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mmO2 posts 'strong' Q3

Users, ARPU, SMS activity up

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UK-based mobile phone network mmO2 today announced "strong" third quarter, pointing to its latest customer and average revenue per user figures as evidence.

During the three months to 31 December 2004, mmO2's O2 networks in the UK, Ireland and Germany were joined by 1.18m new customers, taking the group's total to 23.2m.

In the UK, some 360,000 punters signed up with O2, taking its total customer-base here to 14.2m people. The parent company was quick to point out that a further 250,000 existing O2 customers bought additional SIM cards, a largely UK-only phenomenon dubbed 'spinning'. It affects other networks too, and mmO2 CEO Peter Erskine challenged them to separate out such additional purchases from their overall new-user figures. "Net adds are not all new customers," he emphasised.

mmO2 similarly excluded 500,000 users contributed through its 15-month-old partnership with retailer Tesco, since they are not billed by the network.

Of the 360,000 new users signed in Q3, almost 94 per cent were pre-pay customers - just 22,000 people joined the network on contracts. That figure is down significantly on previous quarters - 127,000 in Q2, for example. Erskine said the dip was largely due to UK telco BT's replacement of O2 UK with Vodafone as its mobile telephony partner. The big decline shows just how many users BT was bringing to O2 and how many it will now presumably be putting Vodafone's way.

Still, the overall number of users joining O2 UK's network has been increasing over the past four quarters - a good sign, said Erskine, given that "churn is up in a competitive market" - and with it the blended average revenue it takes from each of them in a quarter, to £283, from £264 in the year-ago period.

The blended ARPU grew year on year in Germany and Ireland, Erskine said, to €370 in Germany and €564 in Ireland. These countries contributed 729,000 and 91,000 new customers, respectively, to the group during Q3. Their total customer bases are 7.4m and 1.5m, respectively. The Irish operation demonstrated "encouraging performance", Erskine said.

Data traffic

Erskine said that data was the key ARPU growth driver during the past 12 months, with the contribution of voice remaining roughly the same through the last four quarters, but data ARPU growing almost 11 per cent.

But what he was quick to point out that non-SMS traffic is making an increasing contribution to the total, it remains just 11.2 per cent of the total data service revenue taken in Q3 FY 2004/2005, up from nine per cent in Q4 FY2003/4. Data traffic accounts for 23.9 per cent of O2's total service revenue.

Non-SMS traffic includes all content downloads, browser traffic, MMS, email etc., indicating each of these has a long way to go to individually contribute significant sums to mmO2's top line. Some 3.8bn SMS messages were sent across the O2 networks in Q3, compared to just 20m MMS - 0.5 per cent of the total.

Erskine said the network is standing by is previous forecast of 12-15 per cent revenue growth in the UK for the full year, figures for which will be published in May, with Germany seeing "strong" growth but a more modest increase from Ireland. ®

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