Orange and T-Mobile owner Everything Everywhere has reported a decline in customers and sales in its latest financial results.
The mobile operator's second quarter results showed its overall customer base fell from 27.9 million last year to 27.5 million in the same period in 2011, resulting in a net loss of 188,000 customers for the quarter.
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Prepay customers declined from 15.6 million in 2010 to 14.5 million in 2011. Sales also fell from £1.72bn in Q2 2010 to £1.66bn in 2011.
Despite the decline, Tom Alexander, CEO at Everything Everywhere, said the company grew its net contract customer base by 236,000 and achieved record smartphone sales in the quarter. Increased smartphone data use also drove data sales up by 8% year-on-year.
"Contract customer churn is now at our best ever level at 1.1% and two out of three customers are selecting 24-month contracts as they go to higher-value smartphones," Alexander said.
"We're seeing strong momentum in signing new high-value contract customers, with a net increase in Q2 of 236,000 contract customers. We continue to see growing smartphone adoption, with 85% of customers signing a new contract opting for a smartphone, up from 84% in the first quarter of 2011 - and 64% a year ago."
The company acknowledged commercial pressures, including "macro-economic uncertainty, high competitive environment and regulation" will influence its annual outlook.
Ofcom wants to cut the wholesale charges for connecting calls to mobile networks by 84% over the next four years from 4.18p per minute to 0.69p. However mobile operators say wholesale charges should fall only to 1.25p.
Tom Alexander is due to leave the company at the end of August due to personal reasons. Olaf Swantee, currently France Telecom's executive vice-president for operations in Europe, will replace him from 1 September 2011.
Orange launched the UK's first contactless mobile payments services in partnership with Barclaycard in May 2011.
The company recently migrated its IT infrastructure to T-Systems and signed a five-year IT testing services outsourcing agreement with Capgemini.
BT and Everything Everywhere are seeking 200 volunteers in South Newquay, Cornwall to trial a joint high-speed 4G broadband initiative.
Vodafone's latest financial results show the company also lost 139,000 UK mobile customers within three months. However, UK enterprise service sales increased by 5.3% in Vodafone's first quarter of 2011, compared with the same period in 2010.