Mobile operator O2 today announced its full-year financial and operating results for 2014. Despite the ongoing transformation of the company and deteriorating conditions on the telecommunications market, O2 was successful in stabilising its revenues and optimising costs. Even within a highly competitive environment, O2 continued in 2014 to acquire new customers and succeeded in achieving a record level of loyalty among its existing customers.
"The year of 2014 was a turning point for O2. We changed our corporate values, established our new priorities and streamlined operations throughout the company," said Tomáš Budník, Chair of the Board and CEO of O2 Czech Republic, looking back at last year. "The changes that we introduced have already begun to bear fruit in concrete numbers and improving trends can be seen across all segments of our business. We delivered our guidance for the year," added Budník.
O2's total consolidated operating revenue decreased year on year by 5.4 percent to CZK 44.7bn, while OIBDA decreased year on year by 13.4 percent. O2 Slovakia continues to remain a key growth area. Revenues in Slovakia reached EUR 224m, showing year on year growth of 7.9 percent. "Our results reflect the ever increasing intensity of competition among mobile operators on the market that leads to greater pressure on prices and consequently on revenues," said Budník, summarising the past year.
Operating overview
" The results achieved in 2014 were influenced by the highly competitive environment leading to another reduction of our revenues year on year, driven by decline in prices combined with the simultaneous and ongoing transformation of our company. I am nevertheless delighted to see that even in such highly competitive market we were able to not only gain new customers but also to achieve a level of loyalty among our existing customers that reached an historical high, in terms of both mobile and fixed line service segments," concluded Tomáš Budník, Chair of the Board and CEO of O2 Czech Republic.
As of the end of 2014, mobile services provided by O2 were used by a total of 5.069 million customers. The number of contract customers increased by 1.8 percent year on year to 3.294 million. The number of prepaid customers decreased year on year by 4.9 percent to 1.775 million customers.
Our unlimited tariffs have resulted in growing mobile voice traffic. In 2014, the volume of voice calls reached 11.532 billion minutes, signalling a year on year increase of 7.0 percent.
The volume of data traffic within the O2 network is another indicator that is manifesting a long term growing trend, in terms of both overall volume and per user volume. The company delivered on its promise by providing fast internet access via 3G and 4G LTE to 93 percent of the country's population by the end of the year.
Demand for mobile internet increased by17.1 percent year on year . This gain was partly driven by support of smartphone sales via introduction of instalment model, while keeping the best price guarantee proposition for the bestselling smartphones. Revenues from mobile data services rose by 16.7 percent. Smartphone penetration within the O2 network also continued to increase, adding another 5.3 percentage points to reach 39.8 percent. This increased penetration was certainly helped by pre-Christmas smartphone sales in which LTE-enabled devices made up as much as 92 percent of sales.
The year of 2014 was also a turning point for O2's fixed line services. By the end of the year, 922,000 households were using fixed internet access provided by O2. The number of customers grew by 7,200 in the last quarter of the year alone. More than 420,000 customers made the switch to VDSL. The company plans to invest over the coming year in the installation of DSLAMs to ensure further expansion and higher transfer speeds for broadband internet.
The number of O2 TV digital television service customers reached 184,000, marking a year on year increase of 18 percent. The result was achieved on the back of the introduction of the O2TV Go service that enables - with the use of an application of the same name - the customer to watch TV broadcasts on a diverse range of mobile devices. The application has been downloaded as many as 240,000 times since its introduction.
"We willcontinueto expand our offer for customers, particularly in the area of data services that are provided both over fixed lines - VDSL and O2TV - and over mobile data services - LTE and O2TV GO. One way in which we are achieving this is through our acquisition of Premier League and Champions League football broadcasting rights. In the mobile services segment, which saw the greatest price pressure during 2014, we achieved record levels of voice call and data volumes," outlined Budník.
