Everything Everywhere Results for the First Quarter to 31 March 2012

Underlying service revenue growth driven by postpaid growth and smartphone penetration

  • Service revenue excluding regulated MTR cuts +2.9%* (Q4 2011: +1.2%); including impact of MTR cuts –2.5% (Q4 2011: -4.0%)
  • Continued rapid smartphone adoption and accelerating data revenue growth; postpaid smartphone penetration up 14 ppts at 71% (Q1 2011: 57%); non-messaging data revenue up 10 ppts at 27% (Q1 2011: 17%) of ARPU; non-voice revenues (data and messaging) up 17% to 45.5% (Q1 2011: 37.5%) of ARPU
  • Customer value mix improves further; postpaid customer base up 7.3% year-on-year(yoy) with 886k net adds;  Q1 net adds 151k (Q1 2011: 160k); 49% of customers now on postpaid plans (Q1 2011: 45%); in line with industry trend towards postpaid and reflecting post-Christmas seasonality, prepaid customers decreased by 494k (Q1 2011: -394k)
  • Industry-leading customer retention, with churn of 1.2% (Q1 2011: 1.3%); successfully upgrading existing customers to higher value plans, with average access fees +1% yoy
  • Further progress building the best network for the UK
    • 3G “Smart Signal” sharing doubles of the number of Orange and T-Mobile customers using the other network’s signal
    • Nationwide rollout of 3.5G (HSPA+21 Mbps), delivering up to 50% faster data speeds than 3G
  Quarter ended 31 March 2012 Change year-on-year %, comparable basis
Service revenue £1,503m (2.5%)*
Service revenue change (excluding regulation)   2.9%*
Postpaid Net Adds 151k  
Postpaid Churn 1.2% (0.1) ppts

Olaf Swantee, Chief Executive Officer of Everything Everywhere, commented: “We are seeing improved underlying service revenues, driven by rapid data revenue growth, as we successfully upgrade customers to smartphones and higher value postpaid agreements.    We continue to make major strides improving our current network experience such as better signal sharing and faster 3G data services, and we plan to start to introduce 4G LTE for the benefit of UK consumers and businesses by the end of the year, pending regulatory approval.”

Operating Review

The first quarter was a period of steady progress, with solid postpaid customer acquisition and retention performance. We aggressively advanced our strategy of building the best network for the UK with further investment in the current and future development of our network to underpin the long term growth of our business.

Our Customers: Driving market leadership and customer loyalty

Excluding the impact of regulated Mobile Termination Rate (MTR) cuts, underlying service revenue grew 2.9%, up from 1.2% in the previous quarter; including the impact of MTR cuts, service revenue was down 2.5% to £1,503m.  Underlying growth was driven by a 7.3% year-on-year increase in high value postpaid customers, including 151k net postpaid additions in Q1.  We are successfully upgrading significant numbers of existing customers to higher value postpaid plans and continue to lead the industry in customer retention, with churn of 1.2%.

With nearly half our customers on postpaid plans that generate five times more ARPU (Average Revenue Per User) than prepaid customers, the value mix of our customers continues to improve, with underlying blended (combining pre- and postpaid) ARPU up 4.5%.

We rapidly delivered on our strategy to build the UK’s best network. In March we rolled out “Smart Signal” sharing to provide seamless 3G handover between the Orange and T-Mobile networks, resulting in twice as many customers using the other network’s signal than before.  We have also completed the nationwide rollout of 3.5G (HSPA +21 Mbps), providing up to 50% faster data download speeds than 3G.

To provide high value postpaid customers with increased smartphone support, we are reorganising our customer service functions to ensure that we put the operating systems and devices at the heart of everything we do, resulting in increased rates of one-call resolution and positive customer feedback.

Our Company: Operational excellence

We continue to make progress in reducing costs and simplifying the business.  In the first quarter we initiated our network optimisation programme to streamline the number of network masts.

We completed on a series of other business integration projects including: the head office restructuring in February; the consolidation of the Orange and T-Mobile warehouses and handset supply chain, generating cost savings, improved product availability to customers and stores and allowing quicker introduction of new products and services; and plans to reduce our head office space by 38%. We remain on track to achieve our targeted £3.5bn+ NPV in cost savings by 2014.

Our Future: Creating a platform for growth through smartphones and data

Smartphone penetration continued to increase rapidly and data revenues growth accelerated in Q1 as more customers increased data use. 71% (Q1 2011: 57%) of postpaid customers are now on smartphones, with 90% (Q1 2011: 82%) of new postpaid customers opting for smartphones. Non voice revenues (data and messaging) were up 17% to 45% of ARPU revenues this quarter, with non messaging data revenue up 10 ppts to 27% of ARPU.

We have achieved double digit fixed broadband revenue growth yoy with 90% of new customers in Q1 taking fixed broadband, line rental and mobile.

* 2011 Service Revenue restated, see appendix for details


Media Contacts:

Dan Perlet


Everything Everywhere Press office:

everything.everywhere@golinharris.com or 0870 373 1500

Investor Relations Contacts:

Deutsche Telekom Investor Relations:

investor.relations@telekom.de or +49 228 181 888 80

France Telecom – Orange investor relations:

didier.kohn@orange.com or +33 1 44 44 72 53

About EE

EE is the most advanced digital communications company in Britain, providing mobile and fixed line services to 27 million customers, and will soon become the first company in the UK to provide 4G mobile services alongside fixed-line fibre.

EE is the company that runs the Orange and T-Mobile brands in the UK, and will be launching its new superfast 4G brand – EE – in the coming weeks.

Its 4G service will cover a third of the population by the end of 2012 and its fibre service will cover 50% of the population by the end of the year.

EE’s mobile service currently provides coverage to 99% of the population with 2G and 98% of the population with 3G