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Network upgrading punches Everything Everywhere in the wallet

Cellco's losses widen, eagerly awaits 4G dominance

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Mashed-up mobile operator Everything Everywhere is still losing money as it merges its Orange legacy systems with its T-Mobile systems, invests in its network and taps its foot impatiently for Ofcom's 4G nod.

The UK mobe-and-broadband business is a joint venture between Deutsche Telekom and France Télécom, formed through the merger of Deutsche's Orange and France Télécom's T-Mobile networks.

EE said its pre-tax loss for the first half of this year hit £104m, more than twice its £39m loss for the same period in 2011. Revenue only dipped slightly, from £3.37bn last year to £3.31bn this year, but much of that was spent on sorting out its network and restructuring.

The mobile operator said in December last year that it would be upping investment in the network to more than £1.5bn over three years. EE is also preparing things as much as it can for the rollout of 4G, something it hopes to do before Telefonica (O2), Hutchison 3G (Three) or Vodafone can.

EE has talked plenty about improving its equipment for better coverage and so that it can easily be upgraded to 4G once it's allowed to start supplying 4G services. Just yesterday, Ofcom announced that a 4G auction for spectrum in the 800MHz and 2.6GHz bands would start at the end of 2012, with a view to launching services by the end of next year. However, EE has been pushing to go ahead by the end of this year, using spectrum it already has in the 1800MHz band.

The company said that Ofcom's upcoming spectrum auction was a "crucial step", but it has made it clear that it still wants to go ahead with its own plans.

"The auction is only one step towards bringing 4G to Britain," a spokesperson said. "Everything Everywhere is committed to bringing 4G to the UK this year, and the next milestone will be the regulator's response to our request to roll out 4G over our existing 1800MHz spectrum without further delay."

The other operators have been vocal in their opposition to EE's plan, for obvious reasons, but Ofcom has indicated it might allow it, although it hasn't come to a firm decision yet.

Despite the mobile operator's first-half losses, and the lack of a clear answer on 4G from Ofcom – which could potentially make a big difference to the operator's bottom line – EE's statement was relatively optimistic, talking up smartphone penetration and data revenues.

The firm said the proportion of contract customers using smartphones had risen to 72 per cent from 61 per cent in the second half of last year and 91 per cent of new contract customers went for smartphones. EE has also succeeded in getting more users onto contracts, a more lucrative revenue stream than prepaid customers. Half of its customers are now on contracts and 79 per cent of them are signed up for two years, it said.

The cellco said it had handed over £543m in dividends to shareholders for the first half of the year and still had access to enough funds to see it through, including money raised from issuing bonds. ®

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