Carrier and parent of Orange and T-Mobile UK, Everything Everywhere has posted lower revenue for the third quarter of 2011 compared with the same period last year, citing regulatory cuts as the reason for the drop.

However, the company admitted that this was in line with its expectations and said its customer base was stabilising and that the firm was also successfully and steadily cutting costs.

The UK venture owned by France Telecom and Deutsche Telekom, reported revenue of £1.69bn ($2.72bn); 4.3 per cent less than what it made in 3Q10, but said that this was attributable to new regulation introduced by the UK’s telecoms regulator Ofcom. The regulation forced operators to cut the amount they can charge when receiving calls from other networks – without the impact of these regulatory cuts on mobile termination rates, the underlying revenue was up by 0.6 per cent.

The operator saw a net fall in customer numbers, losing 227,000 pre-paid users over the quarter. However, this rate of customer losses is less than previous quarters, suggesting that the customer base is beginning to stabilise.

Everything Everywhere also noted that 85 per cent of its new contract customers opted for smartphones and said that it was making good progress in cutting costs, claiming it was on track to make at least £3.5bn operational savings by 2014.

“Despite ongoing economic pressure and the impact of regulated cuts to mobile termination rates, our business performance is in line with our current expectations,” said CEO Olaf Swantee.

“The success we’ve had adding nearly 900,000 postpaid customers in the last year is helping to drive underlying service revenue growth. I am particularly pleased that we are attracting high numbers of new smartphone customers and have the lowest customer churn in the industry.”

Dario Talmesio, principal analyst – head of Europe at Informa Telecoms & Media said that the results matched his expectations.

“Overall, the results were broadly in line with what we expected and what we expect to see from the overall market this year.”

He added that the firm is still adjusting to the merger between T-Mobile and Orange, and is beginning to form its identity.

“The company is looking more like an Orange company, rather than a T-Mobile one. They’re pushing more towards contract and high-value customers, and in that sense, they’re betting more on the Orange brand than the T-Mobile one.”