Increasing numbers of contract customers helped Everything Everywhere improve sales and keep its profit margin stable in its most recent set of results.
Increasing expenditure on retaining customers meant adjusted earnings before tax, depreciation and amortisation fell by 1.3% to £673m across its half year. Churn was flat on the previous year at 1.2%.
For the three months ending 30 June, adjusted service revenue grew 3.4%, compared to growth of 2.9% in 2011. Including the effects of changes to mobile termination rates (MTRs), revenue would have fallen 1.1%. Its half year sales were £2.99bn, down 1.8% on 2011 but up 3.1% if MTR changes are stripped out.
The operator has moved more customers onto two-year contracts, with 79% of postpaid customers now on a 24 month deal, compared to 67% last year. Profit margin was flat at 20.3%, with renewals up 9% on last year. Its profit margin was helped by the operator turning off redundant network sites following the merger of T-Mobile and Orange at a much faster rate. In total, 1,390 redundant sites were switched off.
It is continuing to make cuts elsewhere in the business, by closing 30 stores, consolidating warehouses and handset supply chain, and integrating IT systems.
Everything Everywhere made 150,000 contract adds during the second quarter, meaning that half of its base is now on postpaid agreements. Britain's largest operator said it delivers on average five times higher ARPU than prepay. Pay-as-you-go customers continued to decline, down 313,000 year on year. Blended ARPU was up 5.1% on 2011 to £18.70.
Everything Everywhere customers continued to switch to smartphones, with 72% of contract customers now owning a high spec device, compared to 61% last year. The operator revealed 91% of new contract customers opted for a smartphone. This had a knock-on effect on revenues. Non-messaging data revenue was up 61% to 29% of ARPU, compared to 18% last year. Data and messaging revenues were up 21% to 47% of ARPU.
Everything Everywhere CEO Olaf Swantee said: 'In the first half, we delivered a solid commercial performance, with good underlying revenue growth. We are making strong progress integrating the legacy Orange and T-Mobile businesses to create cost efficiencies and deliver planned synergy targets, while investing in significant network upgrades to further improve our customer experience.'
Editor: Graeme Neill