Everything Everywhere sales down 5% in Q2, regulation bites

Everything Everywhere, the new JV of mobile operators Orange UK and T-Mobile UK, has reported that its second-quarter revenue fell 4.8 per cent as enforced reductions in mobile termination fees cut £101 million profit from the £1.56 billion turnover.

While the combined company was able to report that its average monthly churn rate fell to 2.2 per cent from 2.5 percent, its ARPU also suffered with a drop of 7.7 per cent to £19.2 per month.

Commenting on these results, Liberum's telecom analyst, Mark James, said that they made for dismal reading. Noting that the JV had committed to paying 90 per cent of free cash flow as dividends, James said: "Our concern has been that integration costs may, near term, make these dividends fall well short of the €300 million or so of free cash flow that each consolidated UK operation used to deliver to its parent company."

Regardless of these views, CEO Tom Alexander said the new JV was 'well on its way', and confirmed that the company's synergy target was at least £3.5 billion of savings over the coming quarters, and it had an objective of achieving double-digit cash flow growth from 2010-14.

Speaking at yesterday's investor day, Alexander announced a major change to the strategy the JV had initially detailed. Instead of reducing the number of High Street stores as expected, the CEO said the company would boost the number to more than 720 outlets but did not say how much it would cost "Our retail chain is a key strategic asset which we should expand because the customers we get through retail stay with us longer and spend more," he said.

The company said that it expected to see the first major benefit of the tie-up next month, with the first phase of its 'super network' becoming available. From the 5th of October all Orange and T-Mobile subscribers will be able to make calls and send text messages over either network at no additional cost to their standard tariffs. However, subscribers will be required to register specifically for access to both networks.

For more on this story:
- read Capital & Reuters

Related stories:
Orange/T-Mobile mum on 2,500 job cuts
Orange UK joins network sharing deal, but adds little
Winds of change in UK mobile market
Rumour mill: Orange/T-Mobile UK to build new network