London,
26
July
2015
|
00:00
Europe/London

EE Interim Results for 6 Months Ended 30 June 2015

 

Record H1 Adj. EBITDA margin; operating revenue returns to growth, remains the fastest growing 4G operator in Europe

Highlights:

Investment in network differentiation and operational efficiency deliver record margin:

  • 4G customer growth helped maintain market leadership in mobile service revenue.
  • Reduced postpaid churn to 1.1%, as improvements in retail and customer service lead to increasing loyalty.
  • Industry-leading H1 adj. EBITDA1 of £830m, a margin of 26.6%, up 2.2ppts yoy (H1 2014: 24.4%).

Return to growth in operating revenue:

  • Q2 operating revenue growth of +0.1% yoy, and up +2.2% yoy excluding regulatory impact, to £1,506m.
  • Q2 mobile average revenue per user (ARPU) growth of +2.2% yoy (Q1 2015: +1.1%) excluding regulatory impact, and stable yoy, including regulatory impact.
  • Q2 fixed-line revenue continues to grow at +18% yoy. Broadband base up 35k.

Europe’s largest and fastest growing 4G customer base:

  • 4G net adds of +1.5m in Q2, taking total 4G base to 10.9m, up +6.7m yoy. 100% of new connections now on EE, with nearly 50% of consumer postpaid connections on our unique double-speed 4GEE Extra. Firmly on track to reach target of 14m 4G customers by year-end.
  • 4G network reaches 90% population covering over 600 major towns and cities, and more than 6,200 villages and small towns, with double speed 4G now available to over 70% of UK population.
  • B2B base up 7% yoy with 8,300+ corporates now using 4G, including new account wins Abercrombie & Fitch, Lufthansa and thetrainline.com

Continued product innovation and cross-selling strategy drive customer growth:

  • Q2 postpaid mobile net adds of 178k including machine-to-machine (M2M). Total EE connections of 30.9m (Q2 2014: 30.8m).
  • 62% (Q2 2014: 60%) of mobile customers (excluding M2M) on postpaid plans, delivering seven-times higher ARPU than prepaid. Prepaid base reduced 184k yoy.
  • Successful cross-selling strategy and EETV driving significant fixed-line growth.
  • Multiple Product Attach Rate (MPAR) 2, which tracks average number of connected products adopted per postpaid voice customer, up 4.5% yoy to 1.24 per customer.

First half unless otherwise noted

Six months ended 30

H1 yoy change

Q2 yoy change

 

June 2015

(%)

(%)

Turnover

£3,116m

0.1%

0.6%

Operating revenue

£2,975m

(0.5%)

0.1%

Operating revenue change

 

1.2%

2.2%

(excluding regulation)

 

 

 

Adj. EBITDA

£830m

9.2%

 

Adj. EBITDA margin

26.6%

2.2ppts

 

Q2 Postpaid Net Adds (inc M2M)

178k

 

 

Q2 Postpaid Churn

1.1%

 

0.0ppts

Olaf Swantee, CEO of EE, commented: “Our established leadership in 4G and key differentiators such as Wi-Fi calling are working well for the business. We’re the clear network market leader and this, combined with our strong operational performance, has led to a return to revenue growth while delivering our best ever EBITDA margin.

The business continues to focus squarely on improving customer satisfaction and on cross-selling our innovative range of consumer and B2B 4G connected products.”

1 Adjusted EBITDA is EBITDA before Management and Brand Fees and restructuring costs

MPAR is calculated using the following equation and components: (A+B+C+D+E)/A. (A) Postpaid handset and SIMO base; (B) Postpaid Mobile WiFi base; (C) Fixed broadband

base; (D) Fixed telephone base (E) EETV base.

 

Operating review

In the first half, we retained our market leadership in mobile service revenue and further improved our adj. EBITDA margin. Early investment in 4G and network differentiation has led to a rapid increase in our 4G customer base, and access fee growth. The B2B base continues to grow rapidly at 7% yoy, delivering an increase in data revenues of 7.6%, driven by strong uptake of 4G products and innovative services, including security and compliance products and a new suite of enterprise mobility management tools.

