O2 Czech Republic H1 net profit rises 54% to CZK2.33bn

30 Jul 2015

Fixed, broadband and mobile operator O2 Czech Republic has released its second-quarter and half-year financial results for the period ending 30 June 2015, its first results since the telco spun off its infrastructure assets into a new firm Ceska telekomunikacni infrastruktura (CETIN) in June, highlighting a more than 50% increase in net profit to CZK1.26 billion (USD51.61 million) in Q2, compared with pro forma income of CZK1.00 billion in Q2 2014. Revenue for the three-month period stood at CZK9.28 billion, versus pro forma turnover of CZK9.29 billion in the year-earlier period. Prior to CETIN’s separation, O2 Czech Republic said that infrastructure assets contributed approximately 50% of overall group operating profit.

For the January-June 2015 period, the telco noted that its consolidated operating revenue stabilised year-on-year reaching CZK18.39 billion, while EBITDA increased by 32.4% to CZK4.83 billion and net profit grew by 54% y-o-y to CZK2.33 billion. Consolidated figures include the results of subsidiaries including O2 Slovakia. Further, the ‘new’ O2 Czech Republic confirmed its ability to generate free cash flow – post separation – booking a figure of CZK3.67 billion for this metric in H1 2015. ‘These are the first presented results following the company’s separation into the separate companies O2 and CETIN. We have succeeded in stabilising revenues and in increasing our operating profit EBITDA. We are capable of generating free cash flow in excess of our net profit. That serves to confirm our belief that the separation was a step in the right direction and that it will bring future value for our customers and shareholders alike,’ said Tomas Budnik, CEO of O2 Czech Republic.

On the operational front, O2 closed out June 2015 with a total of 4.945 million mobile customers, down 2.3% on an annualised basis. Contract customers remained broadly flat y-o-y at 3.252 million (3.253 million, Q2 2014), while pre-paid users declined slightly to 1.693 million. However, 4G adoption saw 272,000 on LTE-based contracts at the end of the period under review, with O2 also reporting that smartphone penetration within the network stood at 43.7%, up 5.6% from 38.1% at June 2014; more than 25% of these devices support LTE networks, it added. In terms of smartphone operating systems (O/S) used within the O2 network, Android is clearly dominating with a share of 74.2%. The proportions of the remaining O/S in use are as follows: iOS -9.4%, Windows Phone – 7.1%, BlackBerry – 1.4%. The proportion of smartphones running the Symbian O/S decreased by 12.4 percentage points y-o-y to 6.6%. Unsurprisingly, the rising popularity for smartphones has seen an increase in mobile data services, which increased by 6.6% over the twelve-month period. Monthly blended mobile ARPU was CZK284 in H1 2015, down by 0.3% y-o-y, impacted largely by ‘price pressures in the market, which were not fully offset by growing quality of the customer base’; O2 reported that while pre-paid ARPU was flat over the year, contract ARPU fell 1.8% to CZK372 per month in January-June.

Turning to the group’s fixed line business, O2 reported that the number of fixed (xDSL) internet customers reached 799,000 at the end of June, an increase of 1.1% over the year, with net additions of 5,000 customers in the first six months of 2015, alone. Of the total, 51% (or 404,000) are connected to VDSL technology, up 12.4%. Furthermore, digital television services (i.e. IPTV) offered via O2 TV benefited from the launch of a new O2 Sport channel and saw service subscriptions climbing to reach 188,000 households by 30 June. The telco added that its O2 TV Go application, which enables the watching of TV channels on portable devices, has been downloaded as many as 350,000 times. Fixed (voice) telephony services continue to experience a downward trajectory, with 44,000 net line losses reported in 1H15, for a total of 883,000 at end-June. However, the outflow is decelerating when compared to the 74,000 net disconnections in the corresponding period of 2014. Total fixed operating revenue reached CZK5.74 billion in H1 2015, down 8.0% y-o-y.

Elsewhere, the Group reported that its Slovakian operation O2 Slovakia remains ‘one of the key growth areas’. Revenues for the first half-year reached EUR117.3 million (USD129.6 million), up 14.1% on the corresponding period a year ago, as the total number of customers in Slovakia reached 1.711 million (+6.4%). EBITDA for O2’s Slovakian venture increased by 20.2% to EUR40.8 million.

Czech Republic,O2 Czech Republic (incl. CETIN), O2 Slovakia,

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