O2 at a glance

Telefónica Europe plc

We provide integrated mobile, fixed and broadband services in the UK, Ireland, Germany, the Czech Republic and Slovakia. Together, we’re Telefónica Europe, but customers know us as O2.

Telefónica Europe also owns 50% of the Tesco Mobile joint venture business in the UK and Ireland, as well as, the Tchibo Mobilfunk joint venture in Germany. In addition, the group includes the Isle of Man fixed/mobile operator, Manx Telecom.

We now have 47.6 million mobile, fixed and broadband customers across Europe and 29,000 employees across the Group.

Telefónica Europe plc reported a strong performance in 2008, despite a worse economic environment and changing patterns in customer behaviour; reporting revenues at the year end (31 December 2008) of €14.3 billion.

With the markets being affected unequally, the main common strength across Telefónica Europe has been the delivery of new propositions that anticipated customer needs in the current environment.

We delivered a strong set of results in the first half, to 30 June 2009, in increasingly competitive markets. We have, in particular, reported impressive cash flow growth (up 16.8% year-on-year to €1.130 billion), while maintaining our levels of investment to ensure the long-term health of the business.

In the first six months of 2009, we added 1.5 million customers, bringing Telefónica Europe's total base to 47.6 million. Telefónica has further underlined its position as the 'home of the smartphone' with the recent signing of the Palm Pre exclusive across Europe to add to its already impressive portfolio of high-end mobile devices.

Telefónica O2 UK experienced slower growth in the second quarter, yet clearly outperformed the competition in a flat to declining market, with a 4.1 per cent increase in revenues and net mobile customer additions of 252,268 in the last three months to 30 June 2009.  The UK's excellent postpay net additions – up 73.3 per cent year-on-year - were driven by ongoing record low levels of churn and market-leading customer satisfaction scores.  Telefónica O2 UK reported yet another quarter of strong growth in data fuelled by mobile broadband and usage of smartphones.  O2 has also actively expanded into new business areas, with the introduction of the Joggler and, most recently, O2 Money.

Telefónica O2 Germany maintained its impressive OIBDA performance in the second quarter, up 29 per cent year-on-year, and – excluding the impact of the latest cut in mobile termination rates – mobile service revenue growth accelerated to 1.2 per cent, while net mobile customer additions amounted to 426,723.  Our German business continues to make significant progress thanks to the solid foundations put in place in recent years – including the rollout of our own next generation networks, greatly improved distribution channels and a new simpler product portfolio.  The flagship O2o tariff proposition is gaining traction from other networks and delivering higher than average ARPUs, while it is anticipated that the Palm Pre exclusive will be important in driving customer acquisition and revenues.  Telefónica O2 Germany is now moving into an exciting new phase in Europe's biggest market.

The severe economic climate has resulted in an extremely tough trading environment which is impacting revenues for both Telefónica O2 Ireland and Telefónica O2 Czech Republic.  Nonetheless, in Ireland we have delivered operational improvement and increased cashflow generation through efficient business management, while in the Czech Republic we are maintaining our commercial momentum and reported our best-ever quarterly customer additions in Slovakia.

Our strong first half results for 2009 reflect our ongoing investment in the products and services that our customers really value, which will continue to pay dividends and prove critical in driving long term growth of our business in Europe.