O2 Czech Republic reports strong profit growth, plans share buy-back

O2 Czech Republic reported a 49 per cent year-on-year increase in net profit in the first three quarters of 2015 and unveiled plans to distribute up to 110 per cent of profits to shareholders and launch a share buy-back in January 2016.

The company, now 83 per cent-owned by the PPF investment group and no longer part of Telefonica, said net profit reached CZK3.7 billion (€137 million/$156 million) in the nine months to end September, while EBITDA increased by 29.4 per cent year-on-year to CZK7.5 billion.

The company said total consolidated revenue, which includes subsidiaries such as O2 Slovakia, stabilised at CZK27.7 billion compared to the previous year. The results do not include CETIN, which now owns the company's mobile and fixed infrastructure and was spun off earlier this year. Operating revenue in the mobile segment increased by 0.8 per cent to CZK14.3 billion in the first three quarters.

Chairman and CEO Tomas Budnik said the simplification of the way the company is run helped it to reduce operating expenses by 22 per cent.

"Customer loyalty remained at historic high levels and average spend has stabilised despite 25 per cent decline in mobile market voice pricing. This confirms that our customers trust in our proposition, see its value and they request additional services," Budnik said.

However, the company still reported a drop in the overall number of mobile subscribers, which fell by 2.8 per cent year on year to 4.9 million by the end of the third quarter. At the same time, contract customers fell by only 1 per cent to 3.25 million while the prepaid base was 6.2 per cent lower at 1.66 million.

The company said that improving the quality of the customer base was the key driver for ARPU, which reached CZK287 in the first nine months of 2015. In the third quarter alone it increased further to CZK293.

Based on the results for the first nine months of 2015 and the outlook for the fourth quarter, O2 said it expects 2015 full-year consolidated EBITDA will reach CZK9.9 billion to CZK10.2 billion and consolidated net income will reach CZK4.85 billion to CZK5.2 billion.

The company also said it intends to distribute 90 per cent to 110 per cent of its net profit to shareholders and relaunch a share buy-back in January 2016.

CTO Tomas Kouril said the company planned to repurchase shares for up to CZK8 billion or up to 10 per cent of ordinary shares over the next five years.

"O2 is taking advantage of favourable market conditions to refinance its existing debt and potentially increase leverage up to 1.5 times net debt to EBITDA," Kouril added.

The dividend and share buy-back could be a seen as an effort to appease those shareholders who voted against the spin off of CETIN, which they saw as devaluing their investment.

O2 Czech Republic noted that four months after the separation, it is confident that the new operating model has stabilised and is sustainable and viable for the future.

For more:
- see the O2 Czech Republic statement

Related articles:
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Gorila Mobil is latest Czech MVNO casualty as O2 takes it over
Czech T-Mobile and Telefónica plan to share LTE networks
Czech Republic's MVNO boom continues apace in 2014
Czech Republic concludes LTE spectrum auction, fails to usher in new entrants

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