T-Mobile bounces back with 18.7% profits rise

T-Mobile bounces back with 18.7% profits rise

T-Mobile UK has bounced back after a tough year, reporting an 18.7% hike in EBITDA profitability to £159m in Q3 and a 4.1% profit margin increase to 21.4% on Q2.

The operator attributed the profits rise to its increased focus on selling via direct channels. This has seen prepaid customer numbers rise 59,000 in the last quarter with retail stores reporting a record month in September. Prepay gross additions through T-Mobile’s 293 stores rose 51% in Q3 and 46% year-on-year. Contract sales also soared by 12.9% in the same period.

However the operator’s focus on high value contract customers has seen contract customer numbers fall by 40,000 over the quarter, mainly in the low value sector. T-Mobile dismissed this fall as ‘a blip’, saying it would be addressed in Q4 by new tariffs on 24 month contracts, aimed at luring lower value contract customers.

Richard Moat, md of T-Mobile UK, said: ‘In the third quarter, T-Mobile UK has continued to strengthen by attracting new customers, reinforcing its brand and marketplace position and markedly improving its financial performance. Our retail network has contributed significantly to this, with a record prepay month in September and contract sales up 12.9% over the previous quarter.’

He added: ‘I’m pleased that over the quarter we have substantially improved our operating efficiency with the result that profitability and margins have bounced back to levels that are appropriate for a business of our scale.’

Whilst T-Mobile’s earnings before tax fell 9% on a year-on-year basis, it rose 18.7% sequentially to £159m with the EBITDA margin increasing 4.1ppts on Q2 to 21.4%.

Service revenue was down year-on-year to £680m, hit by the introduction of lower regulatory caps on mobile termination rates in the summer.

Phil Kendall, director of global wireless practice at Strategy Analytics said the results showed a good performance.

‘These are quite encouraging results. In terms of positive cashflow T-Mobile seems to be on the right track.’

Kendall added that the drop in contract customer numbers in Q3 was ‘not a major cause for concern, particularly if T-Mobile are looking to bring new offers to the lower part of the contract market.’ He added: ‘They are obviously being more selective on where they subsidise and focusing on the high end of the market.’

However more cost cutting measures are on the cards for T-Mobile. Parent group Deutsche Telekom, reporting its results today, said it is planning to continue to bring efficiencies to its subsidiaries. It said: ‘Deutsche Telekom will continue its cost cutting and address the entire cost base of the Group.’ The operator will release details when it publishes its end of year results.

Kendall said: ‘The numbers suggest a certain move towards a leaner meaner operation and I am sure there are more cuts that can be made. They are not running a hugely efficient company and I don’t think the forthcoming merger with Orange will make T-Mobile exempt from group wide cost cutting.’

Written by Mobile Today
Mobile Today

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