EE exploits LTE leadership with higher prices

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EE will become first UK operator to launch its LTE service when it lights up its 1800 MHz network Oct. 30 with coverage in 10 UK cities. The company aims to cover 20 million people by Christmas.

Click here for details on EE's LTE pricing.

The new service will cost 10 to 20 per cent more than EE's 3G service, albeit with the promise of delivering downlink speeds that are five times faster. EE's rivals are restricted from launching LTE until the middle of next year because they lack the spectrum to do so, though forthcoming spectrum auctions will level the playing field in the UK.

Despite the price hike, the company is confident its LTE offering will attract new subscribers. The cheapest LTE tariff plan for consumers will be £36 ($57.62) per month on a two-year contract, with 500 MB and Wi-Fi, plus unlimited voice and texts. Prices range up from there to include plans that offer 1 GB of data for £41 per month, 3 GB for £46, 5 GB for £51 and 8 GB for £56. All of the smartphone plans comes with unlimited voice and texts. 

EE plans to launch a multimillion-pound advertising campaign for the new LTE service featuring actor Kevin Bacon. The TV campaign will begin during the program "X-Factor" on Nov. 3

Of note, unlike on the 3G network, EE has dropped free smartphones for new LTE subscribers on a two-year contract, because "fraud rates dramatically decrease if you've got an upfront price on it," Pippa Dunn, CMO for EE's consumer business, told Dow Jones Newswires.

Dunn said she expects "quite a large proportion of our own customers deciding that they want to come across," but is looking to attract subscribers from other networks given their inability to compete. "I also believe that we have something which is truly differentiated in the market," she said.

"The pricing positions the brand very much at the high-end of the customer spectrum, but the premium to legacy services isn't as high as those seen elsewhere," Steven Hartley, an analyst at Ovum, said in a statement. "This suggests that aggressive targeting of its rivals' most valuable customers awaits."

EE CEO Olaf Santee told reporters that the operator should generate considerable interest with the launch of LTE in 10 cities. "We expect a strong penetration of EE into the business market and anticipate a lot of consumers in the metropolitan areas to move to LTE," he said, according to Reuters.

Coinciding with the LTE announcement, EE said it added 250,000 new postpaid customers in the third quarter, and that data traffic was nearly on a par with voice.

EE CFO Neal Milsom said: "Now 48 per cent of the ARPU revenues are data and messaging. So, it is a step change in our business from a voice business to a data driven business."

Analysts at investment bank Jefferies said EE appeared to be growing its market share of the contract market, driven by the aggressive promotion of smartphones. "The newly announced 4G strategy is only likely to reinforce that momentum and make it more challenging for Vodafone and O2 to hold onto customers," they said, according to Reuters.

However, EE said in a statement that service revenue for the quarter, including the impact of regulatory cuts, fell 3.0 per cent to £1.5 billion ($2.4 billion). The operator's churn rate was 1.2 per cent, while its total customer base fell 2.1 per cent to 26.9 million after it lost 393,000 prepaid customers.

For more:
- see this EE release
- see this separate EE release
- see this Ovum release
- see this Dow Jones Newswires article
- see this Reuters article
- see this Bloomberg article

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CCS Insight: Everything Everywhere bets on 1800 MHz LTE, but for how long?
Vodafone, O2 UK and 3 UK to speed up LTE launches following 'peace talks'
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