Maiden profit raises mmO2 dividend hopes

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The Independent Online

The mobile phone operator mmO 2 cheered investors yesterday with the prospect of a dividend as it posted maiden annual profits and reported positive cash flow.

The mobile phone operator mmO 2 cheered investors yesterday with the prospect of a dividend as it posted maiden annual profits and reported positive cash flow.

Despite fierce competition in its UK, German and Irish markets, mmO 2 said customer numbers rose 14 per cent in the year, bringing its subscriber base to 20.7 million. Its UK business saw record results, growing customer numbers by 10 per cent to 13 million and increasing average revenues per customer by 10 per cent to £272. Some 250,000 customers have been recruited through the company's joint venture with the supermarket chain Tesco, launched in September 2003.

The company is now reviewing the possibility of returning cash to shareholders and will report back in November."With one of the healthiest balance sheets in the industry and having reported positive full-year earnings and cash flow for the first time, we will now review our distribution policy," Peter Erskine, chief executive of mmO 2, said.

Revenues were up 22 per cent to £5.6bn as pre-tax profits came in at £95m. The company took a £9bn write-down on the value of its third generation licences last year, leading to losses of more than £10bn. But, three years after it demerged from BT, mmO 2 now says it has put the company on a footing for growth. "We are pleased that all our businesses have met or exceeded the targets set out at the beginning of the year, and delivered strong revenue and profit growth," Mr Erskine said.

Germany has also seen growth accelerate throughout the year, with customer numbers rising 24 per cent to 6 million and customer revenues rising an average of 8 per cent. The UK business is predicted to grow between 5 and 8 per cent a year.

But the City remains unconvinced about the growth potential of 3G mobile technology, as it has so far brought higher costs and lower margins. Shares in mmO 2 remained flat at 95p yesterday after its former parent BT said it was ending its partnership with mmO 2 to service BT's business mobile customers when it expires in November, and awarding it to its rival Vodafone.

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