EE says LTE subscriber base doubled in first half of 2014

UK-based mobile operator EE doubled its LTE subscriber base to 4.2 million in the first half of 2014, and said it remains on track to meet its target of 6 million LTE subscribers by the end of the year.

This means that the company, which is jointly owned by Orange Group and Deutsche Telekom, continues to maintain a strong lead on the UK LTE market: Vodafone UK reported that it had 0.9 million LTE users by the end of June, although the group as a whole had 6.7 million LTE subscribers across Europe.

EE said it gained 1.3 million LTE users in the second quarter alone, and claimed this was "the best quarterly 4G performance ever by a European operator". After saying in May that sales of LTE contracts exceeded 3G contract sales for the first time, the company noted that 72 per cent of new postpaid customers selected LTE in the first six months of 2014.

The company still sells 3G plans under the Orange UK and T-Mobile UK brands, but those two operators have now been absorbed into the online and high street retail presence under the EE brand.

The growing LTE subscriber base indicates that EE continues to benefit from its head start on the UK LTE market over rivals Vodafone UK, 3 UK and O2 UK. The operator has also steadily reinforced its "4GEE" message with so-called "double-speed" LTE services, high inclusive data allowances of up to 50 GB and data sharing among several devices. It also allows mobile plans to be bundled together with home broadband plans at a discount.

The company has also recently launched a range of more affordable new products that it hopes will spread its services to a broader market, including the Kestrel smartphone, the Eagle tablet, the Osprey 4G WiFi hotspot and the Buzzard 4G WiFi hotspot for cars.

Nonetheless, despite this strong LTE growth the company's operating revenue growth remained fairly muted, indicating the commercial, economic and regulatory challenges that still prevail in the UK market.

Jefferies analysts noted that second-quarter figures show a slight slowdown of momentum, but said the bigger picture is that EE continued to make progress with its strategy of product differentiation through leadership in LTE.

Turnover in the first half of the year was down 3 per cent compared to the previous year, reaching £3.1 billion (€3.9 billion/$5.2 billion). Operating revenue declined by 1.3 per cent to £2.99 billion.

Adjusted EBITDA grew by 1.9 per cent to £760 million, while the EBITDA margin improved by 1.2 percentage points to 24.4 per cent. EE noted that improving its EBITDA margin has been a strong focus, and said it reduced its indirect cost base by 6.7 per cent in the first half of the year.

Meanwhile Orange CFO Gervais Pellissier said in June that an IPO remains the preferred option for EE. He said the two parent companies will re-evaluate the pros and cons of such a move after the summer.

According to Jefferies analysts, "a sell-down (possibly via an IPO) in early 2015 would be seriously considered" by EE's owners.

For more:
- see EE's results statements here

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