O2’s Refresh tariff and its network modernisation programme have helped drive up contract customer numbers in Q1 by 7% year-on-year whilst keeping churn at an all time low of 1.1%.
Reporting its Q1 results today (9 May) O2 said its contract customer base had grown by 7% year-on-year despite a slower market in the quarter which had seen fewer handset launches.
The operator said that the Refresh tariff, which allows customers to upgrade at anytime during their contract, had contributed towards that growth and helped lower churn levels.
The 7% contract customer growth led to a total mobile customer increase of 3% year-on-year to 23.6 million at the end of the first quarter. Meanwhile the contract segment accounted for 55% of the mobile base, up 2% year-on-year.
However contract net additions were down, totalling 135,000 in the quarter. Excluding M2M contracts, net additions stood at 72,000, down from 174,000 in the same period last year. O2 said this reflected a lower volume of gross additions in the market.
Analysts said this could reflect a slow down in the migration from pre-pay to contract. Kester Mann, network analyst at CCS Insight said: ‘This is interesting and could indicate a plateauing of pre-paid migration, particularly as low priced but very capable smartphones continue to come onto the market.’
O2 reported revenue as ‘broadly stable’, down 0.3% at £1,361m with mobile service revenue down by 0.8% year on year, which the operator said showed a stabilisation compared to the fourth quarter of 2013 which also reported a 0.8% fall.
OIBDA totaled £334m in the quarter (+16.3% year-on-year) with OIBDA margin at 24.6% in the first quarter, up 3.5 percentage points year-on-year. Meanwhile Capex amounted to £158m up to March up 8.3% year-on-year excluding spectrum with ongoing network enhancement and 4G roll out.
The operator is set to capitalise on the popularity of the Refresh tariff in the next few weeks. In a statement O2 said: ‘O2 Refresh which uniquely gives customers more freedom to leave has been successful in encouraging them to stay. This is reflected in O2’s contract churn which at 1.1% remains the lowest in the market. Over the coming weeks, O2 Refresh will be extended to customers who purchase tablet devices with the option of no upfront payment.’
The operator also pointed to its network modernisation programme as a key factor in driving customer loyalty. O2 also reported strong growth of data usage among customers on 4G tariffs. It said that in the eight months since launch, O2’s 4G network has grown to cover 41% of the population outdoors, reaching 191 towns and cities across the country with data usage for 4G customers twice that of its 3G customers.
Commenting on the results, Ronan Dunne, CEO for Telefónica UK (pictured), said: 'We continue to drive growth, satisfaction and loyalty among our customers. We are also matching the accelerating customer demand for connectivity with huge investment in our network and services. Our focus for 2014 is to continue to deliver for our customers through our innovative products and services and the experiences that only come with being part of the O2 family.'