TDE.L Regulatory News (TDE)

RNS Number : 6868H

Telefonica O2 Czech Republic, A.S.

25 February 2010

 

Telefónica O2 Czech Republic - 2009 Full Year Financial Results

 

 

 

February 25, 2010

 

Telefónica O2 Czech Republic, a.s. announces its audited financial results for the fiscal year 2009. These results are consolidated and prepared according to International Financial Reporting Standards and fully include the results of Telefónica O2 Slovakia, Telefónica O2 Business Solutions and other smaller operating companies.

 

Operational Highlights

 

·; In 4Q 2009, Telefónica O2 Czech Republic maintained solid commercial momentum in fixed broadband and contract mobile segments.

·; Mobile customer base in the Czech Republic increased by 22 thousand in 4Q 2009 (contract: +68 thousand) resulting in 3% year-on-year growth in 2009.

·; ADSL retail accesses grew by 17.0% year-on-year to 677 thousand (+26 thousand in 4Q 2009).

·; Telefónica O2 Slovakia kept its commercial momentum and improved its financial performance.

·; Consolidated business revenues declined 7.3% year-on-year in 2009 impacted by challenging economic environment, universal service and MTR cuts, while OIBDA went down 4.4% year-on-year in 2009.

·; Efficiency agenda and non-recurring items allowed the Group to improve OIBDA[1] margin by 1.7 p.p. year-on-year in 2009.

·; Consolidated net income increased by 0.3% year-on-year to reach CZK 11,666 million in 2009.

·; 2009 full year guidance[2] met for OIBDA and Operating Cash Flow.

 

2010 guidance[3]

 

·; OIBDA[4] decline of -5% to -9%, CapEx around CZK 6 billion

 

2009 dividend

 

·; The Board of Directors approved a proposal to the AGM of CZK 40 per share.

 

"I am pleased that we met our 2009 full year targets for OIBDA and Operating Cash Flow. Despite the negative impact of the economic downturn on the consumption patterns of our customers, particularly in the mobile business, we have been able to maintain strong commercial performance leveraging on successful proposition meeting our customers' needs. In mobile business, we recorded solid uptake of our O2 NEON tariffs which further improved the customer base mix. Introduction of the new flexible broadband centric proposition in May led to accelerated growth of fixed broadband customers in 4Q. As a result of our financial discipline, OIBDA margin improved and allowed us to maintain operational profitability well above the industry average in CEE region," Jesús Pérez de Uriguen, Chief Financial Officer and the First Vice-Chairman of the Board of Directors of Telefónica O2 Czech Republic comments on the operator's financial results. "In 2010, we will stay focused on sustaining commercial momentum via delivering more value to our customers through introduction of new products and service improvements as well as on strengthening our position in Slovakia and keep focus on OpEx efficiencies. All of these should lead to strong cash flow generation even though we think that challenging environment will prevail at least in the first half of 2010. Based on the thorough analysis of current financial position and prospective business performance, the Board of Directors will propose a dividend payment of CZK 40 per share, which offers solid dividend yield around 9%," says Luis Antonio Malvido, Chief Executive Officer and the Chairman of the Board of Directors.

Consolidated Financial Statements

Financial performance of Telefónica O2 Czech Republic group in 2009 was negatively impacted by challenging environment and MTR cuts. In addition, revenues from Universal Service (USO) negatively impacted year-on-year revenues comparison in the second half and full year 2009. Consolidated business revenues went down 7.3% yoy to CZK 59,751 million in 2009 and down 9.1% yoy to CZK 15,009 million in 4Q alone. Excluding the impact of USO, Group business revenues would have declined 6.0% yoy in 2009 and 7.7% in 4Q alone. Fixed business revenues in the Czech Republic declined by 9.9% yoy to CZK 26,872 million in 2009 (-7.1% yoy in 2009 excluding USO impact) and by 12.0% yoy to CZK 6,827 million in 4Q (-9.0% yoy in 4Q 2009 excluding USO impact). Mobile revenues in the Czech Republic declined by 7.6% to 31,021 million in 2009 and by 9.8% yoy to CZK 7,608 million in 4Q. On the other hand, revenues in Slovakia continued to grow healthy and recorded a 57.7% yoy revenues growth in local currency in 2009 (+66.9% yoy in 4Q 2009).

