Press release

Interim results - download PDF

• Strong first-half performance delivered across the Group(1)
• - Customer base grew 15% to 22.0 million (2003 : 19.2 million);
  - Group turnover grew 23% to £3,285 million (2003 : £2,680 million);
  - EBITDA grew 37% to £851 million (2003 : £621 million);
  - Group operating profit increased to £251 million (2003 : £66 million);
• Basic earnings per share increased to 2.7 pence (2003 : 0.3 pence)
• Underlying earnings per share(2) increased to 4.5 pence (2003 : 1.5 pence)
• Group net debt reduced by £130 million during first half, to £236 million.
• O2 UK full-year net service revenue growth now expected to be 12 - 15%.
• Increased network investment in Germany of €1.0 - €1.5 billion over 5 years
• New policy of regular, sustainable dividends based on underlying EPS
• - Final dividend expected to be declared in May 2005 and paid in August 2005
  - Medium term target payout ratio 50%
• Corporate reorganisation to create distributable reserves before end FY 05

(1) Continuing operations. Comparative period is 6 months to 30 September 2003.
(2) Before goodwill and UMTS licence amortisation and exceptional items.

David Arculus, Chairman of mmO2 plc, commented:
"In the first half mmO2 delivered another good performance, with strong revenue and EBITDA growth. Over the past three years there has been a transformation in the Group's operational and financial performance, and we are very pleased now to be able to establish a policy of sustainable dividends, earlier than originally expected. The Group has delivered earnings growth and positive cash-flow, and we believe strongly that shareholders should benefit directly from this. The new policy reflects our confidence in the company's future prospects, and our commitment to deliver returns for shareholders."

Financial highlights

(1) Continuing operations.
(2) Before goodwill and UMTS licence amortisation and exceptional items.

Peter Erskine, Chief Executive of mmO2 plc, commented:
"In the first half mmO2 has delivered further strong revenue and profit growth, across all our businesses. Despite robust competition in all our mobile markets, year-on-year we have delivered a 15% increase in the customer base, 23% revenue growth, 37% growth in EBITDA, and a Group operating profit of £251 million. Underlying earnings per share, the measure on which we intend to base our dividends, increased three-fold, to 4.5 pence per share. Our net debt was reduced by a further £130 million, to £236 million.

The strategic development we have announced in Germany, investing to grow the business further and to accelerate the roll-out of our 3G network, builds on the strength of the O2 brand and the position we have established as the most dynamic and innovative competitor in the German market. Increasing network investment will enable us to offer an enhanced customer experience in Germany, with attractive and high quality mobile services delivered across our own 3G platform. This will increase our long-term margins, driving revenue growth and reducing operating costs.

Although the UK market remains highly competitive, our growth through the end of the first half has remained significantly stronger than expected, and we now expect to see full year net service revenue growth of 12-15%, higher than we had previously anticipated. "

Performance highlights - First Half (1)

O2 UK:

• Total customer base grew by 10% to 13.86 million
• Service revenue grew by 20% to £1,848 million
• EBITDA grew by 21% to £581 million
• EBITDA margin 28.5% (2) (2003: 29.2%)

O2 Germany:

• Total customer base grew by 27% to 6.67 million, of which 58% post-pay
• At constant exchange rates, service revenue grew by 29%
• EBITDA grew by 50% to £163 million
• EBITDA margin improved to 18.6% (2003: 15.1%)

O2 Ireland:

• Total customer base grew by 12% to 1.43 million
• At constant exchange rates, service revenue grew by 14%
• EBITDA £106 million (2003 : £103 million)
• EBITDA margin 37.9% (2003: 39.6%)

Airwave:

• Roll-out on track, with service delivered to 40 police forces
• Revenue £76 million (2003 : £25 million)
• EBITDA £24 million (2003 : £(15) million)

(1) Comparative period: 6 months to 30 September 2003.
(2) Reflects impact of transfer to O2 UK of O2 Online/Products O2 costs, previously reported separately.

Operational highlights - Second Quarter

Group:

• Customer base grew by 3% quarter-on-quarter, to 22.0 million
• 714,000 net new customers added (Q1 : 603,000), of which 45% post-pay

O2 UK:

• 331,000 net new customers added (Q1 : 261,000), of which 127,000 post-pay
• Blended ARPU £282 (Q1 : £279)

O2 Germany:

• 351,000 net new customers added (Q1 : 336,000), of which 186,000 post-pay
• Blended ARPU €371 (Q1 : €367)

O2 Ireland:

• 30,000 net new customers added (Q1 : 4,000), of which 5,000 post-pay
• Blended ARPU €560 (Q1 : €556)

Mobile data:

• Data as a proportion of service revenue 21.9% (Q1: 21.2%)
• Total SMS sent grew by 4.3% in the quarter to 3.359 billion

Interim results - download PDF

Back to press release list