Lack of ambition would presumably not be the most obvious failing of a new company which styles itself under the label “Everything Everywhere” (EE for sake of brevity). The name was chosen to represent the combined UK operations of both Orange (France Telecom) and T-Mobile (Deutsche Telekom), which now form a 50-50 joint venture and which announced their first results at an investors meeting in London yesterday. It would be a tad unfair, given the company’s core network technology assets, to assume that EE would be branching out into home pizza delivery any time soon, even though casual observers might assume “everything everywhere” might encompass all manner of exciting goods and services. Nevertheless, it was perhaps a little disappointing to discover from EE’s tagline – “Creating a new mobile champion” - that the network will apparently only serve network-based communications and applications to customers who happen to be moving around at any given time.
Taglines are tough to get right, of course, and inevitably cannot please everyone. As the management presentations progressed, it became clear that mobility was not after all an absolute requirement for any future products and services which EE may choose to emphasise. Indeed, although they remain well hidden beneath the inevitable deluge of mobile phone and wireless network-centric commentary, fixed broadband and IPTV (for big screens) are very much alive and kicking as key elements in EE’s strategy. Executives even went as far as to designate IPTV as a “key part of a converged play” and that fixed broadband was “strategically hugely important”.
This should come as a relief, perhaps even a surprise, given that fixed networks have played no part in T-Mobile’s UK business to date, and have been losing money (£80m in 2009) from the few customers Orange alone had managed to acquire. Given this performance the new venture might have been forgiven for abandoning fixed network businesses altogether as a lost cause. Instead we were assured that Orange’s broadband profitability was “already improving”, and that the recently announced deal to outsource network, IT and customer service to BT will have the desired impact of returning “Home” EBITDA to positive territory by 2012.
Specifically EE will increase targeting of home broadband to its existing Orange mobile customers initially, and also introduce it to T-Home customers during 2011. Marketing will also encourage take-up of fixed voice by Orange and T-Home customers, since EE claims that the BT deal means that acquiring fixed voice customers would no longer have a negative margin impact on overall performance as was previously the case. The company is planning for 80% of new broadband customers to include fixed voice as part of their package.
Potentially even more significant will be EE’s plans for IPTV, once they are finally confirmed. The company announced that it is looking at IPTV opportunities, including Canvas, the BBC-led over-the-top initiative. It would not join Canvas as a shareholder, but is considering affiliate membership. Whatever decision is eventually made on IPTV, EE will not become a major content player, which will come as a relief to shareholders and a disappointment to content rights holders looking for new competitors in the distribution market in order to boost values. EE even has the UK’s long-awaited fibre rollout on its radar. Its agreement with BT allows for access to the new fiber network by EE, although no specific plans have been agreed.
Other emerging opportunities on EE’s radar include M2M (machine-to-machine), in which the company includes connected home devices and home automation as specific “high growth” verticals. M2M is a broad concept which may certainly one day lead to services and applications which approach “everything everywhere” capability. In the meantime, EE has probably has enough on its plate just to meet its growth and profitability targets in its core mobile and broadband businesses.
Client Reading: Global Broadband Forecast 1H2010