Annual report (20-F) - Ono

A. Operating Results
Overview
We are a leading provider of integrated telephony, broadband Internet, and cable television
services to residential and business customers in Spain. We commenced operations in 1998 and, since that
time, have pursued a strategy of rapid penetration generating multiple revenue streams to grow our
business. As of December 31, 2004, we had 676,858 residential customers and 17,369 primarily small
and medium-sized business customers. During the year ended December 31, 2004, we generated revenue
of €443.4 million and EBITDA of €172.4 million, resulting in an EBITDA margin of 38.9%. During the
three months ended December 31, 2004, we generated revenue of €119.3 million and EBITDA of
€46.3 million, resulting in an EBITDA margin of 38.8%.
Our 862 megahertz hybrid fiber coaxial network provides a high speed, high capacity, two-way
communications pathway with direct access to our customers. As of December 31, 2004 our backbone
network extended 7,575 route kilometers and our local networks extended 8,214 route kilometers, passing
almost over 2.3 million homes. Our current addressable market is 5.6 million homes and 0.7 million
businesses, representing approximately 27% of the 20.8 million homes and 25% of the 2.8 million
businesses in Spain. We believe our franchise areas, especially those in our Mediterranean cluster, are
growing rapidly both in the number of homes constructed each year and in gross domestic product per
capita. We are continuing to expand our network in areas with attractive revenue potential.
Factors Affecting Our Business
Our residential services accounted for 91.2% of our total revenues for the year ended
December 31, 2004. Business services accounted for the remaining 8.8% of our total revenues for the
year ended December 31, 2004.
The following table sets forth certain information with respect to our network and services and
the percentage change from period to period for each of the periods indicated.
As of and for the Year Ended
December 31,
Percentage Change
2002 2003 2004 2002/2003 2003/2004
Residential:
Homes passed 1,760,744 2,003,233 2,285,439 13.8% 14.1%
Homes released to marketing 1,469,061 1,743,266 2,038,172 18.7% 16.9%
Percentage of homes passed 83.4% 87.0% 89.2%
Penetration 32.7% 33.3% 33.2%
Customers 480,296 581,345 676,858 21.0% 16.4%
ARPU (in euro)(1) 50.7 54.1 54.6 6.7% 0.9%
RGUs(2) 887,504 1,082,715 1,263,260
RGUs per customers 1.85 1.86 1.87
Churn(3) 12.1% 13.6% 16.1%
Revenue (in euro millions) 234.5 329.4 404.4 40.4% 22.8%
Business & Other:
Customers 8,648 13,133 17,369 51.9% 32.3%
ARPU (in euro)(1) 205.0 229.0 210.0 11.7% (8.3)%
Revenue (in euro millions) 19.0 29.2 38.9 54.2% 33.2%
(1) ARPU is the monthly ARPU for the fourth quarter in each of the periods presented in the table.
For a definition of ARPU see “Certain Operational Definitions.”
(2) RGUs are revenue generating units where each customer is counted as a revenue generating unit
for each service for which such customer subscribes. See “Certain Operational Definitions.”
(3) Churn is a measure of the number of customers who stop using our services. For a definition of
churn see “Certain Operational Definitions.”
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