[3g-g]

Ok, this is a tad garbled, but it's from one of these stock / market watch type websites, however a couple of points to take from it. If you were running a business, even with the financial clout you have, would you be happy still not being in the black 'till 1H2009? Also, there's talk of 3Italy merging with fixed and mobile operator Wind as a way to ditch the company. Surely this would seem like a better way for 3UK to go here too? Sell all your assets and customers off to a more established operator here?



Hutchison +1% to HK$71.40 with 8.9 million traded, in line with recent sessions; Hutch likely helped by Merrill Lynch resuming coverage with Buy rating, HK$90 target based on sum-of-parts valuation. But fine print of long report highlights some negatives; Merrill doesn't expect Hutch to exit 3UK anytime soon given investment of about US$13 billion in building 3G UK ops. Says 3 Italia could merge with fixed-line, 2G player Wind but benefits not certain, would depend on deal terms. For 3G as whole says funding including capex, opex, interest expenses won't peak until 2008, won't hit free-cashflow break even until 1H09. 3G ops net debt now huge HK$30.50/share, Merrill estimates 3G ops have HK$21.80/share in enterprise value.

[Hands0n]

Hmmmmm. 2009 is only two-and-a-bit years away now, well within the radar of yer average accountant, and so might provide Hutch with a good reason to stay the course. Abandoning 3 UK and putting it into liquidation would be financial suicide, the investment (said to be US$13 bln) is no small beer and Hutch would be unlikely to want to take that kind of hit.

If 3 UK can be brought into financial balance it may prove a more saleable asset than it is today. There can be few that would want to take on such a debt-ridden company. Unless there is a confidence that the 2009 target will be met, and that is by no means a certainty with 3 establishing for itself such a poor Customer relationship at the hands of its Customer Services (sic), 3's classic Achilles Heel which they have steadfastly refused to remedy.

Stelios is in the market for a replacement for the MVNO that they ran easyMobile on. Has he the cash and the stomach for something like 3 UK? I rather doubt it.

It is interesting that Merrill are talking 3 up when no-one else is. Perhaps they have a quiet deal under the table to manage the sale of 3 when the time comes. That would be very lucrative for Merrill, at least.

[3GScottishUser]

I can see why HWL would want to keep 3 going in the UK. They have spent £5 billion on it so far.

But on the other hand I have problems seeing where they can get customers from, especially ones which will spend what they need to earn on their services.

The days of the land grab through dealers is coming to an end as networks, including 3, focus on their own distibution to reduce costs and churn.

Problem for 3 is that they have a very small user base and moving to direct dealing is a fine prospect but it'll take time and will cost them far more in the short term than the others who have 3-4 times the clout they have in the High Streets. Meanwhile the big 4 have all the cards and if 3 continue to deal through CPW etc they will simply replicate the mistakes of the past and be the churn incentive that retailers know are easy to get folks onto and even easier to churn off of...

With 60% of the UK on Pre-Pay 3 have abdicated a huge proportion of the market to the others thanks to silly uncompetitive and expensive schemes like WePay.

They (3) claim they have lots to make revenues from, like downloads, MSN, Internet Access etc... but they include lots of those in tariffs that cost the same as other networks for no extra!! So they make nothing extra and worse they now offer less in terms of basic services on a £ for £ basis... so those extras now appear to cost and thats bad if you only want voice and texts!!

3 UK have another big problem... convergence... Orange, Vodafone, 02 and Virgin are already or in the process of combining mobile, telephone and broadband services. One other issue is critical mass... numbers of customers. Vodafone can do deals to gain advertising with 16.8 million customers to offer free services... but it will be hard to replicate that with a fraction of that potential audience.

HWL might have spent £5 billion but there are many reasons why their original partners in the UK business (NTT DoCoMo & KPN), got out when they did even when it cost them dearly and they lost most of their investment. Perhaps they saw what was coming and the short term loss was a better prospect than a continual input of cash.