Press release

Quarterly KPI's (3 month period to 31 December 2002)
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mmO2 plc today announced key performance indicators for the three-month period to 31 December 2002. The company also announced agreement with T-Mobile to extend the scope of co-operation on the rollout of third generation (3G) mobile networks in Germany. Key developments reported for the quarter include:

Customer numbers:

• mmO2 added 791,000 customers, an increase of 4.3%, to 19.1 million customers.
• O2 UK added 503,000 customers, including 114,000 contract customers.
• O2 Germany added 286,000 customers, of which 74% were contract customers.

Average revenue per user (ARPU):

• All mmO2's businesses delivered blended ARPU growth for the nine months to the end of December on track to achieve, or exceed, their full-year target of 4-8% growth :
• UK : £243 + 5.2% year-to-date
• Germany : £212 + 8.7% year-to-date
• Ireland : £341 + 3.6% year-to-date
• Netherlands : £173 + 6.1% year-to-date

Mobile data :

• The total number of SMS messages grew quarter-on-quarter by 19%, to 2.2 billion.
• Data as a proportion of service revenues increased to 17.7%, from 15.6%.

Business developments

• O2 Germany extended its network sharing agreement with T-Mobile

Peter Erskine, Chief Executive of mmO2, said:
"We have built up momentum in our markets by offering mobile customers a strong range of competitive voice and data products and services. Our total customer base has grown by 9.2% since the start of the year. ARPU in all our businesses is on track to achieve or exceed our target of 4-8% growth for the full-year. The proportion of service revenue generated from mobile data has already surpassed our year-end target of 16%.

"We were particularly encouraged by our performance in the UK market, where we added more than half a million new customers, including 114,000 valuable contract customers. We were also pleased by our continuing momentum in Germany, with customer numbers, ARPU and data revenues all ahead for the fifth consecutive quarter. Across the whole footprint the O2 brand continued to gain profile and drive growth.

"In Germany we have extended our co-operation with T-Mobile on the roll-out of 3G networks. This move positions us to launch a mass-market 3G service cost effectively, in the same timeframe as our two major competitors. We also gain increased flexibility to match our 3G investment profile to the growth of customer demand for high-speed mobile data services, and the availability of devices, without constraining our strategic or operational options in Germany."

OPERATING REVIEW

O2 UK
A total of 503,000 net new customers were added, comprising 389,000 pre-pay and 114,000 contract net additions, and taking the total customer base to 11.95 million. Customer growth was driven by attractive and competitive propositions, such as "bolt-ons", rather than by higher handset subsidies. Contract subscriber acquisition costs (SAC) were in line, and pre-pay SAC almost one third lower than the previous quarter. The O2 shops again performed strongly, accounting for the highest proportion of new connections. The continuing development of customer retention programmes saw contract churn fall to 28%. Pre-pay churn was flat against the previous quarter.

Blended ARPU grew to £243, an increase of 5.2% since the start of the financial year. Contract ARPU fell slightly to £503, from £505 in the previous quarter, reflecting a sharper drop this year in business usage over the Christmas and New Year holiday period. This was more than offset by significantly stronger pre-pay ARPU, which grew to £117 from £112 in the previous quarter, reflecting the success of voice and data propositions targeted at higher value pre-pay customer segments, including increased focus on E-Top-up capabilities. Text messaging grew by 21% over the previous quarter, with almost 1.5 billion messages sent. On New Years Day, a record number of 27.7 million messages was delivered. Overall, data as a proportion of O2 UK's service revenue grew to 17.4%, compared to 15.3% in the previous quarter.

Following publication of the Competition Commission's recommendations regarding mobile termination charges, O2 UK announced that a range of mitigating actions would be implemented. These include deferral of previously planned tariff reductions, acceleration of cost savings initiatives, and delay of the planned launch of commercial 3G services until the second half of 2004. This will enable O2 UK to deliver its stated aims of 10% service revenue growth, and a 30% EBITDA margin, in 2003/04.

O2 Germany
O2's momentum in the German market continued, with 286,000 net new customers added, taking the total customer base to 4.58 million, 53.6% of which are contract customers. In the year to date, the total customer base has grown by 17.6%. Growth continued to be driven mainly by the unique "O2 Homezone" service, which accounted for 60% of the contract customer base at the end of the quarter. Pre-pay SAC for the quarter was broadly unchanged, and contract SAC fell slightly.

