Video services

UK Mobile Giant Flexes Its Muscle

The management team of UK joint venture EE , Britain's biggest mobile operator, came out fighting today at the company's first ever investor day, with talk of being bigger than expected, and highlighting some key growth areas.

But the team, formed earlier this year when Orange UK and T-Mobile (UK) merged, also had to explain why the customer base wasn't quite as big as first announced, and reveal that revenues and average revenue per user (ARPU) are heading south. (See Orange, T-Mobile Do Everything Everywhere .)

The company's second-quarter revenues of £1.72 billion (US$2.7 billion) are 4.8 percent lower than the comparable period a year earlier, but that's mainly down to regulatory changes that have impinged on roaming income. (See Euronews: Sept. 28.)

Regulatory changes are also the key reason the ARPU level has dipped by 7.7 percent year on year, from £20.80 ($33.00) in the second quarter of 2009 to £19.20 ($30.48) in the second quarter of this year.

When the joint venture was formed, it boasted of a customer base above 30 million, nearly 29.5 million of whom were mobile users, with the remainder fixed broadband customers.

Now, though, the customer base is 27.9 million and, apparently, on the rise. What's that all about?

Well, the company had to choose a consistent set of operational metrics, one of which is the period during which a pre-pay (pay-as-you-go) mobile customer must be active to be counted in the customer numbers. Orange UK used a 90-day period, while T-Mobile UK included anyone who was active during a 180-day period. The joint venture has opted for the 90-day cut-off, and that has trimmed a whopping 2.5 million customers from the pre-paid subscriber base. The encouraging news for the operator, though, is that it is attracting more and more precious contract/post-paid customers, many of which are signing up for 24-month deals.

So how will that customer base be satisfied in the future? Well, CEO Tom Alexander is looking to lead from the front after a relatively short integration period. "We're beyond the defensive now -- we're on the offensive," he told the company's investor day audience.

He said the operator is "about more than just voice and text. We see cloud services as a huge opportunity," along with mobile apps, machine-to-machine (M2M), and mobile advertising. Alexander also highlighted the R&D potential from the combination of T-Labs and Orange Labs, which are collaborating to develop new applications.

The operator also sees significant growth potential in business-to-business services, fixed broadband, and new business developments (including e-transactions and e-health, as well as mobile advertising). The Everything Everywhere team estimates these services collectively to be worth £1.4 billion ($2.22 billion) in 2010, but that they'll grow to be worth £1.9 billion ($3 billion) in 2014.

With the "everything" covered, Alexander and his team turned to the "everywhere," which means coverage of various types.

First, the CEO announced that on October 5, the operator will "launch national roaming. This will allow Orange customers to roam onto the T-Mobile network, and vice versa. This will result in a significant improvement in coverage and quality for UK customers."

He said his company will "leverage the fact that we have the biggest and best network in the UK," though it's likely that rivals, and some customers, might question the claim about the "best" network.

But it's certainly a big network. Everything Everywhere is on course to decommission about 9,000 sites around the UK, to take out duplication and duplicated costs, but that will leave it with 18,000 sites nationally, more than the 14,000 to 16,000 the operator had originally planned. "Our planning assessment is that we will have a bigger network than we had originally thought."

In addition, the operator isn't cutting down the number of retail outlets as expected. The CEO said that all its 720 retail stores will be retained, and there are plans to open more. "We see the nature of retail changing. We see the need in this highly penetrated market to move more towards our own distributors," stated Alexander, though he also noted that partners such as the Carphone Warehouse Group plc (London: CPW) are still very important.

— Ray Le Maistre, International Managing Editor, Light Reading

Be the first to post a comment regarding this story.
Sign In