Report Overview

O2 UK doing better than appears in tough times

In spite of total revenue growth of 4%, O2’s service revenue growth took another step down to -3% this quarter, consistent with the worsening environment and EE’s results

Its true performance is likely better than reported as IFRS15 has an artificially dampening effect on its service revenue as a consequence of O2’s Custom Plans, and is something of a boost to its impressive 6% EBITDA growth

O2 needs to continue to pedal hard to keep ahead of this challenging environment – with little let-up on the regulatory front, more aggression from Vodafone and H3G, and a potential regulatory hit to its Custom Plans

Contents

IFRS driving service revenue and EBITDA divergence

Performance solid in context

Non-IFRS operating metrics robust

MVNO exposure lower than it seems

Strong EBITDA boosted by IFRS15 and direct distribution

List of charts/tables

Figure 1. Organic EBITDA and mobile service revenue growth

Figure 2. SIM-only pricing by data allowance –direct distribution (GB)

Figure 3. SIM-only unlimited data bundle pricing

Figure 4. Outlook for change in mobile trends in 2019 by operator

Figure 5. Reported organic mobile service revenue growth

Figure 6. Contract net additions (000s)

Figure 7. O2 KPIs

Figure 8. Service revenue growth and ARPU-based service revenue growth

Figure 9. Non-ARPU service revenue (€m)

Figure 10. O2 non-ARPU service revenue growth