4G growth pushes EE closer to London float
Markets brace for £10bn float of surging mobile giant EE this year
Thursday 25 July 2013
The strongest-ever quarterly earnings from the UK's biggest mobile phone group, Everything Everywhere, yesterday boosted the chances of its £10bn float 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 it was allowed to launch its high-speed 4G services well ahead of 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.
Olaf Swantee, its chief executive, 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 the recent doubling of 4G speeds in several cities, including London, will give EE the edge when rivals finally get around to launching their services. "We are bringing in more mid-range phones and services for 4G while the iPhone 5 won't actually work on Vodafone's or O2's 4G networks," he said. "The only country that has 4G speeds as fast as ours is Korea."
Mr Swantee said any decision on an imminent float was up to his joint shareholders. "They have both appointed banks to advise them, but when and how is up to them," he said. "Orange may 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."
Earnings before interest, tax, depreciation and amortisation (Ebitda) rose 9.1 per cent to £734m in the three months to the end of 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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