Everything Everywhere posted a 2.4% increase in profits in its first full year trading, boosted by a record addition of new customers and increasing use of smartphones.
Sales at the operator were hit by the changes to mobile termination rates (MTRs). Mobile service revenue was down 2.1% to £6.17bn and overall turnover was down 3.8% to £6.78bn. If the effects of MTR changes were stripped out, mobile revenue growth would have increased by 2.1%. Adjusted earnings before interest, tax, depreciation and amortisation was up 2.4% to £1.42bn. This excluded the costs of Everything Everywhere’s restructure as well as brand and management fees. Otherwise, EBITDA was up 1% to £1.17bn.
The operator said underlying service revenue growth was driven by a 7.5% increase in its postpaid customer base, the equivalent of 894,000 customers. The operator reported its strongest quarter of new postpaid customers during the fourth quarter, with 313,000 net additions. Almost half of its customer base is now postpaid customers. It reported its third consecutive quarter of postpaid churn of 1.1%.
Contract sales in the fourth quarter were up 4.1% to £156.2m. However, prepay sales took a battering, down 43.5% to £10.2m during the fourth quarter. It also lost 241,000 prepay customers in the fourth quarter of last year, compared to a loss of 187,000 in the fourth quarter of 2010.
Contract average revenue per user was down 6.7% to £32.90 and prepay down 11.8% to £6.70. However, the operator reported an underlying growth in ARPU of 2.1%. Data continued to play a more important role in sales with data revenues up 12% year on year. It accounted for 24% of ARPU by the end of 2011, up from 16% by the end of 2010. The operator reported increasing demand for smartphones, up 35.2% to 69%.
Strategy Analytics director Phil Kendall described the figures as ‘encouraging’. He said: ‘The change in numbers is reasonably common to the market as a whole. The impact of MTR changes pulling down revenues quite significantly is a fact of the market.’
He added: ‘One concern would be the decline in postpay ARPU. Some of that would be attributable to MTR changes but it’s a sign that the market is so competitive. Obviously Everything Everywhere is fully participating in that with the Full Monty tariff. But my concern would be if growth is meant to come from the postpay market and ARPU is on the decline, then it doesn’t point to a good place for long-term growth.’
The business said it had ‘strong momentum’ in its machine-to-machine business, hitting more than one million connections during 2011, up by more than 400,000 during the past year.
Everything Everywhere CEO Olaf Swantee said: ‘Our focus on operational excellence has generated solid performance over the year as we accelerated network and organisational integration to deliver planned cost savings. As a result of network sharing and customer experience improvements, we are seeing good commercial momentum and are capitalising on the smartphone and data opportunity to drive underlying growth.’