Report Overview

O2 UK: COVID and loss of Carphone bite

Along with the rest of the mobile market, O2’s results were harder-hit by COVID than expected, with service and total revenues down by 9% and 4% respectively

O2 estimates an 8ppt drag on revenues from COVID—much higher than the 1.6ppt Vodafone figure—a question of definition and business mix. The overall COVID impact on the market looks to be tentatively easing from next quarter and O2 should fare relatively well in that bounce-back

The decision to terminate the Carphone Warehouse relationship will cause some short-term technical drags on performance but creates an opportunity to improve profitability. Reopening of O2 stores post lockdown will help to compensate for forfeiting Carphone as a route to market

Contents

Several metrics hit—a couple of bright spots

COVID hits in various guises

OIBDA relatively resilient

O2 not aggressive on pricing

Doing okay, outlook improving but not in a straight line

List of charts/tables

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

Figure 2: O2 KPIs

Figure 3: O2 mobile revenue and service revenue growth under IFRS 15

Figure 4: Breakdown of O2 revenues and quaterly trends

Figure 5: Reported organic mobile service revenue growth

Figure 6: Contract ARPU growth

Figure 7: Contract/prepay revenue split by operator

Figure 8: Contract net additions (000s)

Figure 9: Annualised contract churn

Figure 10: Contract gross additions (000s)

Figure 11: OIBDA growth

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

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

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