Improving customer satisfaction remains a core focus. More EE stores have opened in new areas, increasing catchment area by 11%, creating more opportunities for in-store service and support. The average number of calls to service centres has reduced by 30% yoy, with further investment in customer initiatives, including the on-shoring of 1,000 roles back to the UK (a year ahead of schedule), leading to double digit improvement in Net Promoter Scores across Customer Service (+14ppts yoy), Retail (+12 ppts yoy) and Digital (+38 ppts yoy).

In addition, more than 1.1m customers are already enjoying our popular new customer loyalty programme, the EE Power Bar, launched in April. This entitles customers to receive a free portable charger, with free swaps for a charged Bar in EE retail stores.

Our Customers: Growth in postpaid customers supports increase in operating revenue:

Q2 operating revenue returned to growth at +0.1%, demonstrating the success of our 4G leadership strategy. Underlying operating revenue in the first half grew by 1.2% yoy, with Q2 revenue 2.2% higher yoy. The customer value mix further improved with postpaid mobile net adds of 96k in Q2, and total postpaid net adds, which include a +13.6% yoy growth in M2M, reached 178k in the quarter. Postpaid customer retention improved, with churn reducing to 1.1%.

The 4G customer base reached 10.9m, maintaining our position as the largest 4G operator in Europe, and we remain firmly on track to exceed 14m 4G customers by the end of the year.

Home broadband growth, driven by EE TV, continues to outpace the market. In Q2, fixed revenue grew +18% yoy, the 14th consecutive quarter of growth, with 35k fixed broadband net adds added. Our MVNO base reached 3.7m, up 1.3% yoy, bringing the total number of connections to the EE network to 30.9m.

Our Company: Continued 4G roll-out and network firsts, highlight continuing network leadership: The rapid roll–out of EE’s 4G network continued, with 4G coverage increasing 23% yoy, to 90% of the UK population. This includes 165% more major towns and cities with 4G coverage, yoy to 600, as well as significant increases in the number of villages and small towns now with 4G coverage, to 6,200. Additionally EE’s unique double speed 4G is now available to more than 70% of the UK population.

We continued to innovate on network services with the launch of our unique Wi-Fi Calling in April, the first fully embedded seamless voice service to use Wi-Fi, and is already activated for approximately 1.2m customers.

Network leadership was further demonstrated with the winning of recent industry awards, such as Fastest Mobile Broadband at the uSwitch Awards (January 2015), Best Network at the Mobile News Awards (March 2015), and Best Consumer and Business Network at the Mobile Industry Awards (June 2015). We have also been named number one network for overall call, text and mobile data performance by RootMetrics® in each of the 16 cities tested in 2015.

Our Future: data growth, product innovation and delivering our connected strategy

Excellent progress is being made leveraging our advanced data network to grow data revenues. All new and renewing customers are on EE plans, with nearly 50% of consumer postpaid customers selecting double speed 4GEE Extra plans. Data and messaging revenues reached 63% of ARPU in Q2, an increase of 4ppts over Q2 2014, with data (non-text) revenue up to 54% of ARPU compared to 48% in Q2 2014.

Our Connected strategy is starting to deliver for the business. In June we launched the world’s first 4G camera, the 4GEE Action Cam, while also driving robust growth in tablet (+61% yoy) and mobile Wi-Fi (+27% yoy) sales across Q2. Our cross-selling strategy continues to drive growth for the business, increasing connections to the network from existing customers as our Connected portfolio broadens. As a result, MPAR2 was up +4.5% yoy to 1.24 connected products per postpaid voice customer.

Capital Structure and Dividend

As of 30 June 2015, our Net Debt to EBITDA ratio was 1.39 (30 June 2014: 1.47). In the first half of 2015, the company paid dividends of £529m.

