EE increases LTE users to 5.6M, reports flat revenue growth

EE saw the number of its LTE subscribers increase by 1.4 million to 5.6 million in the third quarter of 2014, although it reported flat operating revenue of £1.5 billion (€1.9 billion/$2.4 billion). Including the impact of regulatory cuts, operating revenue was 1.2 per cent lower.

The UK operator, which is jointly owned by Orange and Deutsche Telekom, also reported slower growth in mobile average revenue per user (ARPU), which increased by 1.6 per cent year-on-year excluding regulatory effects after 2.7 per cent growth in the second quarter.

According to Jefferies analysts, this slow-down in mobile ARPU growth mostly reflects exposure to a prepaid customer base, although this exposure is now much diminished.

Indeed, EE saw an improvement in its overall customer mix in the third quarter, with a net increase of 119,000 postpaid mobile customers (excluding M2M). That growth means that 60.3 per cent of EE customers are now on postpaid plans, generating an average of six times higher ARPU than prepaid customers.

EE CFO Neal Milsom insisted that the company is delivering consistent underlying performance despite facing a highly competitive environment and significant regulatory pressure.

Jefferies analysts were certainly impressed by EE's LTE momentum, noting that the third-quarter results were in line with the core objective of the operator's owners to demonstrate that it "can leverage a leading position into (modest) revenue market share gains while at the same time expanding margins."

Jefferies noted that evidence of progress on margins would not be apparent until the full-year and fourth-quarter results, however.

The third-quarter results also did not include information on any planned job cuts, which were widely reported this week: citing an EE spokesman, the Financial Times said around 350 jobs would be lost primarily at the former T-Mobile UK base in Hatfield. According to Reuters, CEO Olaf Swantee said the cuts would affect a maximum of 380 employees.

A spokesperson for EE did not comment on any figures, but said in comments emailed to FierceWireless:Europe: "As part of our strategy to expand UK-based customer service teams, and reach our goal of being number one for service, we need to make changes to our company structure. Consequently we're proposing changes to some of our corporate functions. We appreciate this will be a difficult time for the staff affected and will support them through this period in any way we can."

The company also did not comment on reports that its two parent companies have resumed talks on a possible flotation or sale in 2015.

EE did continue to emphasise the positive aspects of its network development and LTE subscriber base, saying it now has the biggest LTE base of any operator in Europe and is on track to exceed its target of 6 million LTE customers by the end of 2014. The total customer base including 3G, MVNO and fixed broadband customers was unchanged year-on-year at 31 million.

The company's LTE network now covers more than 75 per cent of the population, with so-called "double-speed 4G" available in 40 cities. EE added that over 82 per cent of new postpaid customers selected LTE, of which a third opted for the double speed 4GEE Extra plans.

The company's fixed broadband business saw a 20 per cent increase in revenue year-on-year, meanwhile, with 18,000 new customers. Fixed broadband is set to become a stronger focus for the company in the final quarter of this year following the introduction of EE TV, a set-top box service designed to attract new broadband customers and help EE better compete with fixed rivals that focus on the home.

In terms of network investment, EE completes its three-year £1.5 billion network investment programme in 2014 after investing £275 million each year from 2012 to 2014 to focus on voice coverage. The company said this programme has now provided some clear results: in August, Ofcom said EE had the highest call success rate across the UK at 97 per cent and was also best in rural areas, with 93.7 per cent success rate.

EE also reiterated that it was ranked number one in the latest RootMetrics study for overall network reliability in the first half of 2014.

For more:
- see EE's Q3 2014 results statement
- see this Financial Times article
- see this Reuters in-brief article

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