O2 daddy Telefónica reports 12.5% drop in UK sales

Blames it on weak pound

Sales at Telefónica UK, which owns O2, plunged 12.5 per cent to €6.8bn (£5.7bn) for the firm's full year, mainly due to currency changes.

Organic revenue fell 1.5 per cent. Earnings before interest, tax, depreciation and amortisation fell 11.4 per cent for 2016 to €1.7bn (£1.4bn), increasingly organically by 1.7 per cent.

Overall reported group revenue at Telefonica dropped 5.3 per cent to €52bn (£43bn), with organic revenue up 1.3 per cent.

Last year Telefónica had hoped to sell its UK biz O2 to Three's owner Hutchison Whampoa for £10.5bn until the EU squashed that deal earlier this year.

Philip Carse, analyst at Megabuyte, said the most striking feature of the results was a 20 per cent reported and 42 per cent organic increase in capital expenditure to €278m (£235m) to meet 4G indoor coverage obligations of 95 per cent by the end of 2017

"This of course is the licence coverage obligation that O2 signed up to, and which the other MNOs are also voluntarily targeting," he said.

José María Álvarez-Pallete, exec chairman, said: "For 2017 we expect similar operating trends: revenue stability despite higher regulatory impacts mainly in European markets, OIBDA margin expansion and lower CapEx intensity."

Yesterday IoT bods Sigfox struck a global deal with Telefónica to offer their unlicensed spectrum connectivity tech through the telco. However, IoT revenue is still around 0.5 per cent of the firm's total earnings, Carse noted.

Last year Juan José Hierro, head of Telefónica's newly created IoT unit, told The Register: "We cannot sustain our traditional business – it is something that is slow growing.

"That is one of the reasons why we are paying so much attention to IoT."

This week Telefónica also flogged a 40 per cent stake in its Telxius infrastructure subsidiary to private equity fund KKR Group. ®