EE Posts Record Profit Margin

EE has released its preliminary results for H1 2013 and reported profits of £734m, an increase of 9.1 per cent year-on-year.

Although this came on turnover of £3.2bn, which was 3.1 per cent lower than a year earlier, it gave the company its largest ever margin of 22.9 per cent, an increase of 2.6 per cent year-on-year.

 EE’s chief executive Olaf Swantee said the group aims to increase this margin to 25 per cent by 2014 by increasing ARPU and generating cost savings. Although the company’s capital expenditure grew by £295m in H1 because of its investment in 4G, a 20 per cent growth year-on-year, the company also made cost savings by reducing its retail estate by 130 stores to 600.

EE added 216,000 contract customers in Q2 2013, reaching 14m, along with seeing its lowest ever rates of churn from these customers of just 1.1 per cent – its ninth consecutive quarter at or below 1.2 per cent. But the company also lost 1.9m pay-as-you-go customers as it moved its focus to selling 4G handsets with postpaid contracts. 

It is now seeing double the rate of 4G adoption compared to the first six months after launch and now has 687,000 4G customers – up from 318,000 at the end of March. The company says the majority of new and existing customers are now choosing a 4G contract and handsets and it is on track to exceed its 1m 4G target by the end of the year.

EE says that existing customers who migrate over to 4G produce an ARPU increase of 10 per cent. Data usage made up 41 per cent of ARPU in Q2 2013, up 12 per cent on the same quarter in 2012.

Its total usersbase for Q2 2013 was 27.5m, a decrease of 2.3 per cent year-on-year.