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    Telefónica CR: 95% of customers have already made switch to FREE tariffs, mobile internet growing in popularity

    Mobile operator O2 today announced its financial and operating results for the first quarter of 2014. The operator's customers continued to prefer the unlimited tariffs while the popularity of mobile internet grew markedly. O2 also consolidated its position with digital television O2TV and broadband internet VDSL. O2 continues to increase its coverage in the Czech Republic of its fastest mobile network and plans to provide mobile broadband to 90% of the population by the end of 2014.

    Overview of operating results
    The total number of mobile customers stood at 5.065 million as of 31 March, up by 0.3% year on year. The number of contract customers increased by 3.7% to 3.232 million. A reduction in the number of prepaid customers was offset by the transition of such customers to one of the unlimited tariffs or to an offer from one of the virtual operators.

    The unlimited FREE tariffs, now used by 95% of the residential customer base, have significantly transformed consumer behaviour. The total volume of mobile voice traffic within the O2 network increased by 17% year on year, reaching 2.818 billion minutes in the first quarter alone. The simplified service offer has also resulted in notable internal savings due to reduced administration, reduced error rates and shorter times to service activation. Operating costs fell by more than 6%.

    Mobile internet is growing in popularity with the development of high-speed mobile networks and the offer of FREE tariffs. As of 31 March 2014, mobile internet was actively used by more than 1.2 million customers, a year-on-year increase of69%. Mobile internet revenues grew by 137.6%.

    More than one in every three mobile phones currently used on the O2 network is a smartphone - the proportion of smartphones increased in the first quarter to 36.4%. The mobile world is clearly dominated by the Android and iOS operating systems and the same applies to the O2 network: Android - 63%, iOS - 8%, Windows Phone - 6%. Symbian operating system is still very popular, accounting for 19% of all mobiles in use.

    The Czech mobile virtual network operator (MVNO) market continues to be dominated by virtual operators operating within the O2 network. The highly successful trio of Bleskmobil, Tesco Mobile and Mobil od ČEZ was joined in March by Gorila Mobil. The latest addition is intended by O2 to appeal to customers preferring data over voice services. It is estimated that the above four virtual operators together hold about 65% of the MVNO market.

    The number of O2TV customers exceeded 163,000 in March and continues to grow. All existing customers have already been transferred to the new platform, which has contributed to a 16% year-on-year increase in subscriptions. The ever-growing interest in digital TV is based mainly on the service's unique functions of Timeshift and Recording and the new O2 Video on Demand.

    Broadband VDSL internet was used by more than 379,000 customers by the end of the first quarter, a year-on-year increase of 31.5%.

    O2 continues to increase its coverage in the Czech Republic of its fastest mobile network. The availability of 4G LTE is to be considerably extended in Prague and Brno by the second half of 2014. The two biggest cities in the country, plus their surroundings, should have near complete coverage by the turn of the year. O2 plans to provide mobile broadband to 90% of the population by the end of 2014. This extent of mobile broadband availability will be possible thanks to an agreement on network sharing that will allow O2 customers in the west of the country to connect via T-Mobile transmitters.

    Overview of financial results
    Total consolidated operating revenue decreased by 9.6%year on year in the first quarter of 2014 to CZK 10.764bn. Operating revenues excluding lower termination fees, which have no direct impact on operating profit, decreased by 6.5% year on year.

    Operating Income Before Depreciation and Amortisation (OIBDA) decreased by 15.9% year on year.

    Free cash flow (excluding the LTE frequencies licence fee) decreased by 14.3% year on year, having a lower rate of decrease than OIBDA.

    Financial results achieved in Slovakia continued to show a positive development. Total revenue reached EUR 50m. Revenues denominated in CZK increased by 7%. OIBDA increased by 7.4% year-on-year to EUR 16m.

    Financial indicators for the group

    Financial indicators Q1 2013 Q1 2014 Yoy change
    Operating revenue CZK 11.902bn CZK 10.764bn -9.6 %
    Operating costs CZK 7.594bn CZK 7.120bn -6.2 %
    OIBDA CZK 4.099bn CZK 3.447bn -15.9 %
    OIBDA margin 34.4 % 32.0 % -2.4 p.b.
    Operating indicators - Czech Republic      
    No of mobile customers Q1 2013 Q1 2014 Yoy change
    Contract customers 3.121m 3.236m + 3.7 %
    Prepaid customers 1.927m 1.830m - 5.0 %
    Total 5.048m 5.065m + 0.3 %
    Smartphones Q1 2013 Q1 2014 Yoy change
    Smartphone penetration within O2 network 28.8 % 36.4 % +7.6 p.b.


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