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LTE does not assure cellco profits, results show

The UK's EE sees 4G growth, but falling overall revenues, while China Mobile hit by subsidy costs and Wi-Fi challenges


Published: 23 April, 2013

READ MORE: Financial | China | Everything Everywhere | LTE

China Mobile aims to step up its investment in LTE following poor quarterly results, but 4G-based upticks can be slow to materialize, as the UK's only LTE operator, EE, revealed in its own first quarter figures.

The UK's leading cellco - which launched LTE services last year ahead of its rivals, by refarming its 1.8GHz GSM spectrum - said its Q113 revenues fell by 5.4% year-on-year, to £1.42bn, despite its controversial 4G headstart and an intensive marketing campaign behind the high speed services. It blamed a combination of the local economic climate and regulatory actions for the decline and said LTE uptake was a highlight of the quarter.

Although the France Telecom/Deutsche Telekom joint venture did not detail ARPU for its LTE service, it did say 318,000 subscribers had signed up for it since its launch, and it is on target to increase that total to one million by year end.

Overall, EE added 166,000 net new postpaid customers, but its prepaid base shrank by 571,000, leading to a net loss of customers for the company as a whole. The company ended the quarter with 26.44m subscribers, down 2.9% on the year-ago quarter, a trend which shows how vital it is for the cellco to build on its 4G momentum, to boost overall numbers and the percentage of high value customers.

CFO Neal Milsom said in a statement: "Today's results are in line with our expectations, and we are making good progress focusing on high value segments."

This will get tougher once Vodafone, O2 and 3UK launch their own LTE services, and EE has already reduced some of its initial tariffs, criticized for being too high, presumably in anticipation of competition.

The EE results make the general point that, while LTE may be essential to keep cellcos in crowded markets competitive, they need to keep costs down too - EE said it had decommissioned 548 base stations during the quarter, bringing its total to 3.207 as it converges the former Orange and T-Mobile systems. And other factors must go in their favour too, including regulatory policy. EE has criticized UK regulator Ofcom's policies on mobile termination rates, which have depressed revenue growth for several quarters.

Round the world, China Mobile also needs action from its regulator, particularly to enable it to convert its massive 'trial' TD-LTE networks to full commercial status, which will help it accelerate expansion and add new services. Its key weapon to fight against stagnating financial results is to invest more heavily in 4G, to improve its competitive position against rivals China Unicom and China Telecom, and reduce reliance on its unsatisfactory TD-SCDMA 3G infrastructure.

The company recently said it would boost its investment in LTE networks by nearly 50% this year, helping to drive total capex up to over $7bn for 2013.

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