O2 Czech Republic : January to June 2017 Financial Results – Press release (28 July 2017)

Press release

28 July 2017

• Consolidatedrevenue reached CZK 18.5 billion, up 1.4%. Higher revenue from O2 TV,mobile data and Slovakia continued to be the key growth drivers

• Net profit grew by 3% to CZK 2.6 billion in the first half 2017, operating profit EBITDA increased slightly to CZK 5.1 billion.
• O2 newly offers O2 Spolu (O2 Together) tariff, which as the first in the market brings families, friends and small entrepreneurs flexible bundle of up to 4 SIMs with unlimited voice and SMS, mobile data and digital TV in one package
• Following the recent auction of 3.7 GHz spectrum O2 keeps the most spectrum among all operators suitable for further development of WTTx and 5G
• Number of mobile contract customers in the Czech Republic grew by 68 thousand year-on-year, by close to 90 thousand in Slovakia.

O2 Czech Republic today reports its unaudited operating and financial results for the first half 2017. Consolidated figures include results of all daughter companies.

"I am pleased that our broadband home internet offer, which is available to 99% households in the country, is well accepted among our customers" comments Tomáš Budník, Chief Executive Officer and the Chairman of the Board of Directors of O2 Czech Republic on the results, and adds: "In the second half, we will intensify investments into our own network expansion in Slovakia aiming to reduce dependency on national roaming and consequently improve our future profitability. In addition we will continue in 4G network rollout in order to satisfy increasing customers' demand for mobile data. "

"Financial services were the fastest growing area in the first half of 2017. Revenue in this area reached close to CZK 80 million, confirming our successful proposition. In the second half, we will support instalment handsets sales in Slovakia by additional working capital funding," amends Tomáš Kouřil, company's Chief Financial Officer and Vice-Chairman of the Board of Directors, and continues: "We manage to extend period we can use O2 brand by another three years until January 2022. We will continue to be a member of the Telefónica Group's partnership program. In connection with this extension, we have to pay a prepayment of about CZK 900 million by the end of this year."

O2 Czech Republic a.s. Za Brumlovkou 266/2 Praha 4

140 22

T +420 271 462 076

http://www.o2.cz/spolecnost/en/investor-relations/ investor_relations@o2.cz

In line with its strategy focused on package offering for smaller customer groups, since May 2017, O2 as the only operator in the market has been selling O2 Spolu tariff, which offers families, groups of friends and small entrepreneurs a flexible combination of up to four SIM cards with unlimited calling and SMS, mobile data package (3 to 10 GB per SIM card) and digital TV in one package. Within a few weeks from the launch this tariff has become very popular among the customers.

As of 30 June 2017, total number of mobile customers reached 4.903 million, up by 0.1% year- on-year. The number of contract customers increased by 2.1% year-on-year reaching 3.366 million. They represented already 68.7% of the mobile customer base, up by 1.3 percentage point. Number of prepaid customers reached 1.537 million.

Helped by broadband network rollout and tariff proposition with increased data package mobile data traffic increased more than by 80%. Number of internet in handset service went up by one third year-on-year to 2.222 million.

Already close to 60% of handsets in O2 network is a smartphone and 39% of them supports LTE technology. Number of customers with LTE smartphone and with USIM card, which supports the new technology, reached close to 990 thousand at the end of June.

Thousands of viewers also enjoyed watching O2 TV Sport with a 24 hours access. For CZK 69 fee they gain an access to the most attractive sporting events. O2 TV Sport for a day can also subscribed anyone at the O2 TV Free channel, which is available in terrestrial broadcasting via HbbTV application.

Number of xDSL fixed internet customers reached 752 thousand at the end of June 2017. Thanks to internet speed increase through installation of remote DSLAMs, the share of customers enjoying VDSL technology on total xDSL base reached already close to 70%. For

households with insufficient internet speeds over xDSL, O2 has been offering an unlimited 4G LTE wireless connection since March. Combining both technologies, O2 covers 99% of all addresses in the Czech Republic. And customers like and demand Home Internet, which is confirmed by fact, that at the end of the first half, over 770 thousand of them subscribed for this service.

Total number of fixed voice lines reached 654 thousand at the end of June 2017.

Number of mobile customers in Slovakia increased by 3.5% year-on-year to 1.903 million, of which contract base grew 8.5% to 1.108 million. Their share in total base increased by

2.7 percentage point to 58.2%.

up 1.4% year-on-year. Operating revenue in the Czech Republic totalled CZK 15.135 billion, representing a 0.2% year on year growth. Fixed business operating revenue declined by 5.3% year-on-year to CZK 5.350 billion, and O2 TV revenue with 11.4% growth remain the key growth area. Mobile operating revenue reported a 3.5% growth to CZK 9.785 billion. The year on year decline of voice and SMS/MMS revenue slowed down and was more than compensated by mobile data and hardware revenue uptake. Financial services (hardware & travel insurance, electronic sales recording solutions) were the fastest growing business, with overall revenue of CZK 76 million in the first half of 2017.

In Slovakia, revenue reached CZK 3.466 billion, up 8.0% year-on-year. Revenue denominated

in euros improved by 9.1% to EUR 129 million. Similarly to the Czech Republic, higher data and hardware revenue were the key drivers.

1.131 billion. Net profit improved by 3.2% year-on-year reaching CZK 2.632 billion.

O2 Czech Republic extended the O2 brand license period for an already agreed fee by another three years on top of current period ending January 27, 2019, i.e. newly till January 27, 2022. Moreover, it extended the Partnership agreement with Telefónica till the same date. Furthermore, the Company will be entitled to extend the O2 brand license by another five years, i.e. until January 27, 2027, while the total price for the O2 brand will be reduced. A prepayment of about CZK 900 million, which the Company has to make by 2017 year end, is the condition for O2 brand license and Partnership agreement extension until January 27, 2022.

KEY FINANCIAL AND OPERATING INDICATORS

Financial indicators for the Group

Operating indicators - Czech Republic