O2 :Trending nicely, outlook challenging

Report Overview

O2 :Trending nicely, outlook challenging

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O2 :Trending nicely, outlook challenging

  • All of O2’s operational metrics ticked up this quarter with service revenue growth, continued strong net adds and OIBDA growth particular highlights in spite of the end of O2’s Carphone Warehouse relationship
  • Next quarter will be hit by the prolonged lockdown and, in spite of an improving picture thereafter, there remain several challenges particularly lower in-contract price rises than peers and some pressure on MVNO revenues post Sky MVNO renegotiation
  • The merger with Virgin Media appears on track for a mid-year approval. O2 management will need to work hard to sustain their sharp operational focus at a time when merger integration and strategic question marks risk diverting much of their attention

Contents

Trending nicely, outlook challenging

Challenging March quarter, pressures beyond

Some O2-specific hits to relative growth

Virgin Media merger on track for mid-year approval

Continued operational focus required

All mobile revenue trends improving

Distribution shift continues to distort

O2 vs the market—context is everything

Strong contract net adds again reassuring

OIBDA trend back into positive territory

Price aggression tempering down?

Merger with Virgin Media on track for mid-year close

CMA not concerned about impact on retail markets

MVNO concern likely to be dismissed as with BT-EE merger

Ofcom oversight likely to address any leased line worries

List of charts/tables

Figure 1: OIBDA, revenue, and mobile service revenue growth

Figure 2: O2 KPIs

Figure 3: O2 revenue breakdown and trends

Figure 4: O2 mobile revenue and service revenue growth under IFRS 15

Figure 5: Reported organic mobile service revenue growth

Figure 6: Contract ARPU growth

Figure 7: Contract net additions (000s)

Figure 8: O2 market share of contract net adds

Figure 9: OIBDA growth

Figure 10: ‘Sweet spot’ bundle with iPhone 6s/7/8/XR/11/12

Figure 11: SIM-only pricing by data allowance (GB)––July 2020 (£/month)

Figure 12: SIM-only pricing by data allowance (GB)—November 2020 (£/month)

Figure 13: SIM-only pricing by data allowance (GB)—February 2021 (£/month)

Figure 14: 12-month, SIM-only unlimited data bundle pricing (£/month)

Figure 15: 18-24-month, SIM-only unlimited data pricing (£/month)