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Press release

18/07/2002

mmO2 reports higher customer numbers, ARPU improving and data revenues continuing to grow

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mmO2 plc today announced key performance indicators for the three-month period to 30 June 2002. These demonstrate continuing momentum in Germany and in the UK contract market, encouraging increases in ARPU, and further growth in mobile data. The key achievements in the quarter included :

Customer numbers :

  • mmO2 added a total of 292,000 net new customers in the quarter, 86% of which were contract customers.
  • O2 UK added 111,000 net new contract customers; pre-pay declined by 24,000.
  • O2 Germany added 195,000 net new customers, of which 103,000 were contract customers.

Average revenue per user (ARPU) :

  • O2 UK's blended ARPU increased to £234, from £231 the previous quarter; contract ARPU increased to £502, from £498 the previous quarter.
  • O2 Germany's blended ARPU increased to £203, from £195 the previous quarter; pre-pay ARPU grew by 7% quarter-on-quarter, and contract ARPU by 3.5%.

Mobile data :

  • Data as a proportion of service revenues increased to 14.6%, from 13.4% the previous quarter.
  • The total number of SMS messages increased by 6% to 1,768 million.

David Varney, Chairman of mmO2 stated :
"We continue to make encouraging progress in implementing our strategy across the Group. We remain confident that by focusing on attracting and retaining higher quality customers, building our leading position in the growing market for mobile data services, and tightly controlling operating costs and capital expenditure, we can deliver further progress towards the financial goals we have set out for the Group."

Peter Erskine, Chief Executive of mmO2, commented :
"We added 292,000 net new customers and ended our first quarter under the O2 brand with a total base of 17.749 million customers, of which 36% were contract customers. ARPU in most of our markets continued to improve, for both pre-pay and contract customers. We continue to target ARPU growth of 4-8% for the year.

"We were particularly pleased that we maintained our momentum in the German market. We added 195,000 customers in the first quarter, over half of which were contract customers. ARPU growth was impressive, with pre-pay ARPU up 7% and contract ARPU 3.5% ahead of the previous quarter.

"Our recovery in the UK contract market was sustained, with 111,000 net new customers added, contract ARPU up to £502, and churn down another point to 30%. Pre-pay ARPU was also encouraging, as we continued to target higher quality customers, including through our online channel.

"Data revenue continued to develop towards our target of 25% of service revenues by the end of 2004. In the first quarter data accounted for 14.6% of service revenues, with the growth being driven by higher SMS usage, including an increasing number of premium SMS services.

"The response from our customers and channel partners to the new O2 brand has been overwhelmingly positive, in all our markets. O2 reflects a fresh, forward-looking approach to mobile communications, and is delivering the solutions that our customers truly value."

OPERATING REVIEW

O2 UK
The turnaround in the contract market continued to build pace, with 111,000 net new contract customers added. This reflected O2's enhanced customer propositions in both voice and mobile data services, including the new range of cross-net bundles, rather than increased subscriber acquisition costs (SAC). Churn in the contract market fell to 30%, from 31% in the previous quarter. Contract ARPU improved to £502 from £498 in the previous quarter, and from £486 in the first quarter of last year.

The upgrading of the pre-pay customer base continued, with a net loss of 24,000 customers in the quarter, and pre-pay ARPU of £109 slightly ahead of the previous quarter. The pre-pay SAC remained low, reflecting O2's increasing focus on higher value customers, rather than market share growth.

The volume of SMS messages grew to 1,152 million, a 9% increase on the previous quarter. Growth was driven by person-to-person messaging, and increasingly by premium rate services. Data's share of service revenues increased to 14.1% from 13.8% the previous quarter.

O2 Germany
O2's recent momentum in the German market was maintained, with 195,000 net new customers added in the quarter, of which 103,000 were contract customers. Blended ARPU increased to £203 from £195 last quarter.

The unique O2 Genion service (a Homezone product) continued to drive post-pay growth, accounting for over 80% of total contract customer connections. The growing proportion of the high-ARPU Genion customers within the contract base contributed to the overall contract ARPU improvement to £324, from £313 last quarter. The contract SAC was flat quarter-on-quarter, and there was a fall in churn.

O2 also performed strongly in the pre-pay market, with 92,000 net new customers. The "Mobile Option" flat rate tariff, introduced in April, attracted increasing numbers of high value customers, and ARPU jumped 7% from the previous quarter, to £76. Pre-pay SAC and churn were both below the previous quarter.

