O2: 2013 a year of mobile internet growth
02/26/2014

The year of 2013 can justly be considered a year of mobile internet growth and the further market expansion of smartphones. However, O2 Czech Republic also succeeded in strengthening its position in other key areas.

Overview of operating results

The total number of O2 customers increased by 132,000 to 5.1 million in the period from January to December. The number of pay-as-you-go customers decreased slightly year-on-year, but this decrease was compensated for by the frequent transitions to one of the new "FREE" plans, offering unlimited calls and text messaging. The segment of contract services thus grew by 158,000 new customers.

Some 70 percent of the residential customer base has already taken up one of the FREE plans. The success of these plans is also documented by operating data: the total call duration is 66 minutes longer for an average FREE plan user, marking an increase of 33 percent.

In 2013 more than 40 MVNOs were launched to provide their services on the Czech market. O2 cooperates with three of them to acquire new additional customers. According to estimates, Bleskmobil, Tesco Mobile and Mobil od ČEZ have already reached from 60 to 70 percent market share.

The introduction of unlimited plans and marketing support have combined to bring about a year-on-year increase in smartphone sales. Smartphone penetration within the O2 network has reached 35 percent. Revenues from mobile data services, excluding text messaging and CDMA, grew by 29.5 percent while revenues from mobile internet achieved year-on-year growth of 166 percent. Tablet sales also grew markedly in the last calendar quarter, growing by 25.5 percent year-on-year within the O2 network.

The introduction of the new platform O2 TV was another success for the company as it contributed to an increased rate of new subscriptions in the latter part of the year. As of 31 December, the company registered 156,000 subscribers, equating to a year-on-year increase of 10 percent.

In November, the company succeeded in securing frequency bands in the 800, 1800 and 2600 MHz spectra, enabling it to build a modern fourth-generation network. As an operator it plans to invest billions of crowns in the building and development of the LTE network in new cities and regions over the next five years.

Financial results overview

Total consolidated operating revenuesdecreased in 2013 by 6.5 percent year-on-year to CZK 47.252bn. Operating revenues, excluding lower termination fees that have no direct impact on operating profit, decreased by 2.7 percent year-on-year.

Operating profit in the segment of landlines amounted to CZK 20.275bn. Compared to the previous year, operating profit decreased by 5.2 percent, demonstrating a more positive trend than in 2012.

The company was successful in continuing to improve its year-on-year results in data services, where revenues from mobile data services (excluding SMS and CDMA) grew by 29.5 percent. A gradual increase in the year-on-year change can be seen looking at individual calendar quarters (1Q: +12.9%; 2Q: +29.8%; 3Q: +35.8%; 4Q: +38.1%). This growing trend was strongly supported by the FREE tariffs introduced to the market in April 2013.

Guided OIBDA (excluding brand fees and management fees) decreased in 2013 by 6.4 percent year-on-year.

Free cash flowincreased in 2013 by 3.2 percent year-on-year to CZK 11.582bn.

Revenues realised in Slovakia demonstrated continued positive development. Total revenues in the country increased by 8.1 percent year-on-year to EUR 208m.

KEY FINANCIAL AND OPERATING INDICATORS