The UK's largest operator, Everything Everywhere, unveiled poor fourth-quarter results, with service revenues up only 1.3 per cent over the same quarter in 2009. However, the company stressed that it was on track with plans to boost profitability.
As reported by the Financial Times, the company's CEO, Tom Alexander, was adamant that Everything Everywhere, the joint venture between Orange UK and T-Mobile UK, would achieve its goal of hitting an EBITDA margin of 25 per cent or more by 2014.
"The progress we have made is really, really encouraging," he said. But, referring to the ongoing price war in the UK, he added, "While everybody else is trying to squeeze the pips out of their organisations, we are reaping the benefits of economies of scale, efficiencies, and driving forward that margin progression." This upbeat view should be compared to Vodafone UK's fourth quarter, when the company reported underlying revenue growth of 7 per cent.
For the second half of 2010, Everything Everywhere's revenue were also weak with revenues declining by 0.6 per cent to £3.6 billion. Profit in the second half of the year also fell 12 per cent to £668 million before EBITDA.
This decline in second-half earnings was explained by the increasing costs of attempting to recruit contract customers, which meant Everything Everywhere needed to provide highly subsidised handsets to these new subscribers.
Richard Moat, Everything Everywhere's finance director, said that the company had attracted 300,000 customers to sign contract deals in the fourth quarter, which would provide the firm with a platform for revenue growth in the coming years.
However, Will Draper, an analyst at Espirito Santo, told the FT that this focus on growing its contract base had been at the cost of losing 187,000 pay-as-you-go customers. "You take two underperforming brands and add them together and do not make a national champion," he said. "You end up with two underperforming brands in a bigger underperforming company."
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