O2 Reports First Profit

MMO2 has reported its first profit since its demerger from its former parent company, BT. The company reports that its total revenue from continuing operations grew by 21% in the first half to US$4.5 billion. At constant exchange rates, revenue growth was 17%. First half EBITDA increased by 60% to just over US$1 billion, and the Group EBITDA margin was 23.2%, compared to 17.5% in the first half last year.

For the first time since demerger, in the first half the Group reported a profit before tax, of US$44 million, compared to a loss of US$437 million in the previous year.

Total capital expenditure, excluding UMTS licences, increased by US$365 million in the first half, to US$909 million, reflecting acceleration of the Airwave investment programme, and higher UMTS network spending in the UK and Germany. Group net debt fell by US$93 million in the half year, with the growth in EBITDA more than offsetting the increase in capital expenditure. Net debt at the end of the half year was US$834 million, compared to US$927 million at the start of the period, and US$1.03 billion at the end of the first half last year.

Peter Erskine, Chief Executive of mmO2 plc, commented: "In the first half, mmO2 delivered further revenue and profit growth, across all our businesses. Our 15% service revenue growth in the UK and 15% EBITDA margin in Germany were the highlights of a good all-round operational performance, which reflected the success of O2's compelling, brand-driven, customer propositions. "We are pleased to report our first pre-tax profit, almost exactly two years after the demerger, and to again deliver positive cash-flow and a reduction in our net debt. This reflects the single-minded focus on profitable growth, operational improvement, and financial discipline that we committed to at the time of the demerger."

The Group says that it expects to satisfy the relevant regulatory requirements regarding UMTS network coverage in Germany and Ireland. The launch of commercial UMTS services will depend on the Group's ability to use this technology to offer an acceptable level of service to O2's customers, including availability of attractive, functional handsets and satisfactory network quality. Commercial launch of UMTS services is currently expected in the second half of calendar 2004."

Posted to the site on 18th November 2003