Telefonica lifts sales outlook as O2 rings up strong performance

Telecoms giant Telefonica has doubled its annual sales outlook after quarterly sales and profits rose at its UK network, O2.

The Spanish telecoms group said it now expects full-year revenues to grow by 2%, against the 1% previous forecast.

It hailed a strong performance from O2, where revenues rose 7.9% to £1.5 billion and it nearly tripled the number of new customers, with 120,000 joining in the third quarter on a net basis – those signing up with the group less those leaving.

This was up from 43,000 net new customers in the previous three months.

O2’s underlying earnings lifted 9.8% to £414 million in the three months to the end of September.

The figures come after Telefonica last week shelved its £10 billion stock market flotation of O2 until after Brexit in the wake of market uncertainty and a recent spate of initial public offering (IPO) flops.

An IPO had been expected in 2018 following 4G and 5G spectrum auctions in April.

The third-quarter results saw O2 cheer a good response to its custom plan offering launched in August, which gives customers the flexibility to choose their contract term up to 36 months, amount of upfront payment and data plan.

O2 now boasts a total customer base of 32.3 million in the UK, up 1.9% year on year, with contract customers now accounting for 65% of the total.

Its level of churn – the rate of customers quitting the group – remained firm at 1%.

Mark Evans, chief executive of Telefonica UK, said: “The third quarter saw us deliver strong commercial performance with continued growth in revenues and profitability as more customers chose to join us, stay with us and spend more with us.”

He added: “Our ongoing commitment to invest in our network includes enhancing 4G connectivity and preparing the ground for 5G.”

The group is investing more than £2 million a day in its networks, recently pledging to spend on enhanced 4G connectivity in more than 300 communities by the end of the year, helping around 250,000 residents.

Parent group Telefonica’s third-quarter results showed net profits grew by 35.8% to 1.1 billion euros (£979 million), although underlying earnings fell 1.4% to 4.04 billion euros (£3.6 billion).

Group-wide revenues fell 8.3% year on year to 11.7 billion euros (£10.4 billion).