O2 Germany's ARPU remained strong in the quarter, with contract ARPU growing to £335 from £331 in the previous quarter. Pre-pay ARPU was down slightly to £81. Since the start of the year, pre-pay ARPU has grown by 14.1% and contract ARPU by 7.0%. Mobile data continued to grow strongly. Text messages grew by 17%, with a total of 361 million messages sent in the quarter. Data as a proportion of service revenue increased to 19.7%, from 18.1% in the previous quarter.

O2 Germany faces a regulatory requirement to provide 3G network coverage to 25% of the population by the end of December 2003. The business intends to adhere to this requirement, and to be in a position launch a full commercial 3G service, if customer demand and device availability justify this.

In addition to building its own network, O2 Germany will provide wider 3G coverage for its customers through its network sharing and roaming agreement with T-Mobile. Under an extension to this agreement, mmO2 will pay T-Mobile £137 million in two tranches, plus associated roaming fees, to gain increased access to T-Mobile's 3G network in all areas over a longer period. By adopting this dual approach to 3G coverage, O2 Germany will be in a position to provide a full commercial 3G service to its customers across a wider area, more cost effectively. It will also enable O2 Germany's network roll-out to be matched closely to the development of the market for 3G products and services.

O2 Ireland
A total of 43,000 net new customers were added in the quarter, taking the overall customer base to 1.24 million, 5% higher than at the start of the year. 40,000 of the net additions were pre-pay customers, although the pre-pay SAC was reduced by around 30% compared to the previous quarter. Pre-pay and contract churn were both lower.

O2 Ireland's ARPU remains the highest in the Group, and the business continues to deliver strong growth and performance improvement. Pre-pay ARPU grew to £212, from £208 the previous quarter. Contract ARPU was £639, up from £633. The blended ARPU of £341 represented growth of 3.6% since the start of the year. Strong text message growth was maintained, with 259 million messages sent, 17% higher than the previous quarter. Mobile data generated 15.7% of service revenues, up from 14.1%.

O2 Netherlands
In the highly competitive Dutch market, O2 Netherlands saw a net loss of 50,000, mainly low value, pre-pay customers. This was reflected in the 9.3% growth in pre-pay ARPU, compared to the previous quarter. In the contract market, 5,000 net new customers were added, taking the total contract base to 309,000, 33% higher than at the start of the year. The increase in contract customers drawn from the consumer market over the previous quarters was reflected in the decline in contract ARPU to £473, from £485 in the previous quarter. Blended ARPU was £173, 6.1% higher than at the start of the year.

Mobile data
Data as a proportion of Group service revenue increased to 17.7% in the quarter, compared to 15.6% in the previous quarter and the year-end target of 16%. Text messaging, including premium services, continued to generate most of this revenue, with 2.2 billion messages sent, an increase of 19% over the previous quarter, and representing volume growth of 33% for the year to date.

There was continued growth of non-SMS revenues across the Group. The number of active GPRS subscribers, including those using Blackberry and xda devices, increased to more than 200,000. Java games and the O2 Media Messaging Service (MMS) were launched in August and October respectively, and by the end of the quarter the number of active users of these services had grown to more than 100,000. MMS interconnect agreements with other networks have now been established, covering Orange and T-Mobile in the UK, and Vodafone and T-Mobile in the Germany.

Airwave
The roll-out of the Airwave emergency services communications network continued to make good progress, with ten police forces due to be operational by the end of March. More than 20 further forces are scheduled to switch to the service by the end of 2003/04, including the Metropolitan Police, the largest force in the UK.

APPENDIX: THIRD QUARTER KEY PERFORMANCE INDICATORS

Customer Numbers - download PDF

Average revenue per user(£) (ARPU) - download PDF

Average revenue per user(€) (ARPU) - download PDF

Data as percentage of service revenues + SMS messages - download PDF

Quarterly KPI's (3 month period to 31 December 2002)
- download PDF

mmO2 Contacts:

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

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

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

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

mmO2 press office: +44 (0)1753 628402

mmO2 intends to announce its Preliminary Results for the full-year w/c 19 May 2003. A pre-Close trading update will be released in late March.

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