Events & presentations

11/03/2003

O2 CeBIT press conference

O2 CeBIT press conference - Rudolf Gröger

Ladies and Gentlemen,

I would also like to welcome you to our press conference. Last year's CeBIT was a historic occasion for us, as it was the first time that we exhibited under the name O2. At that time, we had complete faith in our new brand and, looking back, I can now say that the reactions of our customers and the public have far exceeded our expectations. If we look at the development of our business over the last year, we can see that O2 is the leading light on the German mobile communications market. Let me give you a few figures to back up this statement: within 12 months, we boosted our customer base from 3.7 million to 4.6 million, an increase representing 25 percent growth! O2 Germany is the only German network operator to experience continued growth for more than one year. We have also expanded our market share accordingly and have exceeded our target of increasing this market share by one percent point each financial year. Furthermore, the average profit per customer has also risen. At € 29, O2 Germany's ARPU is higher than average. O2 also leads the way in another important area for qualitative growth: within a year, the data portion of the service revenue increased by more than 50 percent to 19.7 percent. We are recording the largest share of revenue from data on the market.

In addition to continuing growth, massive cost reductions in particular enabled us to reach the EBITDA break-even point as early as after the first half of the financial year, which runs until the end of March. In achieving this, we not only exceed the expectations of the financial markets, but we also more than met our own targets. O2 Germany attained the earnings before interest, tax, depreciation and amortisation profit zone one year earlier than expected and posted a positive net cashflow.

These successes motivate us to continue to pursue, with renewed vigour, the course we have embarked upon. By concentrating on high-turnover new and existing customers, we are experiencing profitable growth. Innovative products, such as Genion, the informative SMS services or our high-quality data services, are important components of our value-for-money strategy. We are no longer focussing on technical terms, such as GPRS or UMTS, but on the benefit of our services. The customer can, of course, rest assured in the knowledge that we are providing these services on all 2G to 3G transmission paths available to us. After all, this is entirely in keeping with the spirit of our motto: O2 can do.

With the roll out of UMTS, 2003 is an important year for the industry. This is why we have taken a very close look at the following three questions:

• Which services generate clear benefits for which customer groups?
  
• How can we motivate dealers to sell more data products?
  
• With which partners should we be collaborating?
  

Today, we can reveal the results to you. What we are dealing with here is an overall concept that is, at present, unique on the German market.

For our customers, we have developed new products that make mobile data "tangible". At this year's CeBIT, we are showcasing our Music and Games Packs. The Music Pack includes ring tones and music chats, as well as music-track downloads. Customers can put together pieces of music to meet their own individual requirements - any time, any place. Straight after this, we will show you how to download songs, as well as how to transmit music videos per UMTS at far higher image quality than via GPRS. After a test run, we will be launching this Music Pack on the market in just a few months' time. In order to offer this service, we have established partnerships with BMG and MTV and are currently negotiating with other labels. This year, we will also be presenting the Games Pack. This pack will contain various mobile-phone games, together with all the relevant information and tips. For a low monthly standard rate, customers can download as many games as they like.

In cooperation with our partners, we will be offering these packs via dealers. All parties involved will benefit as a result: for customers, the mobile phone will become an entertainment device that can be used for making phone calls, sending SMS, surfing, gaming or for listening to music and, as we do not work with service providers, we can make the packs available to all our customers. For the first time, dealers will be able to sell tangible data products, since the Music or Games Pack can actually be displayed on the sales shelf. Furthermore, dealers will receive commission for each pack sold. Finally, our partners are flexible with regard to their offer: with the mobile phone, they are opening up a new sales channel and are making their offerings mobile. These packs are just the first of the products to be emerging from our wealth of ideas: other offers will follow.

MMS is another service that is clearly very beneficial to our customers. The success of MMS also confirms our strategy. Although it was only launched in November of last year, the offer has already become a fixed part of our business. By the end of the year, we had already sold 70,000 MMS handsets. Since then, we have continued to extend the offer: we are the first company to enable subscribers to send MMS messages to all German mobile-phone networks. What's more, comprehensive MMS information services are now available. News from the world of politics, business and commerce, sport and entertainment is available on a daily basis. At CeBIT, we are showcasing "MMS to postcard". This enables customers to send an MMS as printed postcard to a recipient. All subscribers have to do is to send an MMS including picture, the postal address of the recipient and the text for the postcard to an automatic call distributor. The picture is then printed and delivered as a postcard. "MMS to Postcard" will be available from April.

In order to provide customers with easy and pre-configured access to the services described above, we have set up the new "O2 Active" portal. Via icons, this quickly accesses the mobile data services and adapts to the customer's individual use. Frequently used applications roam on the first level and can thereby be accessed more quickly. O2 Active is preconfigured for Nokia, Siemens, Samsung and SonyEriccson handsets. Therefore the preferential data services can already be accessed the very first time the phone is switched on.

