Thanks to the group packages and new tariffs the O2 customers’ data consumption more than doubled

• By the end of the first quarter 2018, the number of mobile contract customers grew by 3% year and number of O2 TV customers increased by close to 10%
• On top of packages for families, groups of friends and small entrepreneurs, O2 has been offering tariffs with higher mobile data limits
• Consolidated revenue remained flat at CZK 9.2 billion in the first quarter 2018, EBITDA grew by 2.9% to CZK 2.6 billion; net profit improved by 3.4% to CZK 1.3 billion
• Financial results for the first quarter 2018 are prepared in accordance with IFRS and include impact of new IFRS 15 standard
• The Board of Directors approved a proposal to the shareholders for the General Meeting to pay dividend for 2017 of CZK 17 per share and distribute part of the share premium of CZK 4 per share

"I am glad that our delivered results for the first quarter 2018, which we released today, came in line with our expectation. I am particularly pleased with customers' interest in our packages for families and group of friends, which enable them flexibly bundle mobile services, digital television O2 TV and Internet HD, bringing them also savings. We are also successfully selling in-house developed O2 Smart Box device. It provides not only broadband internet connection, but offers also quality home Wi-Fi coverage. At the same time it represents the most accessible way to smart and secured household," comments Jindřich Fremuth, Chief Executive Officer and the Chairman of the Board of Directors of O2 Czech Republic on the results, and adds: "Thanks to changes in rich data tariffs and continuous uptake in LTE-enabled smartphone sales, the mobile data consumption grew substantially. In the first three months of 2018, our customers generated by 140% more mobile data year on year."

"Inthe first quarter 2018, we recorded continuing pressure on revenue and profitability of our traditional services. Thanks to the investments into new areas we have been able to maintain revenue flat year on year," explains Tomáš Kouřil, company' s Chief Financial Officer and Vice-Chairman of the Board of Directors, and adds: "We will further continue in investments into the areas, which will bring advantages to our customers. We are redesigning all our brand stores across the whole country. There, customers can try and touch latest available technologies, where O2 offers the widest portfolio in the market. In addition, for our customers, we have acquired new exclusive sport content, like UEFA Champions League or domestic ice hockey league," continues Tomáš Kouřil and closes: "At the General Meeting, which will be held on 4 June, we are going to propose to our shareholders the total payment for 2017 of CZK 21 per share."

Operating overview

Mobile segment

As of 31 March 2018, the total number of mobile customers reached 4,954thousand, 0.6% up year-on-year. The number of contract customers increased to 3,472 thousand. At the end of March 2018, they represented 70.1% of the mobile customer base, up by 1.6 percentage point. The number of prepaid customers reached 1,482 thousand.

In the first quarter 2018, O2 recorded continuous customers' demand for O2 Spolu tariff, which brings families, friends and small entrepreneurs flexible bundle of up to 4 SIMs with unlimited voice and SMS, mobile data (3GB to 10 GB per SIM card), digital O2 TV and/or Internet HD in one package. This has helped to increase the number of mobile contracts as well as O2 TV customers. A big data portion included in the tariff together with customers' upsell to rich data tariffs together with growing number of customers with LTE smartphones and increasing number of mobile home broadband internet customers contributed to a 140% mobile data consumption growth year-on-year. The number of mobile internet users went up by one fourth year-on-year to 2,286 thousand.

In O2 network, smartphones penetration reached already close to 65% and 49% of smartphones support LTE technology. 90% of customers with LTE handset have already replaced their SIM card with a new one supporting the technology.

Fixed segment

The number of O2 TV customers provided over O2 fixed line (IPTV) as well as over internet connection from any provider (OTT) reached 243 thousand as at 31 March 2018.
A complementary MULTIservice which enables customers to watch TV on multiple TV sets at once has become very popular. Over 36 thousand customers have already subscribed for this service, thus O2 can show off with close to 280 thousand active set top boxes.

The number of xDSL fixed internet customers reached 718 thousand at the end of March 2018. Thanks to continuous internet speed increase through installation of remote DSLAMs, the share of customers enjoying VDSL technology on total xDSL base has already reached 77%. For households with insufficient internet speeds over xDSL, O2 has been offering for a year an unlimited broadband connection using 4G LTE technology since March. Thanks to the combination of both technologies, O2 covers 99% of all addresses across the Czech Republic.

The total number of fixed voice lines reached 583 thousand as at the end of March 2018.

Slovakia

The number of mobile customers in Slovakia increased by 2.8% year-on-year to 1,944 thousand at the end of March 2018. The number of contract customers grew to 1,141 thousand. Their share in total customer base thus increased already close to 60%.

O2 Slovakia keeps recording increasing demand for its smartphone portfolio. As of 31 March 2018, the smartphone penetration reached 62.7%, LTE smartphone share was at 49.9%. Thanks to the 4G LTE network expansion, growing LTE smartphone penetration a continuous customers' demand for tariffs with higher data limits mobile data consumption went up 72% year-on-year in the first quarter 2018.

Financial overview

Total consolidated operating revenuereached CZK 9,198 million in the first quarter 2018, down 0.3% year-on-year. Operating revenue in the Czech Republic declined by 0.5% to CZK 7,490 million. Mobile operating revenue reported a 2.9% growth to CZK 4,909 million despite a negative impact of the European roaming regulation and continuous decline in voice, SMS and MMS revenue. These were more than compensated by growing mobile data and hardware sales revenue. Fixed business operating revenue declined by 6.4% year-on-year to CZK 2,581 million, as lower revenue from traditional voice and data services was not fully compensated by over 8% growth of O2 TV revenue.

In Slovakia, total operating revenue reached CZK 1,767 million, up 2.2% year-on-year. The year-on-year comparison has been negatively impacted by strengthening CZK against EUR. Thus revenue denominated in euros improved by 8.7% to EUR 70 million. Similarly to the Czech Republic, higher data and hardware sales revenue were the key growth drivers.

Consolidated EBITDA improved by 2.9% year-on-year to CZK2,606 million in the first quarter 2018 thanks to the savings in majority of cost categories. In the Czech Republic, EBITDA grew by 0.7% to CZK 1,984 million, while Slovakia reported a 10.6% increase to CZK 622 million (+17.6% to EUR 24.5 million). Consolidated net profit in the first three months of 2018 improved by 3.4%year-on-year reaching CZK 1,329 million.

2017 shareholder remuneration

The Board of Directors approved the proposal to the shareholders for the General Meeting for 2017 dividend of CZK 17 per share. This represents 98% of net unconsolidated 2017 profit, fully in line with dividend policy to pay out 90% to 110% of the profit. On top of dividend and in line with its earlier communicated intension it will propose distribution of part of share premium in the amount of CZK 4 per share. Overall, it proposes to pay to the shareholders CZK 21 per share before tax, or up to CZK 6.5 billion in total.

The proposed payment date for dividend and share premium distribution is 4 July 2018, those who will be shareholders on 4 June 2018, will be entitled for the payment. This proposal will be a subject of the voting at the General Meeting, which will be held on 4 June 2018.

KEY FINANCIAL AND OPERATING INDICATORS

Financial indicators for the Group

Operating indicators - Czech Republic

Operating indicators - Slovakia