T-Mobile lifted by contract demand

UK mobile phone operator T-Mobile today posted rising revenues as more customers signed up to its contract services.

The German-owned firm said the number of customers signed onto contract mobile phone services grew by 25% over last year to 3.7 million, boosting annual revenues by 8% to £3.1bn (€4.6bn) during 2006.

T-Mobile said the introduction of its Flext tariff helped drive the growth at its more lucrative contract division, which now constitutes 22% of total customers, up from 17% a year ago.

Net contract additions totalled 733,000, a rise of 406% on the 145,000 net customers added last year.

Flext enables customers to set a limit on how much they want to spend per month and divide this up between texts and calls. This compares with traditional contracts which sell users a set bundle of texts and call minutes.

In addition, the company said customer churn – the number of customers leaving its network – decreased by 0.8% to 2.1% a month.

However, the cost of adding contract customers, including the provision of handsets, meant earnings at T-Mobile UK fell by 24% to £665m (€986.8m).

The company said this impact would be short term as the new tariffs and reduced churn would see higher levels of profitability per customer. The introduction of 18 month contracts also helped reduce company losses on new handsets.

Average revenues per user grew by 5% to £20 (€29.7m) a month, also driven by increasing uptake of the Flext tariff, which has been taken up by 1.3 million customers since its launch in March.

T-Mobile, owned by Deutsche Telekom, has around 1.7 million customers in the UK.