Financial overview
Total consolidated operating revenue for 2014 reached CZK 44.689bn, dropping by 5.4 percent year on year. Operating revenue, excluding lower termination rates which have no direct impact on operating profit, decreased by 3.8 percent year on year. The year on year rate of decrease slowed in the fourth quarter to -0.5 percent (-9.6 percent in the first quarter, -8.3 percent in the second quarter and -3.2 percent in the third quarter).
OIBDA decreased by 13.4 percent year on year. OIBDA margin reached 35.8 percent, 3.3 percentage points less than in the previous year.
Consolidated capital expenditure in 2014 amounted to CZK11.489bn. This amount includes the costs associated with the acquisition of LTE frequency band licences in both the Czech Republic and Slovakia, as well as the capitalised costs of the O2 brand. Capital expenditures excluding the aforementioned items reached CZK 3.822bn.
O2 Slovakia continues to maintain its growth trend in the commercial area while also increasing its relative contribution to the group's financial results. The total number of customers in Slovakia reached 1.684m, showing year on year growth of9.4 percent. Total operating revenue reached EUR224m.OIBDA increased by 0.7 percent year on year to reach EUR 71m.
"Despite the persisting difficult situation in the telecommunications industry, our priorities remain investing in new technologies and ongoing reduction of our costs. In specific terms, in 2014 we contributed CZK 2.8bn to the national budget just through the acquisition of the frequency band required for the implementation of the latest LTE technology. We also reduced remuneration of the company's top management by nearly one-half year on year, with full impact expected in 2015. Overall, we succeeded in reducing our operating costs by 10 percent in 2014 and we will continue transforming the company in 2015," said Tomáš Kouřil, Deputy Chair of the Board and CFO of O2 Czech Republic, commenting on the financial results.
KEY FINANCIAL AND OPERATING INDICATORS
Financial indicators for the group
| Financial indicators | Q1-Q4 2014 | Q1-Q4 2013 | Year on year change |
| Operating revenue | CZK 44.689bn | CZK 47.252bn | - 5.4% |
| Total costs | CZK 28.570bn | CZK 29.874bn | - 4.4% |
| OIBDA | CZK 16.010bn | CZK 18.478bn | - 13.4% |
| OIBDA margin | 35.8% | 39.1% | - 3.3 pp |
Operating indicators - Czech Republic
| No. of mobile customers | Q1-Q4 2014 | Q1-Q4 2013 | Year on year change |
| Contract customers | 3.294m | 3.235m | + 1.8% |
| Prepaid customers | 1.775m | 1.866m | - 4.9% |
| Total | 5.069m | 5.102m | - 0.6% |
| Smartphones | Q1-Q4 2014 | Q1-Q4 2013 | Year on year change |
| Smartphone penetration within the O2 network | 39.8% | 34.5% | + 5.3 pp |
Contacts
Martin Žabka
martin.zabka@o2.cz
tel: 800 163 342 (800 1 media)
O2 is the largest integrated telecommunications provider in the Czech market. At present we operate close to eight million mobile and fixed accesses, which ranks us among the market leaders in fully converged services in Europe. To users of mobile services in the Czech Republic we offer state-of-the-art HSPA+ and LTE technology. We have the most comprehensive proposition of voice and data services in the Czech Republic, and we actively exploit the growth potential of the various business lines, especially ICT. Our data centres, with total floor area of 7,300 square metres, rank us among the leaders in hosting, cloud and managed services. O2 data centres belong to the few commercial ones in Central Europe to have TIER III certification. With our O2 TV we are also the largest IPTV service provider in the Czech Republic. In January 2014, O2 became a member of the Czech investment group PPF.
PPF Group invests into multiple market segments such as banking and financial services, telecommunications, real estate, retail, insurance, metal mining, agriculture and biotechnology. PPF's reach spans from Europe to Russia, the USA and across Asia. PPF Group owns assets of EUR 20.9 billion (as at 31 December 2013).
