Thursday 30 July 2020 7:52 am

O2 weathers coronavirus storm as sales surge

O2 appeared to weather the Covid-19 storm in the three months to June, with revenues declining just under four per cent year on year, as handset sales surged during lockdown.

O2 results

O2’s UK operations notched a 10.1 per cent year on year increase in handset sales to €428m over the quarter. 

Handset revenues saw a 10.1 per cent boost compared to the same period last year, reaching €857m for the first half of 2020 following strong demand during lockdown, as isolating Brits kept in touch with friends and family.

Read more: Vodafone shares slide as operator ‘calculates cost’ of Huawei ban

Total revenue declined 3.8 per cent year on year to €1.63bn in the second quarter, wiping out initial growth in the first quarter, and taking revenue for the first half of 2020 to minus 1.1 per cent.

O2’s mobile business revenues totalled €1.57bn in the second quarter, marking a 4.8 per cent slump year on year.

Operating income before depreciation and amortization sank 8.2 per cent compared to the same period last year, largely due to Covid-19 related market decline in service revenues.

However, growth in the first three months of 2020 meant the overall decline for operating income in the first half of the year was 3.8 per cent year on year to €1.01bn.

Telefonica results

It comes as O2’s parent company Telefonica took the wider hit from the pandemic, with total revenue down 14.8 per cent year on year to €10.34bn for the quarter.

The Spanish telecoms firm, which has operations in Europe and the Americas, reported a 50.7 cent drop in net income to €425m over lockdown.

The company, which owns global mobile brands such as Movistar, O2 and Vivo, saw operating income before tax slump 25.3 per cent to €3.32bn for the quarter, compared to the same period in 2019.

Telefonica said it had a solid liquidity position of €24bn and a cash position of €10bn.

The multinational confirmed its 2020 dividend on the basis of its performance during lockdown.

It also maintained its operating income outlook for 2020 and guidance for 2022 of revenue and operating cash flow margin growth.

Why it’s interesting

O2 said it has focused on addressing customer needs in Britain while continuing to invest in its network over the coronavirus crisis.

O2 has seen sales rebound since lockdown measures eased, and was the only UK mobile operator to reopen all 440 stores in June. The firm implemented new layouts and virtual queuing systems as part of safety measures for the pandemic.

The group doubled its voice network during lockdown and its 4G service was boosted in over 91,000 postcodes including almost 400 tourist hotspots.

O2 surpassed its target for 5G rollout with the service now available in 60 towns and cities, as the company looks set to avoid hefty costs from the fallout of the government’s Huawei U-turn.

The Prime Minister earlier this month ordered UK mobile networks to strip all Huawei technology from their 5G infrastructure over national security concerns, sparking outrage from UK mobile networks over potential costs.

However, O2 was the only UK mobile network to avoid the use of Huawei kit, instead relying on Ericsson and Nokia to supply it with telecoms equipment.

O2 today said it “aims to have a wider role in rebuilding Britain, looking beyond helping customers to play a part in getting the whole country connected”.

In May, parent company Telefonica agreed a deal with Liberty Global to merge O2 and Virgin Media into a single UK telecoms giant.

The £31bn deal is expected to close in the middle of next year.

What O2 said

Mark Evans, O2 chief executive, said:  

“The impact of the Covid-19 pandemic has been devastating for many families, communities and businesses right across the UK. As the UK’s number one mobile network for customers, we have naturally provided additional support to our customers at such a critical time, while continuing to invest in and grow our network, maintaining market-leading levels of customer loyalty and satisfaction. 

“Now we’re focused on playing an even bigger role in getting the UK back on its feet. During the pandemic we have doubled our network capacity to meet demand, improved coverage across rural locations and supported our NHS with training venues and devices.  

“We’re acting as a force for good — setting a higher bar for connectivity, service and support for all our customers — and today we’re going further, announcing permanent free access to support websites including the NHS and Samaritans and new virtual 121 appointments with our Gurus. We’re also investing in digital skills training for thousands of our retail colleagues. 

José María Álvarez-Pallete, Telefonica chairman and chief executive, said:

“Telefonica delivered a resilient performance in a quarter marked by the Covid-19 crisis, as we contained the impact on our revenues through strong operational management, cost control and capital expenditure management.

I am very proud of our employees and their work to keep our customers connected in these difficult times. I believe we are strongly positioned to navigate the COVID-19 uncertainties ahead and to play our part in supporting economic recovery, while continuing to execute on our new long term strategy as a platform for sustainable growth, value creation and returns for all our stakeholders”.