28th Apr 2009 15:30
Telefónica O2 Czech Republic - 2009 First Quarter Financial Results
April 28, 2009
Telefónica O2 Czech Republic, a.s. is pleased to announce its unaudited financial results for the first quarter of 2009. These results are consolidated and prepared according to International Financial Reporting Standards and fully include the results of Telefónica O2 Slovakia, Deltax Systems, Telefónica O2 Business Solutions and other smaller operating companies.
"In the first quarter of 2009 we maintained our strong commercial activity. We stayed focused on active marketing propositions better fitting customer's needs in the current environment what resulted in solid customers' net additions. Mobile customers continued to subscribe to our flat rate tariffs, in fixed segment we recorded accelerated growth of ADSL and IPTV customers and Slovakia continued performing well. In financial terms we kept our profitability at 43.8% increasing total net profit by 8.7%. For the coming quarters we will continue to focus on delivering the proposition that maximizes the customer value while keeping strict financial discipline, and we are confident in delivering our full year guidance," says Salvador Anglada, Chief Executive Officer and Chairman of the Board of Directors of Telefónica O2 Czech Republic, when commenting on the operator's financial results.
1Q 2009 Group Highlights1
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1Q 2009 |
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Group business revenues |
CZK 15,106 mil. (-1.6%) |
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CZ Mobile service revenues |
CZK 7,680 mil. (-1.9%) |
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OIBDA |
CZK 6,615 mil. (-1.6%) |
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OIBDA margin |
43.8% (0.0 p.p.) |
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Operating income |
CZK 3,501 mil. (+4.2%) |
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Net Income |
CZK 2,645 mil. (+8.7%) |
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CAPEX |
CZK 1,025 mil. (+27.1%) |
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CAPEX/Revenues |
6.8% (+1.6 p.p.) |
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Net gearing2 |
-9.3%2 |
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Group Headcount |
9,069 (-2.6%) |
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CZ mobile active3 customers |
4,783 ths. (+0.6%) |
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- of which contract |
2,596 ths. (+12.6%) |
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Retail ADSL accesses |
612 ths. (+16.2%) |
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O2 TV customers |
128 ths. (+46.6%) |
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Fixed telephony accesses |
1,851 ths. (-7.2%) |
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SK mobile active3 customers |
365 ths. (+27.3%) |
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Consolidated Financial Statements
Revenues, operating costs and OIBDA
In 1Q 2009 consolidated business revenues declined 1.6% yoy to CZK 15.1 billion. In the same period, fixed business revenues went down 2.1% to CZK 6.8 billion, mobile service revenues in the Czech Republic declined 1.9% to CZK 7.7 billion and revenues in Slovakia increased by close to 40% in local currency. Total consolidated operating costs reached CZK 9.1 billion, up by 3.0% yoy. Consolidated OIBDA thus amounted to CZK 6.6 billion in 1Q 2009, down by 1.6% yoy. OIBDA margin reached 43.8% in 1Q 2009, flat compared to the same period in 2008. The Slovak operations diluted OIBDA margin by approximately 2.0 p.p. in 1Q 2009.
Operating Income, Income before tax and Net income
Consolidated operating income and consolidated income before tax went up by 4.2% yoy and 1.6% yoy to reach CZK 3.5 billion and CZK 3.4 billion respectively in 1Q 2009, due to continuing decrease in depreciation and amortization charge. Consolidated net income amounted to CZK 2.6 billion, up by 8.7% yoy in 1Q 2009.
CAPEX
As a result of the accelerated investment in the 3G rollout in the Czech Republic, total consolidated CAPEX increased 27.1% yoy and amounted to CZK 1.0 billion in 1Q 2009. Additionally as in the previous periods, CAPEX was spent on selective basis in the growth areas of the business like an expansion of the GSM network capacity and further development of ADSL and IPTV networks. In Slovakia the company continued to rollout its own GSM network.
Free Cash Flows
In 1Q 2009, the Group's free cash flows amounted to CZK 3.6 billion, slightly down by 0.9% yoy. In this quarter, the company collected CZK 811 million from real estate sales representing remaining amount of the proceeds from the real estate sale which was booked in 2008 and the full amount from the sale of the former headquarter which resulted in CZK 340 million of the capital gain booked in January 2009.
