O2: Telefónica subsidiary is struggling with problems in Germany

O2's sales fell further in the current quarter and profits also fell sharply. The company wants to turn things around in the coming year – with new partnerships.

Things continue to decline at the telecommunications provider O2 Telefónica. As the German subsidiary of the Spanish group Telefónica announced, sales fell by 2.9 percent to around 1.9 billion euros in the third quarter. The decline was significantly more moderate than in the second quarter, when revenues fell by 11.1 percent.

However, there is no end to the decline in sight, because the business became less profitable: Earnings before interest, taxes, depreciation and amortization (Ebitda) fell by 9.9 percent to around 0.6 billion euros - in the previous quarter the loss was lower at 7.2 percent.

The company attributed the deep skid marks to increased marketing expenses and special effects in the same quarter of the previous year: at that time, savings effects had strengthened the operating result; these savings effects currently do not exist.

O2's most important business division is the mobile communications business. The company reported some slightly positive news here: the number of mobile contract customers rose by 49,000, more than in the second quarter (30,000).

Compared to Vodafone, O2 is doing well here; its competitor only recorded an increase of 10,000 mobile contract customers. However, Deutsche Telekom announced an increase of 322,000 - this shows that the Magenta Group is well ahead of the competition.

Germany's mobile phone market is considered saturated, and the number of cell phone users is no longer increasing or is barely increasing. The fact that all three established network operators are still reporting growth figures is largely due to the increased use of additional devices – such as a SIM card for a tablet or a smartwatch.

A mobile phone contract customer means an activated SIM card for which a minimum amount is paid every month. One can also speak of connections.

O2 is also recording an upward trend in its landline business, and the number of customer connections is increasing. However, the landline segment only plays a secondary role for mobile operators.

O2 is under pressure - the company is cutting jobs heavily to reduce costs. One reason for the difficult situation is the loss of the major customer 1&1 last year, which means that important rental income is missing. 1&1 has switched to Vodafone.

This year, 1,100 jobs are to be eliminated at O2 Telefónica, which means around one in six jobs. The number of shops is to be reduced by 60, most recently it was around 250. The company said that they have come a long way with this restructuring program. Next year, more jobs will be eliminated in customer service and sales.

“We are making Telefónica Deutschland more efficient and more efficient,” said CFO Markus Rolle. The first successes of the transformation would become visible. “But we haven’t reached our goal yet: with strict cost management and based on our stable financial position, we want to get back to profitable growth over the next year.”

In 2027, new O2 partnerships will be reflected in the financial figures. The Munich company now also allows the new mobile phone provider Simsalasim and the financial service provider Revolut onto its mobile phone network and receives rental income in return - this is also why sales are expected to develop positively over the next year.