O2 notes shift to postpay contracts as iPhone launches

The iconic Apple iPhone went on sale in the UK and Germany on Friday evening, marking the start of a new wave of operator competition in some of the world’s most mature mobile markets.

It’s too early to tell whether the device will be a boon to UK partner O2, but on Monday, the Telefonica-owned operator was reporting a shift towards postpaid contracts.

During the third quarter, O2 UK added a total of 115,000 net customers, taking its user base to 17.9 million. But the number of prepay customers fell by 44,000, continuing the trend seen in the second quarter, as users migrate from prepay to contract.

The figures reflect the mature nature of the UK market but also highlight the focus on customer retention. So with a two year postpaid contract, the iPhone might be just what O2 needs.

Unfortunately, all reports suggest that the big launch on Friday was overambitious. While the flagship Apple store on Regent Street, London had something of an image queue outside it all Friday, it seems to have been the only one. Most other O2 and Carphone Warehouse stores are reported to have been overstaffed and devoid of customers, suggesting the launch was a little flat.

Nevertheless, O2 UK reported a 9.7 per cent increase in revenues for the third quarter, compared to last year and a 9 per cent increase in operating income to Eur530m.

Despite a 1.8 per cent decrease in revenues at O2 Germany, which doesn’t have the iPhone – that honour was taken by incumbent T-Mobile – operating profit in Germany was up 8.4 per cent. The O2 Czech Republic operation also increased revenues and operating profit by 3.4 per cent and 5.2 per cent respectively, which resulted in the Telefonica O2 Group maintaining revenues and operating income largely flat year on year. Group revenues came in at Eur3.7bn for the third quarter, compared to Eur3.6bn in the same period last year, while operating income remained flat at Eur1bn.

All this helped Spanish parent Telefonica Group turn in a 38.7 per cent year on year increase in net profit for the third quarter. Net income topped Eur4bn, while consolidated group revenues increased 4.8 per cent to Eur14.2bn.