Cash and Debt levels
On 31 March 2009, the group's consolidated financial debt amounted to CZK 3.3 billion, slightly up from CZK 3.2 billion at the end of 2008. The amount of cash and cash equivalents and short term financial investments reached CZK 10.8 billion at the end of 1Q 2009, up from CZK 7.2 billion at the end of 2008. Combination of the cash and debt balances resulted in net leverage of minus 9.3% and gross leverage of 4.1% at the end of 1Q 2009 compared to minus 5.1% and 4.1% at 31 December 2008.
CZ Mobile Segment Overview4
Total business revenues in the mobile segment decreased by 3.0% yoy in 1Q 2009 to CZK 7.9 billion, while mobile service revenues went down 1.9% yoy. Performance of mobile segment 1Q 2009 was impacted by customers optimizing their usage and MTR cut (from CZK 2.99 per minute to CZK 2.65 per minute as of 1st February 2009).
Revenues from voice services decreased in total by 4.2% yoy to CZK 5.6 billion in 1Q 2009 driven mainly by declining roaming and outgoing voice revenues. At the same time, revenues from monthly fees increased by 10.9% yoy driven by accelerated growth in the contract customer base. Interconnection revenues went down by 5.7% yoy driven by decrease in incoming voice revenues due to MTR cut and less roaming visitors. Other revenues (including revenues from value added services, internet & data and other revenues) increased by 4.6% yoy to CZK 2.1 billion in 1Q 2009 due to a solid growth in mobile data revenues.
Total traffic5 grew by 8.8% to 1,922 million minutes in 1Q 2009 helped by growing number of contract customers and attractiveness of O2 NEON tariffs designed to stimulate traffic, which were well received by customers. By the end of March 2009, more than 360 thousand customers subscribed for one of the O2 NEON tariffs and O2 NEON customers accounted to 14.6% of voice contract customers.
Aligning with the prevailing industry standards, Telefónica O2 started to report only its active mobile customers (based on 3 months activity criteria, i.e. active customer is defined as a customer generating revenue in the last 3 months). The total number of active mobile customers increased by 0.6% yoy to 4,783 thousand at 31 March 2009. At the same date, the total number of the contract customers reached 2,596 thousand, up by 12.6% yoy following the active prepaid to contract migration strategy and good customers' response to new O2 NEON flat rate tariffs introduced in May last year. Net adds of contract customers amounted to 77 thousand in 1Q 2009 compared to 62 thousand in the same period in 2008 (+24.8%). Contract customers thus accounted for 54.3% of the total customer base at the end of March 2009, up from 52.5% in 4Q08 and 48.5% a year ago. The number of prepaid active customers decreased by 10.8% yoy to 2,187 thousand at the end of March 2009. At the end of 1Q 2009, the number of mobile data customers (CDMA, UMTS and GPRS) reached 231 thousand, 12.7% up yoy.
In 1Q 2009, blended monthly ARPU6 reached CZK 535, down 2.4% yoy largely due to lower voice revenues and MTR cuts. Contract monthly ARPU reached CZK 810 in 1Q 2009, compared to CZK 883 in 1Q 2008 (- 8.2% yoy). The main reason for the lower contract ARPU is a dilution caused by customer migration from the prepaid to the contract segment. Prepaid monthly ARPU decreased by 10.1% yoy to CZK 220 in 1Q 2009 impacted by customers optimizing their behavior in the current environment.
The blended monthly average churn rate decreased 0.1 p.p. yoy to reach 2.1% in 1Q 2009, reflecting stronger performance of the contract segment.
CZ Fixed Segment Overview7
Total business revenues went down only by 2.1% to CZK 6.8 billion in 1Q 2009 reflecting largely the operating improvement in traditional business, retail ADSL and interconnection revenues.
Due to 7.2% decline in the number of fixed telephony accesses to 1,851 thousand at the end of March 2009 revenues from traditional access decreased by 9.6% yoy to CZK 2.1 billion in 1Q 2009. This represents a significant year-on-year improvement (in 1Q 2008 these revenues declined 15.0% yoy) which was driven by continuing improvement of the customer proposition leading to less net losses of fixed telephony accesses. In 1Q 2009, the net lines losses reached 42 thousand compared to 74 thousand in 1Q 2008 (down by 42.4%). The company continues in enhancing the quality of fixed lines via broadband and bundled offers. Total number of customers subscribed for one of the bundled products (O2 Duo, O2 Trio and O2 Duo Mobil) reached some 324 thousand at the end of March 2009, with 54 thousand net adds in 1Q alone.
