Telefonica O2 Czech Republic, a.s. : Telefónica strengthened its position on the market in Q1…

• Number of mobile customers grew by 2.2 % year-on-year
• The company added 43,100 contract customers and 35,600 prepaid customers
• Smartphone penetration in the O2 network keeps growing, as does the number of xDSL customers
• Telefónica announced its cooperation with Tesco to launch Tesco Mobile virtual network operator and launched its own revolutionary FREE tariffs
• Frequency spectrum auction conditions unacceptable for Telefónica Czech Republic in their current form

Telefónica Czech Republic announces its financial and operational results for Q1 2013. Despite strong competitive pressure, the company has succeeded in improving its position on the market, with its number of mobile customers growing by 78,700.

An increase was also recorded in smartphone penetration in the O2 network, which reached 29% (compared to 27 % in the fourth quarter of 2012). Interest in mobile internet grew as well. The company responded to the demand for internet in handset by raising data plans in select tariffs as well as by increasing download speeds to up to 200 kbit/s after the limit is spent.

The fixed network business also recorded good results with the number of xDSL internet access users increasing by 4,3% to 921,000 year-on-year. As many as 72% of the users who live in areas covered by VDSL technology already use this high-speed broadband. The number of O2 TV users reached 141,000, a 2.1% increase year-on-year.

Telefónica Czech Republic continued in bringing the most innovative products and technologies to the market. In March, the company announced that it will, in cooperation with Tesco, lauch a new MVNO called Tesco Mobile. The new virtual network operator, due to start offering its services in Q2, intends to bring more competition and choice to the market.

In the middle of May, Telefónica Czech Republic launched a price revolution by introducing its new FREE tariffs. These simple and transparent tariff plans offer unlimited calls and texts in each plan, with data included in the higher tariffs. The company holds that a simple tariff structure will help it in acquiring new customers as well as in simplifying its operation and achieving cost reductions.

The company further announced that it will continue rolling out its 4G LTE coverage nothwithstanding the proceedings of the announced spectrum auction. The company plans to invest up to CZK 6 billion in 2013, mainly into new technologies and LTE.

The Czech Telecommunications Office decided to cancel the auction for spectrum in the 800, 1,800 and 2,600 MHz bands. Telefónica finds the conditions for the new auction, that are currently subject to public consultation, unacceptable. For an unknown reason, the conditions provide an advantage to one of the bidders and do not respect the proceedings of the previous auction. The previous auction has clearly shown that four strong players were bidding for the frequencies, therefore any advantage for one of them is unsubstantiated.

Telefónica Czech Republic will endeavor to achieve the cancellation of the discriminatory conditions. If the conditions are not balanced, the company will consider not participating in the auction and will defend its business interests and its shareholders' investments using all available means.

Consolidated business revenues decreased in 4.4% year-on-year, reaching CZK 11.902 billion. Excluding the MTR cut impact they would decline 2.3% year-on-year, a lower decline compared to Q4 2012 (-2.7% year-on-year ), largely due to better year-on-year performance in mobile operating revenues.

Guided Operating income before depreciation and amortization (OIBDA) reached CZK 4,346 million in Q1 2013, down 13.9% year-on-year. The year on year performance has been impacted by positive impact of the CZK 220 million gain from sale of non-core assets in Q1 2012 (80% stake in Informa