O2 burns bright with latest financials

Telefónica must be pleased -- its newly acquired UK mobile operator is growing its profits and its userbase

O2 has unveiled its latest set of results, in which it notched up more customers and brought in more money.

Across the group, O2 added more than three million customers — 700,000 in the UK — taking its total subscribers to 25.7 million in the six months ending on 30 September.

The operator's revenue also grew to £3.6bn during the period, an increase of 12 percent on the corresponding period last year.

O2 attributed the company's growth to new customer acquisitions in its three core businesses — Germany, Ireland and the UK — as well as in its Airwave business, which has recently won a number of digital radio contracts with the UK emergency services.

The majority of O2's growth came from the German market, where year-on-year EBITDA growth rose by 51 percent and customer numbers by 24 percent. O2's performance in the UK was comparatively flat, with customer numbers increasing by nearly 9 percent and EBITDA profit inching up by around 3 percent, to £598m.

The operator struggled to get consumers' hands out of their pockets. O2 reported its blended Arpu (average revenue per user) remained flat, quarter on quarter, at £271. However, O2 is expecting growth in the range of 6 percent to 9 percent in the six months to the end of March 2006.

The results may be the last for O2 as a separate company following its acquisition by Telefónica last month.

The results will certainly please O2's new bosses, according to Ovum analyst Julian Hewitt.

"O2's strong performance should help to give O2's management some clout within its new prospective owner," he said in a research note. "Chairman Sir David Arculus and chief executive Peter Erskine are due to join Telefonica's board. We're sure that it makes sense to preserve O2's brand for the foreseeable future and some of its independence but if Telefonica is to obtain synergies from the merger, it will need to centralise decisions, particularly for purchasing and systems."