[3GScottishUser]

It's happening at an ever more rapid pace. Consolodation. The telecoms and entertainment industry are forging alliances and swallowing each other up to be able to offer customers all their entertainiment and communication needs from a single company.

Just for fun i thought it would be an idea to consider the most likely options for 3 UK. Hutchison Whampoa won't hold on to it forever, they are busisness builders and they tend to dispose of investments when they can get a premium for them (as with Orange). Thay might not be able to do that with 3 UK as the costs have been astronomical to aquire the licenece and build the network. Add to that the customer acquisition costs, high levels of customer dissatisfction and churn and the competition now providing them with a taste of their own medicine, it's just not sustainable unless HWL want to spend bucket loads of cash just to get out of the market later with no guarantee they'll get back the additional investment. I suspect the current 'reigning-in' of the UK operation has been a significant development. Perhaps one could say they have made their acquisition targets for the period but that seems fanciful when poor H3G UK Ltd has been the least succesful of all of the major 3 operations when measured by market share. With analysits now saying that 3 UK are well below critcal mass (15% of the market) other options have to be considered.

So who could make something of the 3 UK network if/when it becomes available?

Here's some suggestions (in no particular order):

BT - Now about to become a 'media company' distributing PPV and TV over improved ADSL. They used to be a partnet with Sky, selling their services but in 2006 they will offer a service that competes with Sky. They don't have their own mobile network but sell services through Vodafone UK presently. Perhaps they might be tempted to become a fully fledged fixed and mobile operator again if the price was right. They could then compete with the new Virgin Cable/Mobile entity and offer every option from a single company.

Virgin Networks - The new major cable and Mobile group which comprises the merged NTL/Telewest cable services along with Virgin's popular mobile phone product which currently uses T-Mobile's network. They could perhaps be tempted too as NTL were one of the companies that did'nt get a 3G licence when the auction took place. This new merged company would benefit from having full control over all its own services.

Cable & Wireless - They are now rolling out their 'Bulldog' broadband and bundling it with phone services. One can imagine they will shortly also offer TV services and a mobile network would fit well for them too.

T-Mobile UK - Have never really been that successful at attracting contract customers but very good at providing others with network services. They intend to invest £1.5 billion in the UK over the next two years. Consolodating 3's contract customers with their exitsing portfolio might be an attractive option, depending on the quality of of 3's customer base.

Telefonica/02 - Could be interested for the same reasons as T-Mobile but having made such an impressive stand against the competition over the last 2 years it does'nt look as if they need to buy customers 'wholesale'. 02 get revenues from the roaming agreement which backs up 3's UMTS as well so they dont need to own the network to profit from its existance.

Orange UK - Can't see France Telecom being interested, they already have a significant presence and intend to offer their own Orange branded broadband, Phone and Mobile packages in 2006.

Vodafone UK - Have a nice operation of their own in the UK and will probably look to other opportunities (Broadband/fixed line/entertainment) to expand. Perhaps if Virgin Networks don't aquire a mobile network they themselves might end up being bought by a company with the clout of Vodafone.

Sky - They are not a phone company, yet! They are an entertainment company with excellent content and could loose out when ISP's start to offer ADSL distribution of TV channels. Their solution could be to find alternative revenue streams and offer similar packages to Virgin, BT and Orange. They have recently bought and ISP (Easynet) so a mobile network could fit well with their long term ambitions. Never say never when Mr Murdoch and his offspring are involved.

What about others? NTT DoCoMo, bailed out and its hardly likely they'll return to the UK for something with such little market share. Same applies to KPN but Denmark's Tele-2 might consider it.

Lots of options but one can see where things are going. There is'nt a place in the UK for a full 3G network for 5% of the mobile market.

As we look forward to Christmas and the new year we shall have to keep an eye on developments as the pace of change increases and the entertainment and communications businesses converge further.

Just for fun you can vote in the poll above and leave comments below.

[Hands0n]

Whoever buys H3UK will have to have bucketloads of cash to spare as no 3G company will be at bargain basement price. Those 3G licences cost a fair fortune, and that is without the actual infrastructure costs and all else that goes with licencing and building out 3G networks.

I do not subscribe to the negativity relating to 3's business activities to date. They have been as successful as, perhaps, any of the PCN start-ups of the earlier years. What is a great pity is that they did not learn from history and merely set about making the same mistakes all over again. Even more unforgivable is that the people who did this had already a number of arrow holes in their backs from their previous experiences in building out Orange.

I believe that what 3 have demonstrated is that it is entirely possible to function as the 5th mobile networ operator in this tiny island, the UK. Something that I would not have considered prior. To be sure, they have fumbled and dropped the ball a few times but the incumbent network and handset technology are now well established. The problems suffered in the first days are consigned to history, holes and weak-spots notwithstanding. But then even the big four have places of no service or inadequate availability. And so the 3 network is here to stay in one form of ownership or another. The other Big Four's disdain for 3 is, I believe, to 3's advantage. While they wrestle with their internal difficulties in lowering tariffs and offering more for less, 3 are doing precisely that and bringing in the bread. True, it may not be enough just yet, but with only 3Mln customers they [still] have some way to go financial liquidity.

Customer retention for 3 is going to be a challenge. They [still] do very badly when things go wrong and really do make their customers quite fed up at such times. The key to customer retention is Customer Service efficiency and effectiveness. In that respect 3's CS operation is exceedingly poor (I'm being very, very kind here), and the trend by all organisations to relocate their CS to India is having similarly dire consequences. Only one major UK company to date (Abbey Bank) is bringing its CS back on-shore UK because of the poor service quality given to their customers. We can only hope that this is the beginning of a positive trend.

And so to the question, who will buy H3UK? My money is on BSkyB (Murdoch Corp) as they not only have the financial clout but H3UK would be a very positive acquisition for them to be able to compete with the forming "media companies". Murdoch will not be wanting the likes of the Big Four encroaching on his media territory, even though he currently uses at least one of them as a vehicle for his content. What a coup he would score if he was to have his own mobile network to accompany his sattelite delivery network. I forsee double bubble for his premier content, his own (3) customers buying the content from his network and other network customers buying his content sold via the other networks.

Yup, definitely BSkyB.