MOBILE OPERATOR O2 has seen its profits fall dramatically as it lowered prices to retain customers, including users of Iphone devices that it initially offered exclusively in the UK.
The Telefonica-owned mobile network reported financial results showing sales of €1,719m in the three months ended in March, a year on year decline of six per cent. It blamed this fall on a "difficult trading environment" and regulation.
A large part of the regulation induced hit to the company's bottom line came from rate cuts affecting mobile termination rates. Without these cuts O2 said its revenues would have fallen only three per cent year on year in the first quarter.
In terms of mobile service revenue the results were even worse with an 8.3 per cent decline year on year to reach €1,518m. It went on to claim that, excluding the impact from regulation, mobile service revenues declined five per cent year on year.
Average revenue per customer (APRU) was down 8.1 per cent year on year, drivn by customers optimising bundles and moving to lower price points, the company reported. However, it went on to point out that ARPU had a sequential improvement in the fourth quarter of last year. Voice ARPU fell by 15.4 per cent year on year in the first quarter while data ARPU grew 1.3 per cent.
Highlighting the battle to retain customers, the company reported a substantial hike in commercial costs. It said, "As anticipated, and as result of the increase commercial activity to regain market momentum, total commercial costs rose 25.2 per cent year on year."
It concluded, "The company's efforts in retaining the customer base have shown positive signs in contract churn which will translate into higher retained value going forward." µ