O2 had a surprise boost in prepay customers, but the operator's fourth quarter operating income still declined 8.7% on 2011.
Its operating income of £332 million did represent an improvement for Britain's second largest operator, which was hit by a 33.2% decline in income during its first quarter and 10.2% shrinkage in its third.
O2 had 282,000 net contract additions, up 61% year on year. Despite the wider market decline in prepay, O2 posted its highest number of quarterly pay as you go additions for more than two years, up 99,000 in the fourth quarter. Overall, O2 had net adds of 381,000 in the fourth quarter to 31 December, driven by a range of competitive offers. Contract customers now account for 52% of O2's base, up 2.7 percentage points from the end of 2011. Margins declined by 1.4% percentage points to 24.2%.
Service revenues continued to be hit by the effects of changes to mobile termination rates and roaming. Its revenues of £1.20bn were down 8.5% on 2011 but without the effects of regulation would only have fallen by 4.2%. O2 said it showed a sequential improvement in its service revenue performance for four quarters in a row. Data continued its importance, with growth up 10.2%.
Contract churn was down 0.1 percentage points for the fourth quarter to 1.1%. For the full year, O2 had net adds of 961,000, up 118% year on year and ended the year with 22.9 million customers. Operating income fell 18.5% and total revenue dropped 5% to £5.71bn or down 1.5% without the effects of regulation.
Ronan Dunne, CEO of O2, said: 'This is a strong set of results which reflect the positive action we took at the beginning of 2012 to regain and build our commercial momentum. We're changing our business to be truly digital and in 2013 will be focussing on delivering more digital services for our customers to make their lives easier.'
Across parent Telefonica's wider business, it was hit by writedowns of its stake in Telecom Italia and the value of Telefonica Ireland, as well as effects of the fluctuating Venezuelan economy. Net profit was down 27% to Eu3.93bn. Revenues were down 0.8% to Eu62.36bn. Without the effects of regulation, sales would have increased by 0.7%, due to the increasing appetite for mobile data and the growth of its Latin America business. Net debt sat at Eu51.26bn, compared to Eu56bn at the end of September.
Author: Graeme Neill