Ben
1st April 2005, 12:49 AM
http://www.guardian.co.uk/business/story/0,3604,1449655,00.html
Hutchison Whampoa, the Hong-Kong based conglomerate that owns the UK's newest mobile phone network 3, admitted yesterday it blew $3bn (£1.6bn) on new 3G technology last year but plans to make a return on that investment.
Hutchison hopes to float its Italian mobile phone business towards the end of the year with 3 UK, which yesterday announced strong customer growth, to follow in 2006.
Hutchison's boss, Li Ka-Shing, said: "With the 3 Group becoming self-financing in the 2005-2006 period, plans are already being made to put in place appropriate new capital structures for the Italy and UK businesses which will maximise their value contribution."
The company said yesterday that its UK business, which launched two years ago, now has more than 3 million customers, against 1.2 million a year ago and 2.5 million three months ago.
This strong growth suggests the company's policy of offering cheap phone calls and large bundles of text messages is paying off. It will alarm the traditional networks who have been losing customers to 3 over the past few months.
It will also raise questions about the 3G roll-out strategies of the other operators. Vodafone, for instance, is understood to have picked up only about 200,000 3G customers in Britain since the launch before Christmas.
Average revenue per user - a crucial measure for investors - was £40.30 a month in 2004, down on the £43.22 announced at the half-year stage. Nevertheless it is higher than the average revenue achieved by its UK rivals.
Chief executive Bob Fuller said the business passed a critical milestone in December - it is now able to cover the cost of running its existing business from its cashflows. To make the company viable, however, it also needs to cover the cost of acquiring new customers, the largest component of which is subsidising the new 3G handsets.
"Our job is to get the business into a position where Hutchison can, when the time is right, take it to market," he said. He refused to comment on whether the company was ready for a flotation in 2006.
While 3 had a strong second half of last year in terms of new customers, most of them were prepaid customers. Since launching its prepay offering last February it has gained 1.6 million prepaid customers - more than half its customer base. Those using pay-as-you-go vouchers tend to spend less. As a result, industry analysts reckon 3's revenue per customer will continue to fall.
I had already mentioned that Three has topped 3 million customers in the UK, but I think this article points out some interesting angles. They've attributed the fall in ARPU, by almost £2, to the increase in prepay subscribers as opposed to contract subscribers. They've also pointed out that Three still isn't covering the cost of its acquisitions - but at least it is managing to cover the costs of its existing business. There's obviously some profit margin in there somewhere, and if Three can gain enough customers they may well be able to float the UK business as an attractive prospect by 2006. We'll be watching eagerly, as always!
Hutchison Whampoa, the Hong-Kong based conglomerate that owns the UK's newest mobile phone network 3, admitted yesterday it blew $3bn (£1.6bn) on new 3G technology last year but plans to make a return on that investment.
Hutchison hopes to float its Italian mobile phone business towards the end of the year with 3 UK, which yesterday announced strong customer growth, to follow in 2006.
Hutchison's boss, Li Ka-Shing, said: "With the 3 Group becoming self-financing in the 2005-2006 period, plans are already being made to put in place appropriate new capital structures for the Italy and UK businesses which will maximise their value contribution."
The company said yesterday that its UK business, which launched two years ago, now has more than 3 million customers, against 1.2 million a year ago and 2.5 million three months ago.
This strong growth suggests the company's policy of offering cheap phone calls and large bundles of text messages is paying off. It will alarm the traditional networks who have been losing customers to 3 over the past few months.
It will also raise questions about the 3G roll-out strategies of the other operators. Vodafone, for instance, is understood to have picked up only about 200,000 3G customers in Britain since the launch before Christmas.
Average revenue per user - a crucial measure for investors - was £40.30 a month in 2004, down on the £43.22 announced at the half-year stage. Nevertheless it is higher than the average revenue achieved by its UK rivals.
Chief executive Bob Fuller said the business passed a critical milestone in December - it is now able to cover the cost of running its existing business from its cashflows. To make the company viable, however, it also needs to cover the cost of acquiring new customers, the largest component of which is subsidising the new 3G handsets.
"Our job is to get the business into a position where Hutchison can, when the time is right, take it to market," he said. He refused to comment on whether the company was ready for a flotation in 2006.
While 3 had a strong second half of last year in terms of new customers, most of them were prepaid customers. Since launching its prepay offering last February it has gained 1.6 million prepaid customers - more than half its customer base. Those using pay-as-you-go vouchers tend to spend less. As a result, industry analysts reckon 3's revenue per customer will continue to fall.
I had already mentioned that Three has topped 3 million customers in the UK, but I think this article points out some interesting angles. They've attributed the fall in ARPU, by almost £2, to the increase in prepay subscribers as opposed to contract subscribers. They've also pointed out that Three still isn't covering the cost of its acquisitions - but at least it is managing to cover the costs of its existing business. There's obviously some profit margin in there somewhere, and if Three can gain enough customers they may well be able to float the UK business as an attractive prospect by 2006. We'll be watching eagerly, as always!