Preliminary results:Telefónica Deutschland / O2 raises outlook for fiscal year 2021 after record half year

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Revenue and adjusted operating income OIBDA in first half of 2021 at record levels
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Outlook for fiscal year 2021 raised - revenue and adjusted operating income OIBDA for fiscal year 2021 now expected to be slightly positive compared than previous year
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Number of contract mobile customers increased by 594,000 in the first half of the year (excluding M2M), driven by core O2 brand
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Revenue increased by 2.9 percent to EUR 3.74 billion in first half of 2021, showing the highest revenue growth in the joint company history since the merger with E-Plus in 2015
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Adjusted operating profit OIBDA climbed by 8.2 percent (adjusted for exceptional effects by 3.5 percent), an above-average increase
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"We continued to perform very well in the first half of the year, delivering record revenue and operating profit growth. At the halfway point of our strategy program, we are fully on track. Our investments are paying off in profitable growth. Our 'very good' network* and excellent service form the basis for strong customer growth. Based on the strong performance in the first half of the year, we are raising our guidance for the fiscal year 2021," said Telefónica Deutschland CEO Markus Haas
Telefónica / O2 delivered record revenue and operating profit in the first half of fiscal year 2021.
Telefónica / O2 delivered record revenue and operating profit in the first half of fiscal year 2021. Based on the strong operational and financial momentum in the first half of the year, the company raises its guidance for fiscal year 2021. Revenues in the 1st half increased 2.9 percent to 3.74 billion euros. This is the strongest revenue growth in the company's history since the merger with E-Plus in 2015. Adjusted operating profit OIBDA climbed by as much as 8.2 percent to EUR 1.17 billion in the same period. This is the highest OIBDA the company has ever recorded after the first six months. This also benefited from non-recurrent special factors in the second quarter. In organic terms, growth was 3.5 percent. Telefonica / O2 saw very good business momentum in the second quarter in particular. The continued traction of the O2 Free portfolio was supported by strong online channels and historically low churn rates. The gradual reopening of O2 stores reinforced this momentum. The performance of partner brands was also solid.
Markus Haas
"We continued to perform very well in the first half of the year, delivering record revenue and operating profit growth. At the halfway point of our strategy program, we are fully on track. Our investments are paying off in profitable growth. Our 'very good' network* and excellent service form the basis for strong customer growth. Based on the strong performance in the first half of the year, we are raising our guidance for the fiscal year 2021," said Telefónica Deutschland CEO Markus Haas. The company's strategy program was launched in 2020 and runs until 2022, during which the company aims to achieve cumulative revenue growth of at least 5 percent and continuous margin improvement.
Revenues in the second quarter increased by 5.7 percent to 1.9 billion euros. Revenue development in the second quarter was again driven by continued strong customer growth and demand for the core O2 brand. The increase in new mobile contract customers in the second quarter amounted to 374,000; including M2M, the increase was 455,000. Together with 91,000 new prepaid lines, this is the strongest customer increase since 2016. The contract churn continued to decline and at 1.0 percent was once again significantly below the prior-year figure of 1.4 percent. At O2, this figure was 0.8 percent, compared with 1.1 percent in the prior year. Both figures are thus at a historically low level. At the same time, customers use the O2 network for data services more than any other provider.

Strong operational and financial momentum in the second quarter

Credits: Telefónica Deutschland
Telefónica Germany / O2 headquarters in Munich
Mobile revenues climbed in the second quarter 7.4 percent to EUR 1.4 billion thanks to a strong core brand and solid partner business. Based on dynamic contract customer business, this is the strongest increase in the company's history. Contract ARPU – the average monthly revenue per customer - increased from 13.3 to 13.6 euros. Ongoing marketing and sales campaigns will further support further development in the second half of the year. At EUR 318 million, revenue from devices was 1.2 percent down year-on-year. With demand for high-end devices remaining high, the main factor here was the base effect of an extraordinarily high prior-year figure. Revenue from fixed-network business grew by 3.5 percent to EUR 200 million. The driver of this positive development was the further growth in the customer base for VDSL lines. The marketing of fixed-network access lines by Tele Columbus and "Unsere Grüne Glasfaser" (Our Green Fiber), which has started, opens up further sales opportunities here. Operating profit OIBDA increased very dynamically in the quarter by 10.8 percent to EUR 612 million. A key driver of this strong development was the further improvement in revenue quality. The high-margin rates of the core O2 brand account for an increasing share of revenue. The channel mix is improving with an expansion of online sales. This was complemented by efficient cost management in sales and marketing. In addition, one-time effects from the previous year and the past quarter had a positive impact on development.

Investments continue to pick up speed

Credits: Telefónica Deutschland
Construction of a new 5G antenna in Munich
In the second quarter, the company invested 280 million euros in the expansion of its networks and services, significantly more than in the prior year (251 million euros) and the previous quarter (228 million euros). The investment ratio, i.e., the ratio of investments to revenue, was 14.8 percent. Telefónica Deutschland / O2 has set itself an ambitious investment program for the years 2020 to 2022, in which up to 17-18 percent of revenue is to be invested at peak times. The focus of investment in the current fiscal year is on the second half of the year. The share of investments in the new 5G technology is steadily increasing. Since the beginning of the year, the company has continued to expand its 5G network with great strides. Currently, Telefónica / O2's 5G network is transmitting with around 2,000 antennas in more than 80 cities in Germany. By the end of 2021, the company will cover a total of more than 30 percent of the population with 5G. By the end of 2025 at the latest, 5G should be available throughout Germany.

Upgrade of FY 2021 outlook

Financial year 2021 total revenues and OIBDA adjusted for exceptional effects are both expected to be 'slightly positive' year-over-year, respectively. The company's CapEx deployment comes with backend-loaded phasing in 2021 as Telefónica Deutschland is executing its network-focused 'investment for growth' programme to capture available revenue and OIBDA growth opportunities. The expected Capex to Sales ratio remains unchanged at 17% – 18% in FY2021. Telefónica Deutschland Groups's assumptions are based on broadly unchanged overall economic conditions, current competitive dynamics, and existing wholesale relationships. At the same time, management is continuously monitoring and analysing the further C-19 developments. Please find here the detailed Data Tables: https://www.telefonica.de/investor-relations-en/publications/financial-publications.html
*Connect mobile network test, issue 1/2021: Very good (852 points); three times very good (926, 876 and 852 points) were awarded overall