Revenues from traditional voice services declined in total by 1.7% to CZK 2.1 billion. Revenues from voice traffic declined by 15.6% yoy to CZK 825 million in 1Q 2009, as a result of lower voice traffic generated by the customers, which decreased at the same time by 12.6% yoy to 561 million minutes. Interconnection revenues went up by 9.3% to CZK 1.2 billion in 1Q 2009 driven mainly by higher revenues from international transit traffic, which more than compensated a decrease in revenues from the incoming voice.
Revenues from broadband based services grew 2.0% and amounted to CZK 1.0 billion in 1Q 2009, of which retail broadband revenues went up 4.9% yoy and revenues from wholesale ADSL services went down 27.8% yoy. Retail ADSL accesses went up 16.2% yoy to 612 thousand at the end of March 2009, with 33 thousand net adds in 1Q 2009 compared to 19 thousand net adds in the same quarter of the last year (+79.7%).The total number of reported ADSL accesses reached 662 thousand. The total number of reported O2 TV's customers reached 128 thousand at the end of 2009, up by 46.6% yoy.
Revenues from data services decreased by 4.7% yoy to CZK 922 million in 1Q 2009, while revenues from IT services and business solutions decreased by 1.1% yoy to CZK 378 million. Other telecommunication revenues went up by 133.3% to CZK 284 million in 1Q 2009, driven mainly by revenues from universal service which amounted to CZK 179 million.
Slovakia
In Q1 2009, Telefónica O2 Slovakia continued with its O2 Fér (O2 Fair) customer proposition resulting in the strong customer growth. O2 Fair is a simple tariff which unifies prepaid and contract rates and offers SIM-only products without handset subsidy. The proposition continued to be very well received by the market and resulted also in further increase in number of customers who brought their mobile number to Telefónica O2 Slovakia network from other operators. In 1Q 2009, their number grew almost 30 times compared to the same period last year.
Number of active customers in Slovakia using the 3-months customer activity recognition criteria reached 365 thousand at the end of March 2009, up by 27.3% yoy, with 40 thousand net adds in 1Q alone. This increase was driven mainly by 58.8% yoy growth in contract customers to 118 thousand, while number of prepaid active customers reached 248 thousand, up 16.3% yoy.
In 1Q 2009 revenues of Telefónica O2 Slovakia grew close to 40% yoy in local currency. This reflected further customer base increase due to the O2 Fair proposition and its stabilization. Also, bad debt ratios are consistent with industry standards.
Group Operating Expenses
Consolidated operating costs amounted to CZK 9.1 billion in 1Q 2009, up by 3.0% yoy.
Supplies expenses grew in total by 5.0% yoy to CZK 4.2 billion in 1Q 2009 when a decrease in cost of goods sold only partly covered the cost increase related to higher commercial activities, higher interconnection costs due to growth in international transit and universal service (approximately CZK 90 million).
Personnel costs amounted to CZK 1.8 billion in 2008, up 2.4% yoy. The total number of Group employees reached 9,069 at 31 March 2009, down 2.6% yoy. Telefónica O2 Czech Republic headcount went down by 2.9% yoy to 8,357 at that day.
The cost of external services increased in total by 4.3% yoy and reached CZK 2.8 billion in 1Q 2009. Higher marketing and sales costs due to increased commercial activities, increased utilities consumption in Slovakia due to higher number of BTS and increased rental costs due lease back of part of the real estate sold last year were the main reasons behind the increase. Other external services went down by 9.1% in 1Q 2009.
Taxes, comprising taxes other than income tax, fees and provisions decreased by 28.0% yoy to CZK 236 million in 1Q 2009 mainly due to the bad debt provisions created in Slovakia in 1Q 2008.
Attachment:
The consolidated balance sheet and income statement of Telefónica O2 Czech Republic prepared in accordance with International Financial Reporting Standards (all figures in CZK million).
