MmO2 rings up its first profit

By NICK GOODWAY FOR MAILONLINE
Updated:

 

MOBILE phones operator mmO2 has made its first-ever pre-tax profit since it was created and then spun out of BT.

But shareholders will have to sit tight for a further six months to learn how much of its newly found earnings are likely to be paid out to them in the form of dividends.

Outgoing chairman David Varney, who will oversee the merger of the Inland Revenue and Customs and Excise, said: 'At the time of the demerger [November 2001] it was expected all available cash from operations would be used to finance the devlopment and growth of the business.

'The company did not anticipate paying dividends in the forseeable future. As the visibility of the future financial profitability of the group becomes clear, it is time to review distribution policy. We will update shareholders with our interim results in November.'

Analysts believe that mmO2 could afford to pay a dividend of 5p a share within two years.

In the year to end-March, it achieved maiden earnings of 1.9p a share as pre-tax profits came in higher than expectations at £95m. In the previous year the group made a massive loss of £10.2bn after it took a £8.3bn write-down, largely on extricating itself from Holland and cutting the value of third-generation licences.

Turnover soared by 22% to £5.65bn with a 14% rise in the number of customers to 20.7m.

At the operating level, the group swung from losses of £18m to profits of £435m. Net debt came down by another £183m to £366m.

In the UK, O2 added another 10% to take its customer base to 13.3m, but with average revenues per user also rising by 10% to £272 a year, total revenues grew by 16% to £3.18bn.

Airwave, the emergency services radio/phone system, turned in its first profit before interest, tax and depreciation of just £1m. It is now in use with 35 of the country's 53 police forces.

Germany's O2 increased its customer base by a quarter to 5.98m and revenues grew by 32%.

Chief executive Peter Erskine said: 'We are about two years ahead of where we forecast we would be at the time of the demerger. Even when we do pay a dividend we won't change the type of company that we are and still expect to show good growth.

'The coming year will be tougher in the UK because of some regulatory changes. We also don't expect third generation services to become a mass market until late in 2005, although we will launch it later this year.'

He said that after this year's rejected takeover approach from Holland's KPN there were no further talks with potential predators.

Another former BT business, directories group Yell, today beat forecasts made during last summer's flotation with turnover up by 6.5% to £1.19bn and a swing from post-tax losses of £25.5m to a profit of £60.2m before exceptional charges.

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