July 25, 2012 / 7:26 AM / 7 years ago

UPDATE 2-Everything Everywhere H1 lifted by smartphone push

* Q2 service revenue rises 3.4 pct, margins steady

* H1 EBITDA falls 1.3 pct to 673 mln pounds

* Britain’s recession not affecting mobile sales-CEO

* Everything Everywhere urges Ofcom to decide on 4G quickly (Adds CEO interview)

PARIS, July 25 (Reuters) - Britain’s biggest mobile phone operator, Everything Everywhere, signed more customers up to long-term smartphone contracts in the second quarter, driving an increase in revenue and delivering stable profit margins.

Nevertheless, the group’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell in 1.3 percent in the first half to 673 million pounds because of higher spending on keeping customers whose contracts were expiring.

Chief Executive Olaf Swantee said Britain’s gloomy economy was not particularly hurting sales and that competition with rival Telefonica’s 02 had calmed after flaring a few months ago.

“Our revenue growth shows that even in tough economic times, people have an appetite for mobile telephony,” said Swantee in an interview on Wednesday.

“But people are looking for the best deals now, which we can see at our T-Mobile brand that is pitched at value seekers.”

Britain’s economy shrank by 0.7 percent in the second quarter, far more than expected and the sharpest fall since early 2009.

Everything Everywhere, which is a joint venture between France Telecom and Deutsche Telekom, posted service revenue growth of 3.4 percent in the second quarter, compared with 2.9 percent in the first, excluding the impact of regulatory changes.

First half margins were stable at 20.3 percent.

Everything Everywhere, which leads Telefonica’s O2, Vodafone and Hutchison-owned 3 in terms of British customers, also said its cost savings programme, targeted at 3.5 billion pounds by 2014, was on track.

The bulk of such savings come largely from eliminating mobile antenna sites after France Telecom and Deutsche Telekom merged their UK operations in September 2009. But in the first two years of the joint venture the network progress was slow and few mobile sites were decommissioned.

Swantee said that such growing pains were now behind the group and that good progress was being made on merging the two mobile networks.

“We are about 70 percent on the way to our 2014 cost cutting target,” he said. The company said in a statement that 1,390 sites were turned off in the first half and predicted a faster pace for the rest of the year.

Swantee also welcomed the framework for the auction of fourth generation mobile licences released by British telecoms regulator Ofcom on Tuesday, which should allow high-speed mobile Internet to be rolled out in 2013.

Ofcom said the auction process will begin by the end of the year with bidding in early 2013.

Everything Everywhere is also seeking to launch 4G mobile services before the auction by the end of this year by recycling some of its old mobile spectrum in the 1800 megahertz band. But Ofcom has not yet given its approval to the application made in February.

Swantee urged Ofcom to move quickly on the petition so Britain could see it first 4G launch this year, in line with other European markets like Germany and France. ($1 = 0.6441 British pounds) (Reporting by Leila Abboud; Editing by James Regan and David Cowell)

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