For more information, please contact:Martin Žabka
Spokesperson
Telefónica O2 Czech Republic, a.s.
tel: 800 163 342 (800 1 media)
About Telefónica O2 Czech Republic
Telefónica O2 Czech Republic is a major integrated operator in the Czech Republic. It is now operating more than seven million lines, both fixed and mobile, making it one of the world's leading providers of fully converged services. The organization offers the most comprehensive portfolio of voice and data services in this country. It is paying special attention to the exploitation of the growth potential, particularly in the data and Internet sector. Telefónica O2 Czech Republic operates the largest fixed and mobile network including a 3rd generation network, CDMA (for data), and UMTS, enabling voice, data and video transmission. Telefónica O2 Czech Republic is also a notable provider of ICT services.
About Telefónica O2 Europe
Telefónica Europe is a business division of Telefónica comprising mobile, fixed, and DSL operations in the UK, Ireland, the Isle of Man, Germany, the Czech Republic, and Slovakia. With the exception of Isle of Man, all the operating businesses use 'O2' as their consumer brand. Telefónica Europe also has 50% ownership of the UK and Irish Tesco Mobile and German Tchibo Mobilfunk joint venture businesses. Telefónica Europe is headquartered in Slough, UK, and has 43 million mobile and fixed customers.
|
INCOME STATEMENT |
Jan - March 2009 |
Jan - March 2008 |
|
Business revenues |
15,106 |
15,346 |
|
Other recurring revenues |
25 |
64 |
|
Revenues |
15,131 |
15,410 |
|
Internal expenses capitalized in fixed assets |
196 |
91 |
|
Operating expenses |
(9,058) |
(8,791) |
|
Other operating income/(expenses) |
3 |
6 |
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Gain on sale of fixed assets |
354 |
9 |
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Impairment of fixed assets |
(11) |
0 |
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OIBDA |
6,615 |
6,724 |
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Depreciation and amortization |
(3,113) |
(3,365) |
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Operating Income |
3,501 |
3,359 |
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Net financial income (expense) |
(87) |
2 |
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Income before tax |
3,414 |
3,361 |
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Income tax |
(768) |
(927) |
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Net Income |
2,645 |
2,435 |
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BALANCE SHEET |
31.3.2009 |
31.12.2008 |
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Non-current assets |
83,969 |
86,166 |
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- Intangible assets |
8,706 |
8,900 |
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- Goodwill |
13,448 |
13,448 |
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- Property, plant and equipment and investment property |
61,431 |
63,429 |
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- Long-term financial assets and other non-current assets |
384 |
389 |
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- Deferred tax assets |
- |
- |
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Current assets |
21,162 |
17,361 |
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- Inventories |
717 |
779 |
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- Trade and other receivables |
9,140 |
9,203 |
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- Current tax receivable |
536 |
226 |
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- Short-term financial investments |
12 |
37 |
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- Cash and cash equivalents |
10,757 |
7,116 |
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Non-current assets classified as held for sale |
114 |
96 |
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Total assets |
105,246 |
103,623 |
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Equity |
80,784 |
78,168 |
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Non-current Liabilities |
6,928 |
6,977 |
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- Long-term financial debt |
3,150 |
3,098 |
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- Deferred tax liabilities |
3,249 |
3,300 |
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- Long/Term Provisions |
387 |
403 |
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- Other long/term liabilities |
142 |
176 |
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Current Liabilities |
17,533 |
18,478 |
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- Short-term financial debt |
140 |
98 |
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- Trade and Other payables |
14,317 |
15,004 |
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- Current tax payable |
6 |
9 |
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- Short-term provisions and other liabilities |
3,070 |
3,367 |
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Liabilities assoc. with non-current assets classified as held for sale |
- |
- |
|
Total Equity and Liabilities |
105,246 |
103,623 |
1 Comparative period 3 months to 31 March 2008
2 Long and short term financial debt less cash and cash equivalents and short-term fin. investments over equity
3 Active customer = customer who generated revenues within last 3 months
4 Figures are shown net of inter-segment charges between fixed and mobile segment
5 Inbound and outbound, excluding inbound roaming and roaming abroad
6 Including inter segment revenues
7 Figures are shown net of inter-segment charges between fixed and mobile segment
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