LONDON (Reuters) - Britain's biggest mobile operator Everything Everywhere posted lower revenue in the third quarter due to regulatory cuts but said its customer base was stabilizing while it was also making good progress in cost-cutting.
The company, which runs T-Mobile and Orange brands in the UK, said its total customer base shrunk by 1.4 percent to 27.5 million from the previous year.
Everything Everywhere, which was created by a tie-up of France Telecom's Orange UK and Deutsche Telekom's T-Mobile UK in 2010, reported turnover of 1.7 billion pounds ($2.7 billion) on Wednesday, down 4.3 percent compared with a year-earlier.
Without the impact of regulatory cuts on Mobile Termination Rates, the underlying revenue was up by 0.6 percent. The company has also made good progress in signing up contract customers, and selling more expensive smartphones.
It said 85 percent of its new contract customers opted for smartphones such as Apple's iPhone, Research in Motion's BlackBerry and HTC phones in the third quarter.
Everything Everywhere, which has focused on contract customers who are more profitable for operators than pay-as-you-go users, said it had added a net 185,000 contract customers in the third quarter -- the same figure as in the year-earlier period.
The joint venture lost a net 227,000 prepay customers.
Service revenue which reflects the ongoing amount generated by customers, excluding the impact of regulatory measures, was up by 3.8 percent or down 1.9 percent when the measures were included.
"The success we've had adding nearly 900,000 postpaid customers in the last year is helping to drive underlying service revenue growth," said Chief Executive Olaf Swantee, who replaced Tom Alexander on September 1.
The company, which was formed to help its parents compete in the cut-throat UK market, has retained both the Orange and the T-Mobile brands but it has also trialed new stores under the Everything Everywhere name.
Everything Everywhere said it was making good progress in cutting costs and said it was on track to make at least 3.5 billion pounds worth of synergy savings by 2014.
The joint venture, which operates from more than 700 retail stores across the UK, competes with Telefonica's O2, Vodafone and Hutchison Whampoa's 3 UK.
($1 = 0.626 British Pounds)
(Reporting by Michelle Martin)