4G demand pushes EE closer to £10bn float
Wednesday 24 July 2013
The strongest-ever quarterly earnings from the UK’s largest mobile phone group, Everything Everywhere, today boosted the chances of its £10 billion flotation on the London stock market taking place by the end of this year.
EE — formed by the merger of Orange UK and T-Mobile, Deutsche Telekom’s UK network, three years ago — has taken full advantage of the fact that it was allowed to launch its high-speed 4G services well ahead of its rivals Vodafone and O2.
The number of customers switching to 4G doubled in the past three months, taking the total to 687,000 — meaning that EE will comfortably smash its target of one million 4G customers by the end of 2013.
Chief executive Olaf Swantee said: “The latest quarter shows real improvement. That comes from both the number of new customers taking out contracts and from cutting our costs. One in two new business customers is taking 4G against one in four at the start of the year. Across the board, customers who switch from 3G to 4G are producing 10 per cent higher revenues for us.”
He also believes that the recent doubling of 4G speeds in several major UK cities including London will give EE the edge when its rivals finally get around to launching their services. He said: “We are bringing more mid-range phones and services in for 4G while the iPhone 5 won’t actually work on Vodafone’s or O2’s 4G networks. The only country in the world which has 4G speeds as fast as ours is Korea.”
Swantee insisted that any decision on an imminent initial public offering was up to his joint shareholders. He said: “It is about what they think. They have both appointed banks to advise them but when and how is up to them. Perhaps Orange will say more when it reports tomorrow.”
He added: “There are advantages and disadvantages for an IPO, for a sale to private equity and for remaining as we are. An IPO would certainly make EE even more British, which is particularly important in the business-to-business market where we are still in second place even though we are the country’s biggest mobile company.
“I am quite open minded about what should happen. It is interesting that EE is one of those rare examples of a joint venture which has really worked. What I am concentrating on is ensuring that we stay ahead and are the best operator in the UK.”
Earnings before interest, tax, depreciation and amortisation rose 9.1 per cent to £734 million in the three months to end-June. EE has set itself a target of hitting an ebitda margin of 25 per cent by the end of 2014.
Orange has appointed Morgan Stanley and Bank of America Merrill Lynch to advise on a potential EE float while Deutsche Telekom has brought in JP Morgan. EE itself has yet to choose an adviser.
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