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08.05.2014

Telefónica Deutschland keeps focus on data monetisation and LTE in the first quarter of 2014

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  • Double digit growth of Non-SMS data revenues in a competitive market
  • Free Cash Flow increases to 107 million Euro
  • LTE pop coverage increases and achieves 50 percent end of April
MUNICH. In the first quarter of 2014, the German mobile market remained dynamic and competitive, with a strong focus on LTE. Against this background, Telefónica Deutschland continued executing its strategy of monetising data, leveraging a strong set of assets and brands.
“With the refresh of our ‘O2 Blue All-in’ portfolio for the consumer segment and the launch of ‘O2 Unite’ for SMEs we have again successfully demonstrated that Telefónica Deutschland remains at the forefront of data monetisation in the German mobile market”, said Rachel Empey (CFO). With regards to the planned acquisition of E-Plus by Telefónica Deutschland, CSO Markus Haas stated: “We are building a strong foundation on data monetisation today and with the planned integration of E-Plus, German consumers will benefit from a faster and accelerated 4G network roll out and more innovative and attractive offers for all segments in the market.

Mobile data remains main driver for revenue

At the end of March 2014, Telefónica Deutschland had 25.0 million customer accesses. The mobile access base stood at 19.3 million, while fixed line accesses amounted to 5.7 million. Non-SMS data revenues registered growth of 12.1% year-on-year in the first quarter representing 72.0% of total data revenues in the quarter, an increase of 8.6 percentage points compared to prior year. Mobile data continued to be a main driver for revenue performance, reaching 350 million Euro in the first quarter, with the accelerated decline of SMS revenues (-24.6% year-on-year) being the reason for an overall decline of data revenues of 1.3% year-on-year. Telefónica Deutschland’s total revenues reached 1,122 million Euro in the first quarter of 2014, representing a decline of 8.8% year-on-year (-8.7% excluding the impact from mobile termination rate cuts). Wireless service revenues showed similar performance to the previous quarter reaching 707 million Euro (-3.6% year-on-year in reported terms; -3.4% year-on-year excluding the impact from mobile termination rate cuts). Wireline revenues amounted to 293 million Euro in the quarter, already showing a better sequential trend (-7.0% year-on-year, vs. -9.2% in the previous quarter), reflecting a lower retail DSL base which is partly mitigated by an increasing uptake of VDSL.

Smartphone usage further increases

Smartphone penetration continued its positive trend reaching 32.8% at the end of March 2014, an improvement of 5.0 percentage points over the previous year. In the specific segment of O2 consumer postpaid, smartphone penetration reached 70.7%; +5.7 percentage points year-on-year. In the prepaid segment, penetration further improved to 21.2% in the O2 consumer segment (+8.0 percentage points year-on-year) and 28.4% in Fonic (+15.2 percentage points year-on-year).

CapEx reflects focused investments into the LTE network

Operating Income before Depreciation and Amortisation (OIBDA) totalled 234 million Euro in the first quarter of 2014 (-15.8% year-on-year). OIBDA margin was down 1.8 percentage points year-on-year to 20.9%, a largely stable year-on-year performance relative to the previous quarter. The year-on-year OIBDA performance was driven by the negative flow-through effect from service revenues as well as focused commercial investments to gain trading momentum, including selected offers with discounted devices. CapEx was lower year-on-year by 9.3%, totalling to 132 million Euro, reflecting the focused investments into LTE network deployment and a different year-on-year phasing of investments.

Further progress in the expansion of the LTE network

In view of a dynamic and competitive mobile market, Telefónica Deutschland further implements the development of the LTE network. The share of LTE-enabled handsets over total handsets sold underlines this progress reaching almost 80% in the first quarter. The overall number of LTE-enabled handsets sold to O2 postpaid customers exceeded the mark of 1 million at the end of April, which is a leading indicator for further monetisation of mobile data. Furthermore the LTE outdoor coverage achieved the 50% mark at the end of April, 2014. This reflects a significant 8.0 percentage points increase compared to December 2013.

Strong ability to generate Free Cash Flow

Operating Cash Flow (OIBDA minus CapEx) reached 102 million Euro in the first quarter of 2014 compared to 133 million in the same period of 2013. Free Cash Flow pre dividends from continuing operations (FCF) reached 107 million Euro (from 105 million Euro in 2013). The conversion from Operating Cash Flow to FCF was the result of a positive working capital development of 17 million Euro, with silent factoring transactions executed in both years having a major role.

APPENDIX

Additional data are available in our investor relations section on www.telefonica.de.
Telefónica Deutschland Holding AG, listed at the Frankfurt Stock Exchange in the Prime Standard, and its wholly-owned, operationally active subsidiary Telefónica Germany GmbH & Co. OHG belong to Telefónica Europe and are part of the Spanish telecommunication group Telefónica S.A. The company offers its German private and business customers post-paid and prepaid mobile telecom products as well as innovative mobile data services based on the GPRS, UMTS and LTE technologies with its product brand O2. In addition, the integrated communications provider also offers DSL fixed network telephony and high-speed internet. Telefónica Europe has more than 102 million mobile and fixed network customers in Spain, Great Britain, Ireland, the Czech Republic, Slovakia and Germany.