28th Jul 11
Everything Everywhere suffers fall in turnover as Ofcom cuts take effect
by Harry Oldfield
Talk is cheap: reductions in call charges costing companies big
Talk is cheap: reductions in call charges costing companies big
Everything Everywhere has seen margins, turnover and income per customer drop as the telecoms watchdog’s reductions to call charges start to bite.
Ofcom lowered the cost of calling mobiles in April, a change that was costing Everything Everywhere £70m per quarter, said finance director Richard Moat. Year-on-year revenues declined by £105m to £3.1bn during the first half.
However, Everything Everywhere, which was formed last year when Orange and T-Mobile merged, is ahead of schedule when it comes to merger savings, with an increase of £57m in cuts over the first half of 2011, bringing the up-to-date total to £203m. It has vowed to save £445m by 2014.
Tom Alexander, the chief executive, who quit last week after almost four years in charge of Orange and one year running the joint venture, suggested the firm would probably stick to its much-talked about three-brand strategy. The company is due to make a final decision on branding in October, but it will press ahead with plans to open an additional 30 Everything Everywhere outlets before Christmas, which will offer both Orange and T-Mobile products.
Alexander said that there is an obvious developing strategy with the store roll-out. He pointed out that they have two iconic and strong household-name brands which recruited 27 million consumers over the past 15 years, adding that should be looked after and cherished.
The company’s customer numbers dropped by 390,000 to 27.5 million compared to the same time last year. It has more pre-pay customers than contract – the latter usually more profitable – and has been attempting to redress the balance. Numbers of pre-pay customers fell by one million to 14.5 million year-on-year, while contracts have increased by almost 900,000 to 12.3 million.
There was a decline from 20.6 per cent to 20.3 per cent in year-on-year adjusted margins, although Moat said the firm was still in line with its 25 per cent margins target by 2014. There was a fall in revenue per customer, from an average per month of £19.20 to £18.70.
Taking off the impact of Ofcam’s cuts, there was a rise of two per cent during the last quarter in underlying revenue from mobile services. This was some way behind Vodafone, which revealed growth of 5.1 per cent in the UK earlier in the week.
The Royal bank of Scotland was positive about the figures, saying that the first ambition of the joint venture was to secure its market position, which has been showing encouraging signs. It added that underlying momentum revenue has improved, even if performance is still behind Vodafone.
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