Thursday, 14 December 2017

In H1 2013, Telefónica changed the Czech mobile market

Telefónica Czech Republic
Wednesday 24 July 13

• In April, Telefónica launched its revolutionary FREE tariffs • The Company added 95,000 contract customers in H1 (52,000 in Q2) • Smartphone penetration in the O2 network keeps growing, as does the number of xDSL customers • If the conditions set down for the spectrum auction remain as presently known, we will be forced to defend our interests and the interests of our shareholders before a court of law as well as the European Commission Telefónica Czech Republic announces its financial and operational results for H1 2013. The Company has solidified its position as a market leader by introducing the revolutionary FREE tariff plans on April 11th…

• In April, Telefónica launched its revolutionary FREE tariffs
• The Company added 95,000 contract customers in H1 (52,000 in Q2)
• Smartphone penetration in the O2 network keeps growing, as does the number of xDSL customers
• If the conditions set down for the spectrum auction remain as presently known, we will be forced to defend our interests and the interests of our shareholders before a court of law as well as the European Commission

Telefónica Czech Republic announces its financial and operational results for H1 2013. The Company has solidified its position as a market leader by introducing the revolutionary FREE tariff plans on April 11th, 2013. These attractive tariffs contributed to a significant growth in mobile contract customer base: the Company added 52,000 new contract customers in Q2 2013. The total increase in contract customer base in H1 2013 was 95,000. The total mobile customer base reached 5,082 thousand at the end of June 2013.
The mobile revolution is paying off

Nearly one third of the residential contractual base has migrated to new tariffs, with the proportion of up-sells considerably higher to down-sells. These simple and price-transparent tariffs bring the customers more value via unlimited on-net calls and SMS in each package.

An increase was also recorded in smartphone penetration in the O2 network, which reached 30,4% at the end of June 2013. Together with the new tariffs, the Company introduced a new handset financing model called O2 Mobil. With this service, customers are able to spread the cost of their new device across a period of 24 months. Around 30 per cent of O2 customers opt for this transparent financing scheme when purchasing a new mobile device. The flexibility offered contributes to a change in customers' behavior - more customers now chose top-of-the-line handsets with more features. The average price of a handset purchased with O2 Mobil is CZK 7,000, while the average price of a handset purchased in cash is just CZK 5,000. As a result, smartphones now constitute 70 % of total handset sales.

We are expanding our state-of-the-art networks

The Company announced in May that its LTE network coverage will be expanded to cover select areas of Prague and that the centre of Brno will be covered in Q4 2013. The company continues in expanding its 4G LTE network regardless of the spectrum auction and plans to continue with the expansion. The company plans to invest up to CZK 6 billion in 2013, mainly into new technologies and LTE.

The fixed network business also recorded good results with the number of xDSL internet access users increasing by 3,1% to 921,000 year-on-year. As many as 37% of all residential xDSL customers already use the high-speed VDSL service. The number of VDSL customers increased by 50,000 in H1 2013. O2 TV users reached 142,000, a 2.1% increase year-on-year.

Spectrum auction

If the conditions set down for the spectrum auction remain as presently known to us, we will be forced to defend our interests and the interests of our shareholders before a court of law as well as the European Commission, since many of the regulatory measures introduced to the telecommunications market lack sufficient substantiation.

Four financially equivalent competitors participated in the 2012 auction. We therefore consider it unjustified to reserve part of the most lucrative 800 MHz spectrum band for a new entity on the market when it comes to the new auction. The market regulator further discriminates against the existing players on the market by forcing them to accept new conditions for operating their existing mobile networks even prior to taking part in the spectrum auction. Despite some welcome modifications to the draft auction conditions that have been made by the regulator, the conditions are still, in our opinion, insufficient and fail to extinguish doubts about the true transparency of the auction. The move does not contribute to a stable investment environment.

Financial results overview

In H1 2013, consolidated operating revenues (excluding the MTR cut which has no direct influence on operating revenues) went down by 2.4% only. Overall, consolidated operating revenues declined 5.0% year-on-year to CZK 23,905 million.

The company is harvesting the benefits of its focus on data, with a non-messaging data revenues (excluding CDMA) growth of 21.4% year-on-year.

Operating income before depreciation and amortization (OIBDA) declined 6,9 % year-on-year on a fully comparable basis. Guided OIBDA (including one-off items) reached CZK 9,141 million in H1 2013, down 10.3% year-on-year. The year on year performance has been impacted by positive impact of the CZK 220 million gain from sale of non-core assets in Q1 2012 (80% stake in Informacní linky, a.s.) and higher restructuring costs booked in Q1 2013 compared to Q1 2012.

Consolidated free cash flows surged by 7.8% year-on-year while consolidated CapEx increased by 1.6% year-on-year.


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