EE 4G launch slow out of starting blocks

EE has reported less than stellar financial results for the fourth quarter in which it launched its new corporate brand and 4G network, suggesting the company is not yet making the most of its monopoly position in the UK super-fast mobile internet market.

EE Six Degrees of Kevin Bacon
Kevin Bacon explains the ‘six degrees of Bacon’ in EE launch TV ad.

The company, which also includes the Orange and T-Mobile networks, added 201,000 contract – or postpaid – customers in the three months to 31 December, although this was fewer than the 250,000 additions it posted in the previous quarter and the 313,000 additions in the same quarter the previous year. It also did not break out how many of these new customers were taking the new EE 4G tariffs.

EE became the first to launch a 4G mobile service in the UK on 30 October. It launched a multi-million pound marketing campaign starring actor Kevin Bacon to raise awareness of the new brand and service offering.

The company says its spontaneous consumer brand awareness reached “43 per cent” just two months after its launch, based on an online Ipsos Mori poll of 800 people conducted in December.

About 52 per cent of its customers are now postpaid, up from 47 per cent in the same quarter in 2011. It says 78 per cent of those are using smartphones, up 9 percentage points year on year.

Turnover was down 2.8 per cent year on year to £1.7bn, while service revenue was down 3.9 per cent to £1.5bn in the period. The mobile industry has been impacted by government regulated price cuts to mobile termination rates – calls to other providers – and lower roaming fees.

The disappointing year end dragged down full year revenue by 1.9 per cent to £6.7bn – excluding regulatory impacts, it was up 2.7 per cent year on year. The company more than doubled its losses before tax to £249m for the year as it invested in its brand and rolling out the infrastructure for the new network, which reached 18 cities and 43 per cent of the population by the end of 2012.

On the positive side, EE said it has successfully upgraded existing Orange and T-Mobile customers to higher value plans and EE 4G price plans where coverage is available. Early migrations to 4G on EE are showing increases of approximately 10 per cent in average revenue per user – although consumers have previously aired their concerns about the “expense” of the 4G tariffs.

EE says it is also seeing early 4G momentum with business customers, with more than 10 per cent of its corporate clients – including Microsoft, Morrisons, Saatchi & Saatchi Fallon Group, Sony Music and Kier – either trialling or using 4G.

Olaf Swantee, EE chief executive, says: “In the past year, we delivered solid financial performance, underpinned by good progress integrating the business and success in attracting high value customers. At the same time, we built a strong platform for growth, launching a new company, new network, new customer brand, new retail estate and being the first to provide UK consumers and businesses with 4G mobile services alongside fibre broadband.”

Steven Hartley, principal analyst at Ovum, says the latest results show the company is still facing huge challenges – and its decision not to report how many 4G customers it has added is “most telling”.

He adds: “Phrases such as ‘solid early 4G momentum’ cover all manner of sins. Or to put it another way: if customer uptake was far ahead of expectation, then we would hear about it. We therefore have to conclude that uptake has not been spectacular. That doesn’t make it a disaster, just not necessarily fully optimising its monopoly position.”

EE is reported to be the target of a £10bn private equity takeover bid that would see it become more independent from owners France Telecom and Deutsche Telekom, although they are still expected to retain small stakes in the business.

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