 

In 4Q 2009, the Company confirmed its focus on efficiency enhancement via strict financial discipline seen already in 2Q and 3Q to compensate for drop in revenues. This resulted in 12.5% yoy decrease in consolidated operating costs in 4Q 2009 to reach CZK 8,727 million, while for the full year it reported 9.6% decrease to CZK 33,965 million. Reductions have been reported in majority of cost categories (both commercial and non-commercial). Cost of goods sold decreased by 29.3% to CZK 2,305 million in 2009 as a result of continuous effort to deliver value to the customers in a more efficient way, while marketing and sales expenses dropped 13.6% in 2009 to CZK 2,807 (-21.1% in 4Q 2009). For non-commercial expenses, it is worth highlighting a 2.5% decline in network &IT repairs and maintenance expenses to CZK 2,280 million in 2009 due to continuous focus on efficiency in this area.

 

GroupOperating income before depreciation and amortization (OIBDA) went down 4.4% yoy to CZK 27,076 million in 2009 (-2.4% yoy to CZK 6,605 million in 4Q alone). OIBDA margin improved by 1.4 and 3.0 p.p. yoy to reach 45.3% and 44.0% in 2009 and 4Q 2009 respectively. OIBDA adjusted for guidance decreased by 3.9% yoy to CZK 27,880 million in 2009, within the guidance range of -4% to 0% helped by above mentioned efficiency agenda and non-recurring items, while comparable OIBDA, excluding non-recurring items in the year, went down 5.3% yoy to CZK 26,331 million.

 

Consolidatednet income amounted to CZK 11,666 million, up by 0.3% yoy in 2009 (+5.6% to CZK 2,770 million in 4Q) as a result of the decline in OIBDA, which has been compensated by lower depreciation charge and lower income tax in comparison with previous year.

ConsolidatedCAPEX reached CZK 6,489 million in 2009, 19.8% down yoy. Accelerated investment in 3G network expansion in 4Q 2008 and first three quarters of 2009 led to a different CAPEX phasing in 2009 compared to 2008. As a result, CAPEX in 4Q 2009 decreased by 50.4% yoy to CZK 1,953 million.

 

Operating Cash Flow (OIBDA less CAPEX) reached CZK 20,587 million, up 1.8% yoy in 2009, while Operating Cash Flow adjusted for guidance went up by 2.3% to CZK 21,424 million, within the guidance range of +2% to +5%.  

 

The consolidated financial debt amounted to CZK 3,131 million at 31 December 2009, while cash and cash equivalents and short term financial investments reached CZK 1,378 million.

 

CZ Mobile Business Overview

Also in 4Q 2009, mobile business maintained solid commercial performance in mobile contract leveraging on successful customer proposition around O2 NEON tariffs. The financial performance continued to be negatively impacted by customers' optimization due to economic downturn and by MTR cuts (-22.7% year-to-date). 

 

In the highly penetrated mobile market in the Czech Republic, total mobile customer base increased by 3.0% yoy and reached 4,945 thousand at the end of 2009. Number of contract customers went up 11.7% yoy reaching 2,814 thousand at the end of 2009 with 68.3 thousand net adds in the quarter, while the full year net adds reached 295 thousand (+7.1% yoy). This solid performance was driven by continuous uptake of O2 NEON tariffs and by customer migration from the prepaid to the contract segment. At the end of 2009, contract customers represented 56.9% of the base (+4.5 p.p. yoy). Number of prepaid active customers reached 2,130 thousand at the end of 2009, -6.7% yoy. It is worth highlighting an improvement in prepaid customer base net losses development in 2009. In 2009, prepaid customer base decreased by 153 thousand, which was 39.8% less than in the previous year. This is a result of a successful customer proposition "NA!VÍC" focused on regular top-ups.

 

The blended monthly average churn rate reached 2.1% in 2009, 0.1 p.p. higher compared with 2008 and 2.4% in 4Q 2009 alone, largely because of higher prepaid churn.

 

In terms of usage, mobile traffic carried in the Czech Republic grew by 11.1% yoy to 8,155 million minutes in 2009 (+12.6% yoy in 4Q alone) due to higher contract base and successful proposition of O2 NEON tariffs.

 

In 2009, blended ARPU reached CZK 514, down 9.1% yoy largely due to customers optimizing their behaviour and MTR cuts. Contract ARPU reached CZK 753 in 2009, down by 14.3% yoy and CZK 703 in 4Q 2009, down 18.2% yoy. Customer migration from prepaid to the contract tariffs contributed to contract ARPU dilution. Prepaid ARPU decreased by 12.1% yoy to CZK 223 in 2009 and to CZK 224 in 4Q 2009 impacted by customers optimizing their behaviour in the current environment and migration of high value prepaid customers to contracts. However, in 4Q 2009 prepaid ARPU improved from 3Q (CZK 222).

