- O2 recorded history high loyalty of its customers, stabilization in revenue per customer despite continuous market price decline, and a 22% year-on-year reduction in operating expenses
- O2 increased its profitability year-on-year; EBITDA up by 30% to CZK 7,517 million and net profit up by 49% to CZK 3,727 million
- O2 provides outlook for the full year 2015 (EBITDA of CZK 9.9 to 10.2 billion and net income of CZK 4.85 to 5.2 billion) and leverage target (up to 1.5x net debt/EBITDA)
- O2 intends to distribute 90% to 110% of its net profit to shareholders
- On top of dividend O2 intends to relaunch share buy-back in January 2016
O2 today announced its operating and financial results for the first three quarters of 2015. Consolidated figures include the results of subsidiaries, including O2 Slovakia. The results for the whole reporting period exclude the results of Česká telekomunikační infrastruktura (CETIN). In addition the company presented its financial outlook and targets.
"I am glad that customer loyalty remained at historic high levels and average spend has stabilised despite 25% decline in mobile market voice pricing. This confirms that our customers trust in our proposition, see its value and they request additional services", says Tomáš Budník, Chief Executive Officer and the Chairman of the Board of Directors of O2 Czech Republic when commenting on the customer loyalty and spend trend. "Simplification of the way we run the company helped us to reduce operating expenses by 22%. Overall we have been able to stabilize our revenue and increase net profit. We intend to distribute it in full to our shareholders in dividends", he adds.
"On top of regular dividend we will be back to share buy-back idea", adds Tomáš Kouřil, company's Chief Financial Officer and Vice-Chairman of the Board of Directors and continues "We intend to restart the share buy-back in January 2016 and repurchase shares for up to CZK 8 billion or up to 10% of ordinary shares in next five years". Tomáš Kouřil comments also on capital structure and debt target "O2 is taking advantage of favourable market conditions to refinance its existing debt and potentially increase leverage up to 1.5 times net debt to EBITDA".
O2's total consolidated operating revenue for the first nine months 2015 stabilised year-on-year at CZK 27.706 billion. EBITDA increased by 29.4% year-on-year to CZK 7.517 billion. Net profit reached CZK3.727 billion, marking a 49% increase. Mobile data, O2 TV and O2 Slovakia remain the two key growth areas.
As of the end of September 2015, mobile services provided by O2 were used by a total of 4.910 million customers. The number of contract customers reached 3.2548 million, representing two thirds of the mobile customer base. The segment of prepaid services recorded a 6.2 % decrease to 1.652 million customers. The average revenue per customer reached CZK 287 in the first nine months 2015, while it increased to CZK 293 in the third quarter. Growing quality of the customer base was the key driver for this growth.
Also number of smartphones continued to grow year-on-year. At the end of the third quarter the proportion of smartphones within the O2 network rose year-on-year to 46%. In the last quarter almost every sold smartphone supported LTE network. In terms of smartphone operating systems used within the O2 network, Android and iOS are clearly dominating with Android having a 74.2% share.
Demand for the mobile internet and data continues to grow. At the end of the September, number of small screens reached more than 1.5m. Mobile data traffic increased by 58 % year-on-year in the first nine months.
The digital television service O2 TV and fixed internet both continue to manifest positive trends in terms of customer numbers. With the own O2 Sport channel, unique features and exclusive content, the service subscription level exceeded 193,000, up by 8 % year-on-year. The O2 TV mobile application, which enables the watching of TV channels on portable devices, has been downloaded as many as close to 450,000 times.
The number of fixed internet customers reached 796,000 at the end of September. Of the total number of customers, over 50%, in total 412,000 already use VDSL technology.
Total consolidated operating revenue reached CZK 27.706 billion in the first nine months, marking a year-on-year decrease of 0.3%. Fixed business operating revenue decreased by 6.8% year-on-year to CZK 8.556 billion, while in the third quarter the decline rate decelerated to -4.2%. O2 TV and ICT remain the main growth area. Operating revenue in the mobile segment increased by 0.8% to CZK 14.344 billion in the first three quarters.
EBITDA increased year-on-year by 29.7% to CZK7.517 billion. The EBITDA margin reached a solid 27.1%, after a year-on-year increase of 6.3 percentage points.
O2 Slovakia continues to deliver positive financial performance and remains of the growth areas of the group. Revenues in O2 Slovakia for the first nine months reached EUR179.4 million, marking a year-on-year increase of 11.7%. EBITDA increased year-on-year by 24.5% to EUR 63.8 million. The total number of customers in Slovakia reached 1.773 million, representing a year-on-year increase of 8.2%.
2015 Full Year outlook, leverage target, dividend policy, share buy-back
Recently, O2 Czech Republic went through the world first ever voluntary structural separation which resulted in spin-off of all the fixed and mobile infrastructure into CETIN, a newly created company. After four months since the separation, the company's management is confident that the new operating model has stabilised and is sustainable and viable also in the future.
The second quarter after the separation confirmed increasing profitability, with EBITDA up by 25% and net profit up by 40% year-on-year. Considering the financial results for the first nine months of 2015 and the outlook for the fourth quarter, O2 expects that the 2015 full year consolidated EBITDA will reach CZK 9.9 to 10.2 billion and consolidated net income will reach CZK 4.85 to 5.2 billion. This represents expected earnings per share of CZK 15.5 to 16.8.
Under the dividend policy the Board of Directors intends to propose in the future distribution of 90% to 110% of profit to the shareholders. Considering 2015 net income outlook and new dividend policy, O2 shares currently offers around 7% dividend yield, above CEE and Turkey telecoms median dividend yield for 2015.
In addition the company targets its Net debt to EBITDA of up to 1.5 times, which is still below the industry benchmark. Current company's leverage is around 0.3 times net debt to EBITDA, which leads to sub-optimal capital structure.
On top of regular dividend the company intends to relaunch share buy-back program in January 2016. The company will be allowed to buy-back shares for up to CZK 8 billion or up to 10% of ordinary shares. The share buy-back plan shall last up to 5 years. The company implemented the share buy-back program already back in 2012 and 2013.
KEY FINANCIAL AND OPERATING INDICATORS
Financial indicators for the Group
|Financial indicators||9M 2015|
|Operating revenue||CZK 27.706bn||CZK 27.788bn||- 0.3%|
-of which operating costs
|EBITDA||CZK 7.517bn||CZK 5.798bn||+ 29.7%|
|EBITDA margin||27.1%||20.9%||+ 6.3 p.p.|
Operating indicators - Czech Republic
|Number of mobile service customers||Q3 2015||Q2 2014||Year-on-year change|
|Prepaid customers||1.662m||1.772m||- 6.2%|
|Smartphones||Q3 2015||Q3 2014||Year-on-year change|
|Smartphone penetration within the O2 network||45.7%||39.6%||+6.1 p.p.|