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3GScottishUser
30th May 2007, 08:57 AM
From FT Europe (29/05/2007):

New 3 UK chief given tough objectives By Andrew Parker

Kevin Russell has been given the task of bringing 3 UK to profit. It is no easy matter for the mobile operator’s chief executive: in 2005, the last year for which accounts are available, 3 UK made a pre-tax loss of £1.4bn.

That loss was a little smaller than in 2004, but the scale of Mr Russell’s job is underlined by how 3 has yet to reach break-even at the level of earnings before interest, tax, depreciation and amortisation.

“My key objective is to get this business ebitda positive as soon as possible,” says Mr Russell, who became chief executive this month.

3 is the UK’s fifth-biggest mobile operator, with 3.9m customers. However, 3’s hopes of profitability could be hit by a decision by Ofcom, the telecommunications watchdog, to require a 45 per cent cut in how much it charges for connecting calls to its mobile network.

Ofcom wants to bring 3 within a price controls regime for the first time and force it to cut its charges from 10.7p a minute to 5.9p a minute by 2010-11.

Other leading UK operators such as O2, Vodafone, Orange and T-Mobile have also been told by Ofcom to cut their charges, which are known as mobile termination rates.

However, the big four can cope with the cut, partly because the revenue from their charges is roughly equivalent to what they pay out to rivals when their customers make calls to other mobile networks.

Mr Russell says 3 is a “net outpayer” to its rivals. 3 paid out £50m to the leading operators in 2006 and this figure could more than double by 2010-11 because of Ofcom’s decision.

3’s problem is rooted in how many of its customers have two mobile phones. After switching to 3, about 30 per cent of its customers retain a handset with their old operator for incoming calls. This results in 3 having a disproportionately low number of mobile calls made to its network, and hence the £50m payment to the leading operators.

Mr Russell blames the two handsets phenomenon on the UK’s “failed” regime for enabling customers to take their phone numbers with them when changing mobile operators. Before joining 3 UK, he was head of 3 Australia, where it usually takes two hours to move phone numbers from one network to another. In the UK, it takes five days.

Mr Russell is now calling for reform of the UK number portability regime as well as appealing against Ofcom’s decision to require it to cut its mobile termination rates.

However, 3 risks being seen on the wrong side of the argument because if the appeal before the Competition Appeal Tribunal is successful it would stick with its existing rates, which are much higher than those of the four leading operators.

Some of the operators privately admit the rates have been too high and enabled them to generate big revenues indirectly from fixed-line phone users. This is because fixed-line companies such as BT also pay the operators for connecting calls made to their mobile networks.

3, for example, received £40m from the fixed-line companies in 2006. Given that 3 paid out £50m to the mobile operators, it meant it was £10m worse off overall. But that £10m figure could increase to more than £100m by 2010-11.

Meanwhile, Mr Russell dismisses suggestions that Hutchison Whampoa, 3’s Hong Kong-based owner, has charged him with preparing the business for a sale.

He is busy developing an effective strategy for 3. Bob Fuller, his predecessor, presided over a dash to increase 3’s customers in 2005 and 2006 that backfired when many of them defected to rivals.

Mr Russell’s optimism about the future is rooted in his belief that if 3 can raise its game, the leading operators are vulnerable. “We have a leading array of services that leverage off the 3G capability,” he says.

http://www.ft.com/cms/f58bca76-0d48-11dc-937a-000b5df10621.html

3GScottishUser
30th May 2007, 09:35 AM
Here we go again..... previously 3 blamed poor quality customers (low spenders, bad debt etc) for their failings. Now they are moaning that 1/3rd of their customers have 2 mobiles and use their existing one for receiving calls denying 3 revenues!!

Well there could be many reasons for this but I can think of 2 specific ones and they are both the responsibility of 3 UK themselves.

1. Customers have a poor level of confidence in 3 UK's network so they maintain their original mobile to protect the continuity of their contact with friends and family. The offshore customer service will not have helped build their confidence either.

2. Huge bundles of cheap voice or text make buying a 3 handset viable for outgoing use only! I bet there are 1000's of customers who have twigged that they can wipe out mobile calls on their landlines for £15 a month! 500 mins at average landline rate (about 12p/min) = £60 vs a videotalk freebie handset with 500 x/net mins a month for £15 a month!! With many younsters now calling mobiles the above is an obvious and cost effective solution but one which costs 3 dearly.

3 claim they have the innovation to develop new services to capture market share. That seems like the only way they will ever make any impact as the previous dumping of cheap handsets and cheap deals appears to have failed and the honeymoon is now over for 3G operators. If Ofcom's termination cap is'nt accepted then the EU has stated it will challenge with an even tougher termination cap and it has the ultimate authority.

Meantime 3 had better get motoring with x-series before Orange, Vodafone and 02 strike back with their own 'all you can eat' mobile Internet offerings. I suspect Kevin Russell has one of the toughest jobs in the UK battleing 4 incumbents who are embracing convergence in a saturated market with no clearly defined 3G killer application.

miffed
30th May 2007, 12:04 PM
Mr Russell’s optimism about the future is rooted in his belief that if 3 can raise its game, the leading operators are vulnerable. “We have a leading array of services that leverage off the 3G capability,” he says.

Oh dear , its worse than I thought - they haven't learned a thing !

Everyone , but EVERYONE I talk to , that uses Three , say the same thing ... Three are OK as long as you never have to talk to CS , how come this is apparant to all except 3 themselves ?
Simple - want to save your network ? Move CS to the UK and improve it