Data as a proportion of service revenue jumped to 18.3%, from 14.5% in the previous quarter. Approximately 1.5% of this was accounted for by inbound SMS termination revenue, which had not previously been recorded as data revenue. However, on a like-for-like basis data's share of O2 Germany's total service revenues increased by more than two percentage points, due to special offers associated with the World Cup, and the introduction of other new data services.

O2 Netherlands
In a flat market environment, O2 Netherlands delivered strong growth in the contract market, with 34,000 customers added in the quarter, at a lower subscriber acquisition cost than in the previous quarter. This reflected the impact in the Netherlands of the re-branding to O2, which re-positioned the company significantly. Contract ARPU also improved, to £495 from £492 the previous quarter.

O2's performance in the pre-pay market was stable, reflecting competitive conditions in the market as a whole. There was a small decline in the pre-pay customer base and pre-pay ARPU was flat.

Data accounted for 12.1% of service revenues, compared to 9.2% in the previous quarter. Approximately 1.9% of this was accounted for by inbound SMS termination revenue, which had not previously been recorded as data revenue. The underlying growth was driven by higher value SMS, and other new data services.

O2 Ireland
O2 delivered a stable performance in the contract market. Contract customer numbers, ARPU and SAC were broadly unchanged, and churn was slightly lower.

In the pre-pay market ARPU increased to £204, from £197 the previous quarter, growth of more than 3.5%. There was a small fall in the active customer base. APRU improvement was driven by an increase in voice minutes, compared to the previous quarter, and strong SMS usage, including premium rate services. This reflects O2 Ireland's successful focus on higher value customers.

Data's overall share of service revenues grew slightly to 11.7%, from 11.5% in the previous quarter. SMS messages grew by 4.7% quarter-on-quarter.

TABLE 1 : CUSTOMER NUMBERS

('000) Customers at 31 March 2002 Net additions during period Customers at 30 June 2002
O2 UK
Pre-pay 7,542 (24) 7,518
Post-pay 3,542 111 3,653
Total 11,084 87 11,171
O2 Germany
Pre-pay 1,912 92 2,004
Post-pay 1,979 103 2,082
Total 3,891 195 4,086
O2 Netherlands
Pre-pay 1,022 (7) 1,015
Post-pay 233 34 267
Total 1,255 27 1,282
O2 Ireland
Pre-pay 824 (22) 802
Post-pay 356 3 359
Total 1,180 (19) 1,161
Manx
Pre-pay 26 2 28
Post-pay 21 0 21
Total 47 2 49
mmO2 Group
Pre-pay 11,326 41 11,367
Post-pay 6,131 251 6,382
Total 17,457 292 17,749
Pre-pay % 64.9% 14.0% 64.0%
Post-pay % 35.1% 86.0% 36.0%

TABLE 2 : AVERAGE REVENUE PER USER (ARPU)

(£) 3 months ended 30 June 2001 3 months ended 30 Sept. 2001 3 months ended 31 Dec. 2001 3 months ended 31 March 2002 3 months ended 30 June 2002
O2 UK 12-month rolling  
Pre-pay 110 108 105 108 109
Post-pay 486 489 493 498 502
Blended 251 238 230 231 234
Monthly average  
Pre-pay 9 9 9 9 9
Post-pay 41 43 42 40 42
Blended 19 20 19 19 20
O2 Germany 12-month rolling  
Pre-pay na (1) na (1) 70 71 76
Post-pay na (1) na (1) 306 313 324
Blended na (1) na (1) 192 195 203
Monthly average  
Pre-pay 5 5 8 6 7
Post-pay 24 27 27 26 28
Blended 15 16 18 17 18
O2 Netherlands 12-month rolling  
Pre-pay 82 83 79 84 83
Post-pay 477 487 487 492 495
Blended 158 165 160 163 160
Monthly average  
Pre-pay 7 7 6 8 7
Post-pay 41 41 40 42 42
Blended 15 14 12 14 14
O2 Ireland 12-month rolling  
Pre-pay 214 190 195 197 204
Post-pay 630 623 624 622 621
Blended 366 330 331 329 333
Monthly average  
Pre-pay 18 17 17 16 18
Post-pay 53 52 51 51 53
Blended 30 28 28 27 28

(1) Comparable data not available : annualised six-month ARPU previously reported for these quarters.

