EE reports revenue decline despite 4G gains

UK operator EE says it has now signed up nearly 1.2 million 4G customers less than a year after first launching services, while reporting a decline in revenues for the three months ending September.

The company’s 4G progress means it has easily beaten an end-of-year target of capturing one million customers and now covers about 60% of the UK’s population with the high-speed technology.

Rivals Telefonica (Slough, UK) and Vodafone (Newbury, UK) launched 4G services at the end of August but have yet to extend networks outside a handful of the country’s biggest cities.

UK operator EE says it has now signed up nearly 1.2 million 4G customers less than a year after first launching services, while reporting a decline in revenues for the three months ending September.

The company’s 4G progress means it has easily beaten an end-of-year target of capturing one million customers and now covers about 60% of the UK’s population with the high-speed technology.

Rivals Telefonica (Slough, UK) and Vodafone (Newbury, UK) launched 4G services at the end of August but have yet to extend networks outside a handful of the country’s biggest cities.

Nevertheless, despite its 4G lead, EE (Hatfield, UK) – a joint venture between Deutsche Telekom (Bonn, Germany) and France Telecom (Paris, France) – flagged a 2.4% drop in revenue for the third quarter, to £1.63 billion ($2.65 billion), while service revenue fell by 3.3%, to £1.45 billion.

Although cuts to mobile termination rates and roaming charges were largely responsible for the shrinkage, EE said that service revenue would have fallen by 0.6% after stripping out the effects of regulation.

The operator also reported customer losses in all areas of its business except postpaid mobile and machine-to-machine services.

Although EE is focused on attracting higher-value postpaid subscribers, it added only 181,000 during the quarter, while losing 345,000 prepaid customers.

The various setbacks mean the company’s overall customer base had shrunk from more than 28 million at the end of September 2012 to less than 27.5 million a year later.

EE did manage to record a slight improvement in mobile average revenue per user (ARPU) – up from £18.9 a month in the third quarter of 2012 to £19 – but only because of the shift in the make-up of its customer base, with a growing number of subscribers using postpaid services.

Postpaid ARPU fell to £30.1, from £31.8, while prepaid ARPU dropped from £5.7 to £4.8 over the same period.

EE has recently slashed the entry-level price of its 4G services, meaning consumers can now obtain a service for less than £20 a month, in the face of fresh competition from Telefonica and Vodafone and with Three (Maidenhead, UK), the UK’s smallest network operator, set to launch 4G services in December.

EE has also unveiled a selection of pay-as-you-go 4G offerings in an effort to stem prepaid losses.

But the new offers seem bound to put further pressure on ARPU and service revenue in the months ahead.

Regulatory authorities have also proposed increasing the fees that EE and rivals pay for their spectrum licenses, which EE has said could affect its ability to keep investing in network rollout.

Despite that, it recently said it would begin testing a 300Mbps 4G service, with a view to launching a commercial offer sometime in 2014.

EE has also reported major successes in its wholesale activities, winning contracts with a number of companies looking to rent capacity on its high-speed lines, including UK fixed-line incumbent BT (London, UK), cable operator Virgin Media (Hook, UK) and supermarket chain Asda (Leeds, UK).

“Consumers and businesses across the UK are recognizing that EE has the best network for the smartphone era, with more superfast 4G coverage than all the other networks combined,” said Neal Milsom, the chief financial officer of EE.