plummeting.

Quailty over quantity

Oh and franchise stores are traditionally less profitable than owned stores in the industry.

I've nothing against O2 but your blind loyalty to them is as terrifying as the words being heard from Mitt Romney supporters today.
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Old 07-11-2012, 19:30
Steven L Hunter
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There will also be a significant drop in customers in the next results as people move to EE for 4G also I already know of 2 people that have left O2 recently one went to Vodafone and the other went to T-Mobile. I now no longer know anyone on O2 at all!
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Old 07-11-2012, 19:35
Thine Wonk
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Thing is when O2 release their results they will put a lot of spin on it, the city sees through this, but it's all part of the process. Wavejock buys it all though and thinks they are doing brilliantly!

O2 have solid growth, a premium brand and some excellent prospect
I have to ask then, why to The Times, a very reputable newspaper say the following:

O2 lags behind as rivals steal a march

Revenue at O2, Britain’s second-largest mobile phone company, fell almost 10 per cent in the third quarter as it continued to trail its rivals.

http://www.thetimes.co.uk/tto/busine...cle3592894.ece
I've plotted a graph of revenues to try and help Wavejock appreciate what I'm saying, this is what is happening to revenue, in less than 3 years they'll be making losses into the hundreds of millions unless they can kurb the revenue loss. http://oi47.tinypic.com/14cunwp.jpg

At Vodafone data revenues were up 22.2%. O2 has an issue because traditional revenues are not being replaced by selling data to the amount they are on the others.
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Old 07-11-2012, 20:18
Thine Wonk
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Do you have any comment Wavejock or anyone else for that matter? by all means let me know if there's something I've missed or is incorrect.
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Old 07-11-2012, 21:43
jabbamk1
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I'm surprised O2 say they are at 90% 3G coverage, either thats slightly optimistic or the 10% without 3G coverage is a 50 mile radius around my house :P

It's clear O2 are struggling a bit here, especially with the business decisions they have been making recently, but they're not doing as bad as some people think. They still have time to turn everything around. The next couple of years will be intersting to see what o2 do.
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Old 07-11-2012, 21:48
Thine Wonk
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It's population coverage Jambank, of course other operators are advertising 98%.
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Old 07-11-2012, 21:57
jabbamk1
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It's population coverage Jambank, of course other operators are advertising 98%.
I know aha, what i was trying to get across was that even though their population coverage has increased from 84% to 90% in the last year i haven't noticed a difference at all. Hasn't affected me in any of the areas i travel in.
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Old 08-11-2012, 00:01
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My local O2 mast has had the 3G900 treatment today , superb indoor 3G signal now
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Old 08-11-2012, 01:11
Everything Goes
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Anyone can sell to a lot of customers and not make much money though, yes they had a 2% growth in customer numbers, but with revenues down quarter on quarter they are effectively buying customers.

As I have said they have done well to put on customers, Tesco in particular have done extremely well, but the revenue drops are serious for them. So whilst they attracted 2% more customers, their customers are spending 10% less than they were. O2's issue is revenue lost on calls and texts is not being replaced by data revenue, which is powering competitors.

6.8% revenue drop
ARPU down 9.2% year-on-year
Voice traffic down 7% (not sufficiently replaced by data revenue)
Operating expenses up up 0.5%
Operating income down 21.4% in the nine months to September

If this were a line / trend graph they have 30 months before the company is making a loss and by the end of 2015 they would have over £100M in losses.

I have plotted it on a graph so you can see what I mean Wavejock.

http://oi47.tinypic.com/14cunwp.jpg
Thanks for the graph. No doubt the upper management at O2 have a graph similar to this and will be staring at it wondering how to fix things before its too late.

Other things to factor in are O2 still have to bid for a 4G Licence. Not going to be cheap. Invest (a word O2 hate) in a 4G network. Partly offset by Vodafone's network sharing arrangement also improve diabolical 3G coverage.

They will also have to retain or increase customer numbers and cut costs of subscriber acquisition costs (smartphones that contract customers want aren't cheap).

To increase revenue they have already increase outside EU roaming charges.

They will be ale to use 2100Mhz (presently 3G only) for 4G from summer 2014. So savings to be made there.

What next?
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Old 08-11-2012, 02:08
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O2 are still THE most successful UK based mobile network by a mile. Despite all the negative postings on here they continue to prosper with 22.5 milllion customers of their own and another 3.3 million with their Tesco mobile joint venture. Smartphone penetration has never been greater and demand for their srvices remains very strong despite being more expensive than other operators and MVNOs. O2's network must be good enough to satisfy it's customers as their subscriber base continues to grow and O2 do not sell on price. O2 has been a tortoise and others have been hares developing UK UMTS networks but from a business standpoint the tortoise appears to be winning the race for customer loyalty and growth. It's astonishing that anyone actually believes that O2's network is so much worse than others. How are they able to fool so many people for so long and manage to convince more to join their service. The service is so bad O2 keeps coming out with very low ratings for customer dissatisfaction, another mystery.

Revenues have dropped, not just for O2 but for all UK operators due to further EU price caps and reduced UK termination rates.

O2 have solid growth, a premium brand and some excellent prospects that will deliver more value in the future. The franchising of their stores will deliver results as owners with a stake in their own businesses will perform better than employees. The merger of O2 and Vodafone's network operatons will substantailly improve the rollout of UMTS and LTE and will deliver big cost savings in the coming years.

There will be a few very dissapointed regulars on this forum at the continued success of O2 and I'm sure some will continue to post negativity about the UK company and it's Spanish parent at every available opportunity but the paying public seem to have a very different opinion of the company and it's services which is very good news for the 1000s employed by O2 in the UK who should have confidence working for such a successful business.
Oh your back! Care to speak about the second massive disruption to O2 the other week which you completely ignored!!

Anyway, O2 may still be a popular network because they are dirt cheap but, their complete lack of 3G coverage which i experienced the other day coming back from Newcastle to Dundee on the train is absolutely horrifying! You talk about LTE, but if O2 still cant bring decent 3G coverage after nearly a decade, we have zero chance of LTE!!

Stop kidding yourself that people are happy with O2. Have you ever ventured in to their forums?!
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