TABLE 3 : AVERAGE REVENUE PER USER (ARPU)

(EURO) 3 months ended 30 June 2001 3 months ended 30 Sept. 2001 3 months ended 31 Dec. 2001 3 months ended 31 March 2002 3 months ended 30 June 2002
O2 UK 12-month rolling  
Pre-pay 179 175 169 174 176
Post-pay 790 793 793 806 808
Blended 408 386 370 374 376
Monthly average  
Pre-pay 14 15 14 15 15
Post-pay 66 69 68 66 67
Blended 31 32 31 31 32
O2 Germany 12-month rolling  
Pre-pay na (1) na (1) 113 115 123
Post-pay na (1) na (1) 493 507 522
Blended na (1) na (1) 309 315 327
Monthly average  
Pre-pay 8 8 12 10 11
Post-pay 39 43 44 43 44
Blended 24 26 29 27 28
O2 Netherlands 12-month rolling  
Pre-pay 133 135 127 136 134
Post-pay 776 790 783 797 798
Blended 257 268 257 264 258
Monthly average  
Pre-pay 12 12 9 13 11
Post-pay 66 66 65 68 67
Blended 25 23 19 23 22
O2 Ireland 12-month rolling  
Pre-pay 348 308 314 319 329
Post-pay 1,025 1,010 1,004 1,008 1,002
Blended 595 535 532 533 537
Monthly average  
Pre-pay 30 27 27 27 28
Post-pay 87 84 82 83 84
Blended 50 45 45 44 45
Euro Rates  
Quarterly 1.6268 1.6149 1.6110 1.6273 1.5949
Annually 1.6261 1.6214 1.6084 1.6200 1.6120

(1) Comparable data not available : annualised six-month ARPU previously reported for these quarters.


TABLE 4. DATA AS % SERVICE REVENUES

Country 3 months ended 30 June 3 months ended 30 Sept. 3 months ended 31 Dec. 3 months ended 31 March 3 months ended 30 June
O2 UK 9.1% 10.8% 13.4% 13.8% 14.1%
O2 Germany 13.6% 12.9% 12.8% 14.5% 18.3%
O2 Netherlands 7.6% 8.5% 10.0% 9.2% 12.1%
O2 Ireland 7.8% 9.0% 10.5% 11.5% 11.7%
Group 9.7% 10.9% 12.8% 13.4% 14.6%

TABLE 5. SMS MESSAGES

(million) 3 months ended 30 June 3 months ended 30 Sept. 3 months ended 31 Dec. 3 months ended 31 March 3 months ended 30 June
O2 UK 639 754 931 1,060 1,152
O2 Germany 205 217 250 286 298
O2 Netherlands 38 60 80 110 98
O2 Ireland 134 150 179 204 214
Manx 2 4 5 6 6
MmO2 total 1,018 1,185 1,445 1,666 1,768
Growth +11.4% +16.4% +21.9% +15.3% +6.1%

mmO2
mmO2 has 100% ownership of mobile network operators in four countries - the UK, Germany, the Netherlands and Ireland - as well as a leading mobile internet portal business. All of these businesses have now been re-branded as O2. Additionally, the company has operations on the Isle of Man (Manx Telecom).

mmO2 was the first company in the world to launch and rollout a commercial GPRS (or 2.5G) network and has secured third generation mobile telephony ("3G") licences in the UK, Ireland, the Netherlands, and Germany.

mmO2 has approximately 17.75 million customers and some 14,000 employees, with revenues for the year ended 31 March 2002 of £4.276 million. Data represented 14.6% of total service revenues in the quarter ending 30 June 2002.

mmO2 Contacts:

Richard Poston
Director, Corporate Communications
mmO2 plc
richard.poston@o2.com
t: +44 (0)1753 628039

David Nicholas
Head of Media Relations
mmO2 plc
david.nicholas@o2.com
t: +44 (0) 771 575 9176

David Boyd
Head of Investor Relations
mmO2 plc
david.boyd@o2.com
t: +44 (0)1753 628230

Simon Gordon
Press Relations Manager
mmO2 plc
simon.gordon@o2.com
t: +44 (0)771 007 0698


mmO2 Press Office
t: +44 (0)1753 628402

 

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