T-Mobile is to make significant cuts to UK operational expenditure in administration, advertising and technology, as it prepares to unveil a new UK managing director.
T-Mobile, expected to announce former Orange Romania chief executive Richard Moat as former UK boss Jim Hyde’ replacement, will focus 3G services and customer service to drive out profitability in the UK.
In the first quarter, T-Mobile UK recorded a drop in revenues of around 21 per cent due to the fall in the value of sterling. ARPU was also down in the UK. Acquisition costs were up, meanwhile, as it signed 53,000 net contract additions (19,000 more than in the same period last year).
It said a sharp drop in roaming revenues from visitors to the UK, as a result of the global economic situation, also had a “significant impact”.
T-Mobile parent Deutsche Telekom has lowered its 2009 EBITDA forecast for the Group by between two and four per cent on the back of tough economic and trading environments.
Its revised forecast for free cashflow for 2009 is now €6.4 billion.
Deutsche Telekom said T-Mobile in the UK and the US were hit hardest by the conomic slowdown, with sterling undermined by a sliding exchange rate.
It said in a statement: “Various cost-cutting measures being planned at T Mobile UK, particularly in the areas of administration, advertising and technology.
“The main task of the new management team is to strictly focus on repositioning the business in the difficult economic environment.
“The focal points will include turning the best 3G network in the UK into a greater operating success. In addition, prepay and contract customer services are to be improved, for example, by extending SIM-only offers.”
In the US, T-Mobile revenue increased by 20 per cent to €4.1 billion and adjusted EBITDA grew by 10 per cent to €1.1 billion thanks to the strength of the dollar against the euro.
In like-for-like monetary terms, however, EBITDA was down four per cent as the number of call minutes decreased by eight per cent in the quarter and roaming revenue was also hit.
T-Mobile USA also experienced a huge migration from contract to prepay, with 60 per cent of T-Mobile USA’s total base now on prepay (compared with 25 per cent in the same quarter last year). The US operation was also hit by 3G network costs.
Meanwhile, Deutsche Telekom recorded better than expected business developments in Germany, where T-Home achieved the highest market share of new DSL business since 2005 and T-Mobile Deutschland stabilised its revenue and EBITDA further. T-Systems also increased its contribution to results.
Deutsche Telekom chief financial ffficer Timotheus Höttges said: “We are currently in difficult times for rapid, comprehensive and clear communication. For that reason, we have decided to inform our shareholders as early as possible.”