EE suffers revenue decline in Q1 despite head start with LTE

UK operator EE said it signed up 318,000 LTE customers during its first five months of offering the service, but the company still reported a decline both in its overall subscriber base and service revenue in the first quarter of the year.

In a statement on its first-quarter results, the UK's first provider of LTE services revealed LTE subscriber figures for the first time, and said it was on track to achieving its goal of 1 million LTE users by the end of 2013. CEO Olaf Swantee also said on a conference call that "in the next couple of days we will even pass the 400,000 mark, so we have strong uptake," according to Bloomberg.

However, underlying service revenue declined by 0.4 per cent, which the company blamed on macroeconomic and competitive pressures, and service revenue dropped 5.4 per cent year-over-year to £1.42 billion (€1.66 billion).

EE said it gained a net 166,000 postpaid customers in the quarter, meaning that 53 per cent of its customers are now on postpaid plans. At the same time, it said prepaid customers fell by 571,000, leading to a net decline in overall subscriber numbers for the company as a whole. Rethink Wireless said the company ended the quarter with 26.44 million subscribers, down 2.9 per cent from the year-ago quarter.

Meanwhile, EE emphasised that postpaid plans deliver five times higher ARPU than prepaid, and said underlying blended mobile ARPU grew by 2.2 per cent in the first quarter.

The news received a muted response from analysts, who noted that the 318,000 figure was underwhelming given the operator's head start on marketing LTE services under the "4GEE" brand.

"The 4G number is a bit disappointing and the service revenue decline at 5.4 per cent is a pretty significant deterioration," Espirito Santo analyst Nick Brown told Reuters.

EE also noted that more than 1,600 medium and large companies are using its LTE network, which it said would cover 55 per cent of the UK population by the end of June and 70 per cent by the end of the year.

"Today's results are in-line with our expectations, and we are making good progress focusing on high-value segments," EE CFO Neal Milsom said in a statement. Milsom added that the company expects to strengthen its position in the year ahead as its LTE rollout continues and it introduces double-speed LTE services, as it revealed earlier this month.

EE continues to maintain three brands in the UK, along with Orange UK and T-Mobile UK, although it faces persistent rumours that it will eventually phase out the two older brands. EE's parent companies Deutsche Telekom and France Telecom have also previously said they have considered selling their shares in EE, although Bloomberg quoted Swantee as saying that the parent companies have not provided an update on their plans for the business.

For more:
- see this release
- see this Bloomberg article
- see this Reuters article
- see this Rethink Wireless article

Related Articles:
EE aims to boost 4G speeds as UK rivals prep LTE networks
3 UK unfazed by LTE deployment race, adds 900K subs in 2012
Analysts: UK operators underpaid for LTE spectrum, for a variety of reasons
3 UK casts doubt on keeping unlimited data plans for LTE
EE exploits LTE leadership with higher prices
LTE's early benefits hindered by obstacles, according to Economist study

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