Joint telecoms venture between Orange and T-Mobile posts revenue fall of £105m year on year
Everything Everywhere, the joint venture formed a year ago between T-Mobile and Orange, has seen turnover, margins and income-per-customer fall as the telecoms watchdog's cuts to call charges begins to bite.
Ofcom cut the price of calling mobile phones in April, a move which is costing Everything Everywhere £70m a quarter, finance director Richard Moat said on Wednesday. Revenues were pushed down £105m year on year to £3.37m in the first half.
However, the company is ahead of schedule on merger synergies, with a £57m increase in savings during the first half of the year, bringing the total so far to £203m. It has promised to save £445m by 2014.
Chief executive Tom Alexander, who resigned without a job to go to last week after nearly four years running Orange and one year in charge of the joint venture, indicated the company was likely to stick to its much-debated three-brand strategy.
A final decision on branding is due in October, but the company will press ahead with opening a further 30 Everything Everywhere stores before Christmas, which will sell both T-Mobile and Orange products.
Alexander said: "You can see we've got a developing strategy with the roll out of our stores. We've got two iconic strong household name brands that recruited 27m customers over the last 15 years and that's something you've got to look after and cherish."
Customer numbers fell by 390,000 to 27.5m compared to the same period last year. The company has more prepay than contract customers – the latter tend to be more profitable – and has been working to redress the balance.
Prepay numbers are down 1m year on year to 14.5m, while contracts are up by nearly 900,000 to 12.3m.
Adjusted margins declined, from 20.6% to 20.3% year on year, although Moat said the company was still on course to reach its target of 25% margins by 2014. Revenue per customer actually fell, from a monthly average of £19.2 to £18.7.
Discounting the effect of Ofcom's cuts, underlying revenue from mobile services was up 2% in the last quarter. This was behind Vodafone, which reported 5.1% growth in the UK earlier this week.
Royal Bank of Scotland commented positively, saying: "The joint venture's first ambition has been to secure its market position and in this respect there are encouraging signs. There is an improvement in the underlying revenue momentum, even if the performance is still lagging Vodafone."
Alexander stressed that contract customer churn was at a record low of 1.1%, and T-Mobile had been adding contract customers for three successive quarters, having seen growth slow prior to the merger.
He said: "It's the right time for me to handover the reins and the business is well placed for the future."
Alexander will be replaced from September by Olaf Swantee, who was previously overseeing European operations for Orange's owner France Telecom.
Broker Espirito Santo said it was looking forward to his arrival: "Olaf Swantee has better pedigree as a costcutter than Tom Alexander, so we should see further margin improvement from here."
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Source: http://www.guardian.co.uk/business/2011/jul/27/everything-everywhere-turnover-fall-ofcom
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