Soaring demand for smartphones has resulted in Everything Everywhere moving almost half of its customers to contracts, although the operator was hit by mobile termination rate (MTR) cuts as it reported a drop in sales of 2.5% to £1.50bn.
For the quarter ending 31 March, Everything Everywhere said sales would have grown by 2.9% if the effects of changes to MTRs were removed. The appetite for smartphones showed no sign of abating with 71% of contract customers choosing the devices, compared to 57% last year. The operator said 90% of new customers choose smartphones, compared to 82% last year.
The demand for smartphones led to an acceleration in data use. Non-messaging data revenue was up from 17% to 27% of ARPU. Data and messaging combined was up 17% to 45.5% of ARPU. Blended ARPU, which combines prepaid and postpaid, was up 4.5% when the effects of regulation were stripped out.
The operator added 151,000 new customers during the quarter. The wider industry trend of declining prepaid customers was matched in the results. Pay-as-you-go customers fell by 494,000, compared to a drop of 394,000 this time last year. Its postpaid customers increased by 7.3% year on year, with 886,000 net adds. The operator said it was upgrading 'significant' numbers of customers to higher value contract plans. Postpaid customers generate five times more ARPU than prepay.
The operator said it was reorganising its customer service function to cope with the increasing demand for smartphones, although no further details were revealed. During the quarter, it completed its head office restructuring, consolidated the Orange and T-Mobile supply chains, and reduced its head office space by 38%. It said it remains on track to make cost savings of more than £3.5bn by 2014.
Everything Everywhere CEO Olaf Swantee said: 'We are seeing improved underlying service revenues, driven by rapid data revenue growth, as we successfully upgrade customers to smartphones and higher value postpaid agreements. We continue to make major strides improving our current network experience such as better signal sharing and faster 3G data services, and we plan to start to introduce 4G LTE for the benefit of UK consumers and businesses by the end of the year, pending regulatory approval.'
The operator said it has completed its nationwide rollout of 3.5G, which provides up to 50% quicker data download speeds than 3G.
Editor: Graeme Neill