 

Media Contacts:

Mat Sears

Mat.Sears (at)ee.co.uk

Investor Relations Contacts:

Deutsche Telekom Investor Relations: peer.rossbach(at) telekom.de or +49 228 181 88 120

Orange Investor Relations: didier.kohn(at)orange.com or +33 1 44 44 72 53

Bond Programme contacts:

Fairvue Partners

Severine Camp

EE(at)fairvuepartners.com

About EE

EE is the largest and most advanced digital communications company in Britain, delivering mobile and fixed communications services to consumers, businesses, government and the wholesale market. EE has approximately 14,000 employees and 548 retail stores, and serves more than 30 million customers across its mobile, fixed and wholesale businesses.

EE runs the UK's biggest and fastest mobile network, pioneering the UK's first superfast 4G mobile service in October 2012 and is the first European operator to surpass the 10million 4G customer landmark. EE's 4G coverage today reaches more than 90% of the UK population. EE’s 2G coverage reaches 99% of the population while 3G reaches 98%. EE's superfast fibre broadband service covers 74% of the UK population, and ADSL broadband service covers 98.7% of the population.

In the last few years, EE has received extensive independent recognition including being ranked the UK's best overall network by RootMetrics®; Best Network at the 2014 and 2015 Mobile News Awards; Fastest Network at the 2013 and 2014 uSwitch Awards; Best Network at the 2014 Mobile Choice Consumer Awards and the What Mobile Awards 2013 and 2014; Number One for Network Innovation at the 2013 Recombu Awards; Best Mobile Network at the 2014 Recombu Awards; Best Network for Business at the 2013 and 2014 Mobile Industry Awards; and Best Consumer Network at the 2014 Mobile Industry Awards.

Follow… us on

Facebook at: www.facebook.com/ee

Twitter at: www.twitter.com/ee

YouTube at: www.youtube.com/ee

LinkedIn at: www.linkedin.com/company/ee-uk

 

EE Interim Results for 6 Months Ended 30 June 2015

 

Mobile (ex. M2M/MVNO)

 

 

 

 

Q2/14

 

Q2/15

Movement

 

 

 

Subscriber Acquisition Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(SAC) per gross addition

 

 

(£)

 

 

68

 

 

63

(7.4%)

 

 

 

 

 

-Postpay

(£)

 

 

155

 

150

(3.2%)

 

 

 

 

 

-Prepay

(£)

 

 

6

 

5

(16.7%)

 

 

 

 

 

Subscriber Retention Cost (SRC)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

per gross addition

 

 

(£)

 

 

193

 

 

211

9.3%

 

 

 

 

 

Average Revenue Per User

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(ARPU) (monthly average)

 

 

(£)

 

 

18.9

 

 

18.9

0.0%

 

 

 

 

 

ARPU underlying growth yoy

(%)

 

 

 

 

 

 

2.2%

 

 

 

 

 

- Postpay

(£)

 

 

28.9

 

28.0

(3.1%)

 

 

 

 

 

- Prepay

(£)

 

 

4.3

 

4.1

(4.7%)

 

 

 

 

 

Voice ARPU (monthly average)

 

 

(£)

 

 

7.8

 

 

7.0

(10.3%)

 

 

 

 

 

Non-voice % of ARPU

(%)

 

 

58.9

 

62.7

3.8ppts

 

 

 

 

Minutes Of Use per customer per

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

month

 

 

(min)

 

 

200

 

 

198

(1.0%)

 

 

 

 

Movement

Q2 yoy

H1 yoy

0.6%

0.1%

2.6%

1.8%

0.1%

(0.5%)

2.2%

1.2%

(1.8%)

(1.8%)

0.4%

0.1%

 

17.4%

 

9.2%

 

(85%)

 

3.6ppts

 

2.2ppts

 

(7.1%)

 

- Postpay                                     (min)                311               296              (4.8%)