EE revenues up but profits down

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MTR rate cut bites but operator hails shift to postpaid and T-Mobile and Orange merge progress including the decommissioning of 1,390 masts

Everything Everywhere (EE) posted strong underlying revenue growth excluding regulation of 3.1 per cent for the first half of 2012 to £2.99 billion as the shift to smartphones increased usage and drove up the proportion of customers on postpaid contracts.

However, the mobile termination rate cuts continued to cause problems, causing a 1.1 per cent fall in actual service revenues and contributing to a 1.3 per cent fall in earnings to £673 million for the six months ending June.

EBITDA margin at the operator remained stable at 20.3 per cent. EE said it had invested 1.9 percentage points of margin in customer retention after a 9 per cent year-on-year increase in contract renewals.

EE added 150,000 net postpaid customers across the T-Mobile and Orange brands it runs during Q2, but lost 313,000 prepay customers.

EE said the changes were in line with industry trends. The firm says it now has 50 per cent of customers on postpaid contracts.Churn was broadly steady at 1.2 per cent.

In addition, EE said 91 per cent of new postpaid contract customers were opting for a smartphone, and total postpaid smartphone penetration was up to 72 per cent.

EE said that it is ahead of schedule generating savings from the merging of the T-Mobile and Orange brands.

The firm said it had turned off 1,390 mobile masts in the first half of the year, and it plans to accelerate the merging of networks in the second half of this year.

EE also said it has successfully reduced head office space by 38 per cent and combined its supply chain and warehousing operation across the Orange and T-Mobile brands.

The firm is also planning to close 30 retail outlets where it has an overlapping presence.

EE said it had already saved £316 million this year, 71 per cent of its £445 million target for the year, and was still on target to achieve £3.5 billion in synergy savings from the merger by 2014.

EE CEO Olaf Swantee (pictured) said: “In the first half, we delivered a solid commercial performance, with good underlying revenue growth.

“We are making strong progress integrating the legacy Orange and T-Mobile businesses to create cost efficiencies and deliver planned synergy targets, while investing in significant network upgrades to further improve our customer experience.”

EE said that its bond issuance programme raised €500 million in January and £450million in March. The firm paid £543 million in dividends to shareholders in the first half of the year. 

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