Spanish telecoms giant Telefónica SA said it is still considering an initial public offering for its U.K. mobile-phone unit O2 as competition in the British market heats up.

"The IPO is still an option … we are preparing the asset as we speak," Telefónica Chairman and CEO José María Álvarez-Pallete told analysts during a Feb. 22 earnings call.

Telefónica considered floating O2 last year as a means of driving down debt after the European Commission quashed the proposed £10.3 billion sale of O2 to Hong Kong's Hutchison Whampoa in 2016.

However, uncertainty over O2's ability to acquire more airwaves, as a result of legal challenges from BT Group and Three, put Telefónica's plans on hold. U.K. watchdog Ofcom is set to hold the auction in April.

"The operational performance of the [U.K.] company during 2017 has been just outstanding," Álvarez-Pallete said, adding that "as soon as we are clear out of the spectrum auction, we will explore … the possibility of the IPO."

Earlier this year, analysts warned that the future would be far from certain for O2 and other stand-alone mobile-only players in Britain, as the market is rapidly moving toward multiplay services.

Facing stiff competition from BT Group's EE and global powerhouse Vodafone Group Plc,, as well as mobile virtual network operators such as Liberty Global plc's Virgin Mobile and Sky plc, O2 and Three — Britain's No. 3 and No. 4 players — are left vulnerable by their lack of fixed assets in a market focused on multiplay services.

Aside from BT's 32.6% share of the broadband market and a 43.5% of the fixed-line market, according to second-quarter figures from watchdog Ofcom, the group also holds a 29% share of the mobile market, following its £12.5 billion takeover of EE, the U.K.'s largest provider of mobile services. This means that BT holds 45% of all usable mobile spectrum in Britain while Vodafone, O2 and Three own around 28%, 15% and 12%, respectively.

Despite fierce competition in the market, O2 did outperform expectations.

From a customer loyalty standpoint, Álvarez-Pallete said having the lowest churn made O2 the "best mobile asset" in the country. He added this would put it a strong position to benefit from any "window of opportunity" in the public markets.

Revenue at Telefónica's U.K. operations was up 3.2% year over year to €1.73 billion for the quarter ended December 2017, with full year revenue up 2.2% year over year to €6.54 billion.

Operating income before depreciation and amortization, or OIBDA, for the quarter returned to growth as a result of the improved revenue performance, growing 3.7% to €377 million, with full-year OIBDA up 0.7% to €1.64 billion.

Overall, Telefónica managed to reduce its net debt by €4.4 billion to €44.23 billion. Annual revenue was up 3.4% in 2017 to €52.01 billion, against a 4.8% rise in quarterly revenue to €13.16 billion. OIBDA reached €16.19 billion in 2017, up 5.3%, while quarterly OIBDA grew 9.2%.

The company's share price was trading 3.16% higher at €7.89 on Feb. 22, 2018, at 8:25 a.m ET.