U.K. EE Finds LTE a Mixed Success

Major capital spending programs undertaken by service providers have implications. Such programs, even when necessary, divert cash that might have been used some other way, for example. Long term, the investments often are quite necessary. In the near term, the programs can hit earnings. 

Also, near term, investment sums can vastly outweigh the upside from new services, customer gains or boosts to average revenue per account. That seems to be the case for U.K.-based EE, which launched Long Term Evolution services using existing 1.8 GHz spectrum. 

First quarter 2013 revenues fell by 5.4 percent, year over year.  The launch of LTE services also has had other effects, such as boosting the amount of money EE now spends on device subsidies. 

Granted, it is too soon to make a full assessment. EE is early in its launch of 4G service, and LTE customer penetration is only about 1.2 percent. 

Longer term, higher LTE revenue is expected. The issue is how much higher revenues can be lifted, and how operating costs might change. 

Few think LTE will prove a "problem" longer term, as users switch to use of smart phones and smart phone apps that consume more bandwidth. That should translate into significantly higher user spending on data services. 

On the other hand, the full business case has new device subsidy and small cell implications. Those elements will offset the higher revenue. Nobody seems to think the net result will be anything but positive. But "how positive" will be a bigger issue as competition intensifies.