The merger of Orange UK and T-Mobile UK into Everything Everywhere (EE) has yet to spark into life as the company announced another lacklustre set of quarterly results.
While being ahead with its cost-cutting plans, EE reported that its service revenues grew by 1.3 per cent in the first quarter, compared to the same period last year. Meanwhile, analysts at Citigroup said EE's rivals O2 and Vodafone are expected to announce service revenues for the first three months of 2011 of 6 per cent, or slightly above.
Despite EE's CEO Tom Alexander, claiming the company is "ahead of plan", as reported by the Financial Times, with its efforts to cut costs by £3.5 billion and achieve profit margins of 25 per cent by 2014, turnover for the quarter fell by 2.7 per cent to £1.7 billion.
Commenting on the results, EE's financial director, Richard Moat, maintained that the results indicated the joint venture had achieved a "credible performance" in a "very tough" UK economic climate. Moat pointed, as an example, to the increase in monthly contract subscribers from 41 per cent in the first quarter of last year to 45 per cent in 2011.
Also of note, the company said that 84 per cent of its contract subscribers now had a smartphone as part of their plan--up from 64 per cent a year ago--and that churn across both Orange and T-Mobile continued to fall.
However, Will Draper, an analyst with the investment bank Espírito Santo, told the Financial Times that Everything Everywhere is "failing to capture" the opportunity to increase revenue from sales of smartphones and tablets. In particular he highlighted the revenue decline of data compared to voice traffic, falling from 26.4 per cent in the first quarter of last year to 25.4 per cent in the first quarter.
Speaking to Dow Jones Newswires, Moat added that EE is not planning an initial public offering in the short term, and any decision regarding this was a question for EE's parent companies, Deutsche Telekom and France Telecom. At a more tactical level, Moat said that initial results from the merging of the Orange and T-Mobile brands were encouraging, with a decision being made by October whether to retain both brands.
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