[3GScottishUser]

Hutchison Whampoa have just published their interim results for 2007 which provide a rare insight into the customer base for their 3 mobile service.

Last Intereims reported a UK + Ireland base of 3.75 million. The latest accounts show that they have slightly improved this total to 4.095 million. Revenues per contract user was within 1% of the previous period.

To view the latest HWL results visit the link below:

http://www.hutchison-whampoa.com/upload_docs/2007/08/Corporate/1942/1942_eng.pdf

Some of the highlights of the report relating to UK + Ireland are printed below:

"The new management team at 3 UK has made good progress during
the period and is continuing to target higher-value contract customers,
and to limit its activity in the prepaid market. 3 Ireland has also
continued to grow steadily. The combined registered customer base
increased 3% during the period to total 4.0 million at 30 June 2007
and currently stands at over 4.1 million. Contract customers
represented 60% of the registered customer base at 30 June 2007 in
line with the end of 2006 and contributed approximately 90% of the
revenue. Monthly churn, which for prudence takes into account the
potential disconnection of inactive prepaid customers on the registered
customer base, has continued to improve. Combined prepaid and
contract customer churn for the first half of 2007 averaged 3.6%,
compared to the 3.8% in the second half of 2006. Encouragingly, the
churn rate of contract customers, which represent 90% of the revenue
base, stabilised at 2.5%, in line with the second half of 2006. Active
customers as a proportion of the total registered customer base
remained in line with 31 December 2006 at 75%. Despite the adverse
impact of new regulations introduced in April 2007 which reduced
interconnection and roaming fees, ARPU, on a trailing 12-month
average basis improved by 1% to £46.81. Non-voice revenue, on a
12-month trailing average basis, also improved from 29% of total
ARPU to 32%, or £15.00 versus £13.44 in 2006. Combined revenue,
in British pounds, was 16% above the first half of 2006, but 1% lower
than the second half of last year reflecting the adverse effect of
regulated interconnection fee reductions introduced in April.
Recurring EBITDA before all CACs, in British pounds, continued to
improve and was 31% better than the comparable period last year. 3
UK significantly reduced its customer acquisition costs during the
period through various initiatives resulting in lower distribution costs
and lower average handset costs. Average per customer acquisition
cost reduced 17% compared to the second half of 2006. Total CACs
were reduced by over £160 million or 43% compared to the same
period last year. As a result, 3 UK’s cashflow results improved
significantly during the period. Recurring LBITDA after all CACs, in
British pounds, reduced 96% compared to the same period last year.
During the period, the Group refinanced certain non-Sterling
borrowings with Sterling bank loans to create a natural currency hedge
against the 3 UK assets denominated in Sterling and recorded a
foreign exchange gain of HK$368 million. The network upgrade to
roll out HSDPA has commenced in major cities and is progressing
satisfactorily. 3 UK is also reviewing network sharing and other
infrastructure sharing joint venture opportunities to further reduce
costs and enhance its coverage."

Note: Interconnection and roaming fees for the period relating to the results were not altered significantly. Roaming changed in July/August 2007 and Termination pricing is currently subject to Ofcom's open consultation. Interconnection fees to other mobile networks were reduced in 3's favour by Ofcom after an investigation. The reduced interconnection fees 3 proposed were retrospectively imposed.

One wonders what the company definition of a 'higher value contract customer' is looking at the prioritisation of £15/20 deals on the 3 website and in their High Street stores?

[3GScottishUser]

Some early comment from The Financial Times:

Hutchison Whampoa, Li Ka-shing’s global flagship, cited a modest improvement at its struggling 3G telecommunications unit as the conglomerate reported an otherwise strong 53 per cent increase in net profit to HK$28.8bn (US$3.7bn).

Losses before interest and tax at Hutchison’s 3G arm, whose biggest markets are in the UK and Italy, narrowed 6 per cent over the same period last year to HK$11.3bn.

Mr Li, Hutchison chairman and Hong Kong’s richest man, said that the 3 Group met an important internal benchmark in achieving “positive monthly [earnings before interest, taxes, depreciation and amortisation] after all CACs” – a metric combining the traditional earnings measure minus customer acquisition costs.

“This is an important milestone,” Mr Li said ahead of his company’s results briefing. “It means that overall the 3 Group’s total revenue from the business is now expected to cover both running operating costs and the costs of acquiring and retaining customers.”

Hutchison’s HK$195bn investment in 3G has generated significant losses over recent years, although these did halve in 2006 to HK$12bn. The 3G unit has overshadowed perennially strong performances from Hutchison’s other divisions. Its container port operations, accounting for 28 per cent of group earnings, are the world’s largest.

