Profits tumble 18pc at Orange/T-Mobile JV

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Regulatory impact hits Everything Everywhere’s revenue and profits hard, although customer numbers grow on lower acquisition costs

Orange UK and T-Mobile UK have, as joint venture Everything Everywhere, seen revenue fall 4.8 per cent, profit 18.5 per cent and profit margin three per cent in the second quarter of 2010, compared with the year-ago period.

Everything Everywhere posted revenue of £1.721 billion in the period, compared with £1.808 a year ago. EBITDA was down 18.5 per cent to £309 million, from £379 million, and EBITDA margin was 18 per cent, down from 21 per cent.

In profit terms, the gap to market-leader O2 UK has grown, with O2 claiming profit of £410 million for the second quarter, a jump for it of around £43 million. O2’s Q2 revenue was £1.521 billion, a way short of Everything Everywhere, but its margin was 26.4 per cent.

A major part of the reduction in revenue is down to the cut to mobile termination rates, the inter-network charges between operators for terminating calls on others’ networks, as well as other regulatory intervention, the company remarked. It said like-for-like revenue was up one per cent, in fact.

At the same time, Orange continued its aggressive acquisition of contract customers. Combined with T-Mobile activity on contract, the company added 267,000 customers in the period, a jump of 84 per cent.

Prepay customer losses, meanwhile, numbered 195,000, from 147,000 in the year-ago quarter. The fall in prepay figures suggests a slowdown in T-Mobile’s acquisition activity as a standalone business ahead of the merger, when it was pushing strongly on low-cost customer acquisitions.

Everything Everywhere’s total base stood at 27.931 million at the end of the second quarter, up 8.6 per cent from 27.025 million for the two separate units a year ago. In customer terms, it has consolidated its position as UK number one, with O2 claiming 20.7 million customers at the end of the second quarter.

Its consolidated monthly churn was 1.4 per cent, down from 1.7 per cent a year ago.

But Everything Everywhere showed improved customer acquisition costs, the fees paid out in handset subsidies and third-party sales commissions for acquiring new customers. Acquisition cost on contract was £148 per customer in the quarter, down from £152. For prepay, it was just £14, down from £28 per customer in the quarter in 2009. Per gross addition, it was £55, down 18.3 per cent.