Strategy-Update:Telefónica Deutschland / O2 continues to focus on profitable growth and further intensifies network expansion in Germany
- Telefónica Deutschland / O2 still aims deliver minimum cumulated revenue growth of five percent between 2020 and 2022 and sustainably improve its profitability
- Investment plan for the period of 2020 to 2022 continues
- Over 30 per cent 5G coverage in Germany by the end of 2021 and nationwide 5G network by 2025
- Active sharing agreed with Deutsche Telekom and Vodafone in so-called "grey spots" in rural areas
- Telefónica Deutschland / O2 invests proceeds from sale of rooftop sites to Telxius mainly in infrastructure and business development
- Progressive digitalisation reduces costs and increases revenues
Telefónica Deutschland / O2 today reaffirmed its medium-term growth targets despite the ongoing Corona crisis. The company plans to grow by at least five per cent cumulatively in the three years to 2022 while sustainably increasing its profitability. In the ongoing most ambitious network expansion programme in the company's history, the company is making great progress and will invest more in the network in 2021 than ever before. By the end of the year, Telefónica Deutschland / O2 wants to reach over 30 per cent of households in Germany with 5G, and by 2025 have rolled out a nationwide 5G network in the country. In cooperation with Deutsche Telekom and Vodafone, Telefónica Deutschland / O2 also plans to close hundreds of so-called "grey spots" in the 4G network. In places where so far only one operator can provide coverage to the residents, the partners will agree to provide mutual network access for the benefit of their customers. This approach complements the cooperation to close "white spots" where there is still no coverage at all. Following the agreement with Deutsche Telekom and Vodafone to close up to 6,000 white spots, the active network sharing agreed bilaterally today with Deutsche Telekom and Vodafone respectively is a further step to cost-effectively increase coverage and network quality for the benefit of customers. This year, Telefónica Deutschland / O2 also plans to start equipping around 1,000 mobile sites with Open RAN technology, which will make the company less dependent on manufacturers and enable it to roll out new services more quickly. Meanwhile, the company's product and marketing strategy is also showing measurable success: Telefónica Deutschland / O2's own customers, with whom the company is directly in touch, account for around 80 percent of the customer base. The average revenue from new O2 customers is around 20 percent higher than that of existing customers, which is due to the increasing interest in large data volumes and bundled products. At the same time, Telefónica Deutschland / O2 has successfully digitalised its sales and customer service: An increasing share of revenues and services are generated or provided on the web or mobile.
"Our operational business is very resilient. The course we set last year is now bearing visible fruit. We have made decisive progress in network expansion and are now on a par with the competition. Our customer satisfaction is increasing significantly and our business model is proving to be extremely robust in these challenging times," said Markus Haas, CEO of Telefónica Deutschland/ O2. "The further expansion of our strong O2 network and the continued improvement of our offerings for residential and especially business customers, mainly through bundled mobile and fixed products, are key to profitable growth." Telefónica Deutschland / O2 is stronger than ever at the beginning of 2021. The network is more competitive than ever: In December, it was rated "very good" for the first time by Connect, on par with the other network operators. The Net Promoter Score, which measures the proportion of customer recommendations, has risen by almost 20 percentage points over the past three years. Customer loyalty is at record levels, the average monthly churn rate for O2 contract customers was recently at a historic low of one percent per month. And in the first nine months, no competitor was able to show higher growth in mobile phone contracts. These developments were also reflected in the key financial figures: in terms of revenue and operating profit, the company showed good momentum despite the pandemic in the first nine months of 2020 and especially in the third quarter.
With these successes, the company is well-positioned to achieve its strategic goals. Telefónica Deutschland / O2 plans to gain market share through improved network coverage in rural areas and to consolidate its position in cities on the basis of a high-capacity infrastructure. With a strong network as a foundation and an individualised service, the company wants to continue its successes in the business customer segment in 2021. And utilising the largest fixed network coverage in Germany and attractive additional offers, Telefónica Deutschland / O2 plans to increasingly sell bundled offers and thus generate higher revenues per household and customer. The proceeds from the sale of passive infrastructure at about 10,000 mobile sites to Telxius provide the company with financial flexibility during the pandemic phase. To a considerable extent, the money flows back into the business. For example, Telefónica Deutschland / O2 is spending 100 million euros on a stake in the new fibre-optic company "Unsere Grüne Glasfaser" (UGG). Under the umbrella of the Spanish Telefónica, the company wants to expand fibre optics in Germany with a volume of more than five billion euros together with Allianz. Telefónica Deutschland / O2 holds a 10 per cent stake in UGG and also intends to use the funds from the sale of the rooftop sites to redeem a promissory note of 500 million euros maturing this year and to provide for future frequency payments.
Encouraged by the robust business development, Telefónica Deutschland / O2 is again committed to an attractive remuneration for shareholders. The company is therefore extending the period for the promised minimum dividend by one year up to and including the financial year 2023. In addition, the promised minimum dividend per share will be increased from 17 cents to 18 cents. For the 2020 financial year, the company plans to propose a dividend of 18 cents per share at the Annual General Meeting in May. "We decided on a balanced use of the proceeds from the Telxius transaction," said Chief Financial Officer Markus Rolle. "The most important aspect was to strengthen our financial power in the current environment. We are investing in promising infrastructure and at the same time our shareholders are participating in this successful sale."