 

Total mobile business revenues in the Czech Republic declined by 7.6% to CZK 31,021 million in 2009 and by 9.8% in 4Q 2009 alone, while mobile service revenues went down by 7.0% yoy and 9.3% yoy in these periods. Mobile termination rate cuts diluted mobile service revenues by 2.6 p.p. in 2009 and by 3.7 p.p. in 4Q 2009 alone. Significant decline was recorded for interconnection revenues, which dropped 12.3% yoy to CZK 4,679 million in 2009 and 16.0 % yoy in 4Q alone due to MTR cuts and lower roaming. Revenues from monthly fees increased in 2009 by 7.0% yoy to CZK 8,300 million while they went up 2.2 % yoy in 4Q 2009.

CZ Fixed Business Overview

In 2009, the fixed business reported solid commercial performance driven by introduction of new broadband centric proposition in May. The financial performance was negatively impacted by already mentioned universal service, while ICT revenues reported good growth in 4Q 2009 in spite of economical situation and political situation.

 

Total number of fixed accesses declined by 6.5% yoy to reach 1,771 thousand at the end of December 2009, with 19.3 thousand net losses in the fourth quarter helped by solid uptake of naked accesses following the introduction of new broadband centric proposition. For the full year 2009, the Company lost 123 thousand fixed accesses, down from 176 thousand in 2008 (-30.2% yoy).

 

Voice traffic generated in the fixed network went down 13.6% in 2009 to 2,002 million minutes as a result of continued fixed telephony lines losses and fixed to mobile substitution.

 

Retail ADSL accesses reached 677 thousand at the end of 2009, up 17.0% yoy, with 26.4 thousand net additions in 4Q 2009, up from 17.0 thousand in 3Q. For the full year, the Company recorded 99 thousand net adds (+40.1% yoy) on the back of strong commercial activities around broadband centric proposition. The total number of O2 TV customers reached 138 thousand at the end of 2009, up by 20.2% yoy.

 

Total fixed business revenues went down 9.9% yoy to CZK 26,872 million in 2009 (-7.1% excluding universal service) with a 12.0% yoy decline to CZK 6,827 million in 4Q alone (-9.0% excluding universal service). While revenues from traditional access fell by 21.1% yoy to reach CZK 6,924 million in 2009 (-28.3% yoy in 4Q 2009) due to continuous fixed telephony lines losses, Internet & broadband revenues increased in total by 24.9% yoy to CZK 5,111 million in 2009 (+ 41.8% yoy in 4Q 2009) driven by the growth of broadband (ADSL and IPTV) customers, which was helped by introduction of broadband centric proposition in May 2009. IT services and business solutions revenues increased by solid 11.9% yoy to CZK 2,406 million in 2009 (+8.5% yoy in 4Q alone) in spite of economical downturn and political situation in the Czech Republic.

 

Slovakia

In 4Q 2009, Telefónica O2 Slovakia kept its commercial performance and deliver strong financial performance leveraging on successful customer proposition based on value and simplicity strategy (O2 Fér). Total number of active customers reached 553 thousand at the end of December 2009, up by 69.9% yoy. Number of contract customers almost doubled (+97.6% yoy) and reached 196 thousand, while number of prepaid active customers increased by 57.8% yoy to 357 thousand at the end 2009. Contract customers represented 35.4% of total customer base at the end of 2009, up 4.9 p.p. yoy. Total revenues of Telefónica O2 Slovakia increased by 57.7% yoy in local currency in 2009 (+66.9% yoy in 4Q 2009). In 2009, contract ARPU reached EUR 23.8 and prepaid ARPU was EUR 8.4.

 

Outlook for 2010

In 2010, the Company will continue to be focused closely on its customers by improving its services and delivering new products to meet their needs. In particular, the Company will continue with active proposition of its mobile O2 NEON tariffs and VPN based tariffs for business and corporate customers to sustain the commercial momentum delivered in 2009. This will lead to further improvement in the customer mix. In line with its 3G coverage expansion strategy, the Company will focus on improved proposition of new mobile broadband and data services. The Company's aim is to exploit its competitive advantage of having the highest 3G network coverage and the most advanced portfolio of mobile data services. In the fixed line business the Company's effort will stay focused on active marketing and enhancement of the broadband centric proposition launched in May 2009 including the enlargement of fixed/mobile bundles proposition leading to further stabilization of fixed accesses. This should help the Company to outperform again the fixed broadband and mobile contract markets.

 

Telefónica O2 Slovakia will continue in active marketing of its "value and simplicity" customer proposition, which helped to outperform the market in 2009 and will lead to further customer base growth and mix improvement to strengthen its financial position.