Ladies and Gentlemen,

In the business area, too, customer benefit is our priority. We offer solutions for clearly defined customer segments. Working with partners, we develop different applications for certain branches of industry and corporate areas. Let me give you a few current examples:

• We are proud of our new partnership with Xerox. At CeBIT, both companies will be presenting mDoc: this stands for Mobile Document Management. Via BlackBerry this software also permits mobile access to documents residing on company servers. The documents can then be sent, viewed, faxed or printed via e-mail.
  
• A few days ago, we forged a co-operation agreement with Tobit Software in order to offer small and medium-sized businesses mobile office solutions. Using xda and the David XL information centre from Tobit, employees have a mobile connection to the Internet and WAP in order to access e-mails, voice messages, fax and SMS by way of a mailbox, as well as to view and edit appointments, tasks and addresses.
  
• In the pharmaceutical and chemicals industry, we will, in future, be collaborating with Extended Systems, a leading supplier for professional mobile information management. Together, we will develop and market solutions that will enable the integration of mobile applications within companies.
  

As you can see, partnerships are generally new mobile applications.

We have also been cooperating with with Microsoft and RIM for some time now. Together, we are offering solutions for mobile access to company networks. With BlackBerry from RIM, corporate customers have simple and secure mobile access to their company e-mails and other company data via the GPRS network. Using Microsoft's Mobile Information Server 2002, it is possible to call up e-mails and diary entries via xda. Moreover, mobile employees can also use xda to edit Word and Excel attachments.

In the meantime, a lot of companies are now using our products. Our latest reference customer is Sergio Tacchini, an international manufacturer of sports and leisurewear based in Italy. The company was looking for a mobile solution for efficient sales processes. When out in the field, sales staff needed direct access to relevant customer data and had to be able to forward new information from their current location. Furthermore, it also had to be possible to use the solution in other countries. Together with our partner company, m.able, we were able to offer Sergio Tacchini just what they were looking for.

Let me mention a few more high-profile companies. In recent months, we acquired Bertelsmann, Gruner and Jahr, as well as Berliner Verlag, as customers for BlackBerry. Our most recent clients for the Genion solution are Caritas Stuttgart, Heidenheim-based Voith Turbo, as well as Th?r Energie AG. As you can see, Genion is successful in more than just the private customer sector. Genion enables our customers to reduce their telecommunications costs since, calling from within their company, they can use their mobile phones to make low cost phone calls to landlines, and they can also be called at low cost from within the company.

In this way our strategy of cooperating with our partners to offer high-benefit products is also delivering results at corporate customer levels.

Ladies and Gentlemen,

This year's CeBIT is spotlighting mobile applications. In line with our strategy, we are supporting every data transport technology that our customers can put to profitable use. For this reason, we are now also offering WLAN. In the past, the opinion was heard that wireless LAN was undermining UMTS. I do not share this view. On the contrary, I think that both technologies complement each other extremely well. For this reason, in cooperation with our partners, we are also providing WLAN. Our partners install and operate the technical infrastructure while we bill the services, thereby offering mobile data solutions from a single source. In Hanover, our customers can already tap in to WLAN at ten hotels. As a hands-on trial offer, we are giving away vouchers with imprinted user names and passwords. GlobalAirNet AG has installed these WLAN access points. Other hotspot locations include Munich and Hamburg. This year, we wish to continue to drive the development of WLAN. From summer 2003, billing for contract customers will also be possible via the mobile communications invoice. Customers then register at a hotspot via their mobile-phone numbers and are given a password via SMS. Also from Summer 2003 we will provide for example Kempinski and Hilton Hotels with this service together with our partner WLAN AG.

WLAN supplies hotspots, whereas GSM and UMTS are used for broader area coverage. Via GSM, our customers are already able to make mobile-phone calls from just about anywhere today. We have achieved this by setting up some 9,000 base stations, as well as by concluding a GSM roaming agreement with T-Mobile. In areas not covered by our network, our customers tap into the D1 network. This enables us to establish base stations wherever we can expect high revenues and high call volumes. Wherever a base station would not be profitable for us, we draw on the roaming agreements. We are continuing to pursue this successful strategy with UMTS. We have signed a co-operation agreement with T-Mobile that establishes the joint use of locations and technical infrastructure. And, with UMTS, we can also offer roaming in the T-Mobile network. This gives us a flexible and efficient network structure. From late autumn of this year, for example, customers will be able to enjoy UMTS in Berlin and Munich. GPRS will be opted for in the remaining areas. Our strategy consists of offering attractive rates as well as facilitating the entry to the world of mobile data communication. To this end we are offering our customers a standard GPRS rate - available without applications or the need to pay a basic rate. Our competitors will be following this strategy. In view of the most recent announcements, we will also be retaining our position as price leader.

Ladies and Gentlemen,

As you see, the variety of topics in the field of mobile communications has increased. In order to ensure our success today, we are collaborating with the right partners, developing innovative products and placing the emphasis on customer benefits. In my opinion, this is an enrichment of the mobile communications industry.

Thank you for your attention.

O2 CeBIT press conference - Peter Erskine