A drive on adding contract customers, which saw net adds swell by 251,000 customers, has led to O2 returning to positive profit growth for the first time in over a year.
The operator, who reported its results for the three months to 31 March this morning, saw operating income before depreciation and amortisation increased by 3.1% to £287m, which O2 said was due to an increasing customer base and 'strong cost management'. The operating income figure does not include the £550m spent during the 4G auction earlier this year.
Mobile service revenue fell 7.3% to £1.17bn on the same period in 2012 but it was an improvement on the 8.5% decline it reported in Q4 2012. Total sales were down 4.8% to £1.37bn but only down 1.0% when the effects of regulation were stripped out.
An aggressive push on contracts was responsible for the increase in net adds, which is O2's highest first quarter performance for four years and up 13% on year on year. Contract customers now account for 53% of O2's total mobile customer base, up 6% on 2012. The operator now has 22.9 million customers. Churn improved marginally by 0.1% percentage point to 1.0%.
This push on what the operator describes as high value customers caused smartphone penetration to hit 53%, up 6% year on year. The operator made more money on handset sales this quarter, with sales up 13.6% year on year to £189.72m. Operating income margins nudged up by 1.6 percentage points to 21.1%. Contract average revenue per user was down 11.5% to £26.34 but prepay ARPU tumbled 17.7% to £6.78.
Ronan Dunne, CEO of O2, said: 'This is another set of strong results that demonstrates our sustained commercial momentum in a highly competitive market. Solid trading activity and continued successful management of customer loyalty is helping us continue to attract and retain large numbers of customers every day.'
Author: Graeme Neill