EE has more than doubled its losses in its first full year trading under CEO Olaf Swantee's stewardship, with the cost of restructuring the business for 4G hitting the operator.
The business, which is planning to float later this year, made a pre-tax loss of £249m, an increase from the loss of £113m that it posted for 2011. The business restructured last year, ditching its Everything Everywhere brand, rebranding more than 700 Orange and T-Mobile shops as EE, decommissioning network sites, and training staff ahead of its October launch of 4G, which affected the figures.
Service revenues continued to be hit by the ongoing effects of regulation, between changes to mobile termination rates and roaming. Full year service revenue was £5.95bn, down 2.6% on 2011 but up 2.7% if the effects of regulation were stripped out. Despite the loss, the operator said it was pleased with its margin performance, which was 21.2% across 2012 and 22.0% during the second half of last year. It has a target to achieve 25% profitability by 2014.
For the first time, data and messaging accounted for half of average revenue per user during the fourth quarter of last year. Data was 34% of ARPU, up from 31% during the previous quarter, with messaging down by one percentage point to 16%. EE said 78% of contract customers are now opting for a smartphone, up 13.0% on the fourth quarter of 2011. It said 94% of new contract customers are choosing a high spec device. Regulation also hit ARPU, with EE customers spending an average of £18.60, down 1.6% on Q4 2011 but up 3.9% if regulation is stripped out.
Customers increasingly shifted towards more lucractive contracts, with 52% of its base now on a postpay tariff, up slightly from the previous quarter. Contract customers had an ARPU of £30.70, down from £31.80 in the previous quarter.Total customers for the quarter were 26.8m, down 2.6% on 2011, although contract customers increased by 5.9% to 13.6m. Churn remained low at 1.2% for contract customers and 2.3% across the business. Across the full year, it had net additions of 752,000 contract customers, up 5.9% on 2011.
EE CEO Olaf Swantee said: '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.'
Author: Graeme Neill