Hutchison’s results have been bolstered by a series of asset disposals over recent years. On Tuesday the group’s emerging markets telecom arm, HTIL, booked a one-off gain of HK$69.3bn on the sale of its Indian operations to Vodafone. HTIL distributed HK$16bn to its parent in the form of a special dividend and retained another HK$35.8bn for future reinvestment.

In June, Hutchison increased its stake in HTIL from 49.75 per cent to just over 50 per cent, making it a subsidiary and allowing Hutchison to consolidate HTIL’s cash hoard into its accounts.

http://www.ft.com/cms/s/0/92bb86ba-5150-11dc-8779-0000779fd2ac.html

[3GScottishUser]

Limiting it's pre-pay activity which according to the interims has increased it's user base by 100,000!!

Thats 1/3rd of the total new users!!

Eh?

[Ben]

Still, the other nets take on majority prepay do they not? So I suppose, relatively speaking, that's a good contract percentage.

[gorilla]

I see they are claiming 32% of revenue from non-voice services i.e. the £5 a month included in a lot of tariffs! or presumably sms? Still at least if they believe their own figures, data is a key area for them and one that can surely only grow, especially with their 'mobile broadband' offerings.

[3GScottishUser]

I suspect a cold hard fact has hit HWL and that is 3 UK is not going to be saleable anytime soon. So it looks like they have decided to get whatever they can for their services including sharing the network and rolling out anything that has the possibility to generate revenues.

I think they are simply being realistic now and there is a possibility that some customers might manage to get a bargain. Come to think of it another telco might get a bargain if they can get a deal sharing the 3 network but if a new player arrives 3 could end up making a rod for their own back!

[3g-g]

If 3 manage to persuade one of the other UK networks to take up a RAN sharing possibility that can only be good for whoever takes the plunge, so we'll exclude Orange and Vodafone as they're supposedly doing that together. So leaving T and O2... let me think, O2's 3G network is pretty sparse, and 3UK have the largest UMTS coverage over anyone... imagine O2 suddenly becoming the largest, geographically based UMTS operator by merging RANs with 3UK. It's a strong contender.

Stop rolling out 3G. Done. Get the iPhone. Done. Do deal with 3UK. Done. Become largest 3G services operator in one deft swoop. Done!

[Ben]

It's a great theory. The GSM deal with Orange is a bit of a sticking point, though. I guess technically it isn't, but it's just messy to have a situation where Orange provide GSM to Three, who provide UMTS to O2.

[3g-g]

One day...

... there'll be one network, someone will run it and maintain it, and everyone will be on it offering different services, everyone will have the same coverage, there'll be no difference and when it breaks down... we'll all suffer together so no-one can complain!

It's a vision I have :)

[Ben]

Well, I certainly don't think we need five infrastructure providers, providing the same damn infrastructure. I mean, talk about needless duplication.

[solo12002]

Just like Broadband and cars. I mean why not make us all drive smart cars. Have to say i agree with your point, its even more fing silly when the networks in NI are the same in the south of Ireland ie:

O2
Vodafone
Three

And all but three charge you roaming rates for walking 2 feet over a so called border? Beat that one

[Ben]

I thought O2 and Three had sorted out the roaming issue?

Broadband is the same technology supplied by many different providers, yes, but every broadband provider doesn't have its own network that services the whole of the UK. Many are, for the most part, using parts of BT's network. Others provide their own services to certain areas. Some differentiate themselves on low latency or high speed. In any case, they all connect up to form just one network.

Cars? Smart cars? LoL! Ok, well, the roads are one infrastructure that we all pay to share... we don't have 5 road companies all providing the same roads, and we have to pick one for paying our dues to and driving on.

The mobile phone networks, however, are all providing essentially exactly the same services over exactly the same technology, each with their own complete network that has to cover the whole country. It's even worse with 3G, in any given area it's likely to be covered by 5 3G signals and 4 GSM ones. But could a single company or consortium be trusted with a unified mobile network? I mean, just look at broadband as an example - many blame BT for the UK's apparent lagging behind in the speed race.

It seems that Three's network still only covers 85% of the population. Now, yes, that's an achievement, but rollout seems to have slowed (or stopped) now the towns and cities are sorted. They're rolling out HSDPA at the moment, of course. If they were to network share with someone else, O2 for example, I think it'd be a bonus for all of us. Consolidating all of our identical mobile networks into just two or three national ones would make the most sense, and retain some form of competition.

[solo12002]

" If they were to network share with someone else, O2 for example, I think it'd be a bonus for all of us"

Which makes me question why they went from 02 to orange for roaming only to share a network with o2, it just gets silly.

Three should of stayed with o2 for roaming inturn they could of shared their 3g network with them.