 

The Company expects challenging environment to prevail at least in the first half of 2010 due to the limited visibility on customers' behavior given the uncertain macroeconomic performance and political situation. In addition, mobile revenues will be hit by additional MTR cuts. In addition to above mentioned customer focused activities, the Company will stay focused on delivering commercial and non-commercial efficiencies in OPEX to maximize its cash flow generation, which remains the considerable goal for 2010.

 

In 2010, the Group expects OIBDA to decline between -5% and -9% and CapEx to be around CZK 6 billion.

 

2009 dividend proposal

The Board of Directors approved a proposal to the Annual General Meeting for a dividend distribution of CZK 40 per share, i.e. total amount of CZK 12,883,596 thousand from the net profit for 2009 and the part of retained profits from previous years. The proposed relevant dividend record date is September 8, 2010, dividend payment date is proposed on October 6, 2010. The dividend proposal has been reviewed by the Supervisory Board and will be submitted to the Annual General Meeting that will be held on May 7, 2010.

 

 

 

Attachment:

The consolidated balance sheet and income statement of Telefónica O2 Czech Republic prepared in accordance with International Financial Reporting Standards (all figures in CZK million).

 

 

For more information, please contact:Martin Žabka

Spokesperson

Telefónica O2 Czech Republic, a.s.

public.relations.cz@o2.com

tel: 800 163 342 (800 1 media)

 

About Telefónica O2 Czech Republic 

Telefónica O2 Czech Republic is a major integrated operator in the Czech Republic. It is now operating more than six million lines, both fixed and mobile, making it one of the world's leading providers of fully converged services. The organization offers the most comprehensive portfolio of voice and data services in this country. It is paying special attention to the exploitation of the growth potential, particularly in the data and Internet sector. Telefónica O2 Czech Republic operates the largest fixed and mobile network including a 3rd generation network, CDMA (for data), and UMTS, enabling voice, data and video transmission. Telefónica O2 Czech Republic is also a notable provider of ICT services.

  About Telefónica O2 Europe

Telefónica Europe is a business division of Telefónica comprising mobile, fixed, and DSL operations in the UK, Ireland, the Isle of Man, Germany, the Czech Republic, and Slovakia. With the exception of Isle of Man, all the operating businesses use 'O2' as their consumer brand. Telefónica Europe also has 50% ownership of the UK and Irish Tesco Mobile and German Tchibo Mobilfunk joint venture businesses. Telefónica Europe is headquartered in Slough, UK, and has 49 million mobile and fixed customers.

 

INCOME STATEMENT	Jan - Dec 2009	Jan - Dec 2008
Business revenues	59,751	64,450
Other recurring revenues	101	205
Revenues	59,852	64,655
Internal expenses capitalized in fixed assets	787	484
Operating expenses	(33,965)	(37,565)
Other operating income/(expenses)	3	(31)
Gain on sale of fixed assets	422	855
Impairment of fixed assets	(23)	(86)
OIBDA	27,076	28,312
Depreciation and amortization	(12,001)	(12,932)
Operating Income	15,075	15,380
Net financial income (expense)	(198)	(32)
Income before tax	14,877	15,348
Income tax	(3,211)	(3,720)
Net Income	11,666	11,628
BALANCE SHEET	31.12.2009	31.12.2008
Non-current assets	80,316	86,166
- Intangible assets	9,029	8,900
- Goodwill	13,448	13,448
- Property, plant and equipment and investment property	57,545	63,429
- Long-term financial assets and other non-current assets	294	389
- Deferred tax assets	-	-
Current assets	12,357	17,361
- Inventories	618	779
- Trade and other receivables	9,664	9,203
- Current tax receivable	697	226
- Short-term financial investments	109	37
- Cash and cash equivalents	1,269	7,116
Non-current assets classified as held for sale	95	96
Total assets	92,768	103,623
Equity	73,879	78,168
Non-current Liabilities	6,422	6,977
- Long-term financial debt	3,044	3,098
- Deferred tax liabilities	3,333	3,300
- Long/Term Provisions	24	403
- Other long/term liabilities	21	176
Current Liabilities	12,467	18,478
- Short-term financial debt	87	98
- Trade and Other payables	9,384	15,004
- Current tax payable	(1)	9
- Short-term provisions and other liabilities	2,997	3,367
Liabilities assoc. with non-current assets classified as held for sale	-	-
Total Equity and Liabilities	92,768	103,623

 

 

 

 

---

This information is provided by RNS

The company news service from the London Stock Exchange