Postpaid or prepaid doesn’t matter if you nail experience – Three UK CEO

While many telcos are keen to convert customers to valuable postpaid contracts, Three CEO Dave Dyson doesn’t believe the type of payment is relevant, as long as you keep your customers happy.

“We are quite agnostic, so we just view it as a payment method,” said Dyson. “As long as you create a good customer experience you shouldn’t have to worry about the flight of customers. We’re very open to pay-as-you-go solutions on 5G.”

The comment came during a conversation with Telecoms.com as the telco reveals its financial results for the first half of 2018. While Three still sits in fourth place in terms of subscriptions, the numbers are looking healthy. Revenues were relatively flat year-on-year, demonstrating a satisfactory 2% increase to £1.19 billion, though subscriptions are growing. The first six months of 2018 saw a 6% jump, taking the total up to 10.1 million.

The increase in subscriptions also goes as far to explain the decrease in ARPU, which dropped from £18.79 to £17.97. Some might be worried about this statistic, though Dyson pointed out the boost in subscriptions compensated for this metric. For Three, it was important to keep subscriptions moving in the right direction, securing a customer base which can be monetized down the line. Looking forward there are plenty of opportunities to increase profitability.

One of these strategies relates to targeting new demographics for the firm. With the launch of brands like Smarty, which targets cash-conscious consumers, or a wholesale partnership with Superdrug is bringing new customers into the fray. These low-value, low data usage customers will dilute the revenues and data usage statistics of Three, but it is simply a means for the firm to continue grabbing market share from competitors.

Another interesting development is moving away from channel sales. Over the first six months, Dyson claims 99% of all handsets sold were through Three’s own channels, offering greater control over the monetization of these users, but also allowing Three to have more of a direct impact on customer experience. Again, this ties back to the post/prepaid argument, if you focus on creating a positive customer experience, you shouldn’t have to worry about strapping customers down with lengthy contracts. Gaining more control over distribution and the relationship with the customers, as well as seasonal demand increasing towards the end of the year with major handset launches, should see ARPU increase according to Dyson.

Of course, 5G is never far from the conversation either, and while Three boasts about it spectrum collection over the last couple of years, the team is remaining relatively tight-lipped over the launch day. Despite US telcos throwing caution to the wind when it comes to commercially sensitive information, UK operators are remaining coy. Three will switch on 5G mid-way through 2019, with plans to launch more trials towards the end of the year, but the fate of 5G is in the hands of the device manufacturers.

“We have all the components ready in the bag, so we will have trials up and running later this year,” said Dyson. “Availability of devices; this is key. Until the devices are there we are not going to make too much progress. Indication is that they will be around mid next year, but the smaller manufacturers might be sooner. We haven’t heard from Samsung or Apple, but they won’t be too far behind as they will be targeting the high value customer and won’t want to miss out.”

Interestingly enough, Three’s Fixed Wireless Access plans (FWA) might make it to the finishing line first. There isn’t a preference for either offering at Three, though FWA devices might be quicker to the market, allowing Three to move forward. In reality, the launch of mobile or FWA services will probably come at the same time, though fate is seemingly in the hands of the manufacturers.

With the 5G horizon getting closer, this is perhaps another reason Dyson and his team are not particularly worried about ARPU stats heading south. Although telcos are yet to reveal pricing strategies, it would be a fair assumption tariffs will be set as a premium, at least for the first months. With Three holding the largest spectrum portfolio for 5G in the UK, these statistics are likely to feature heavily in marketing campaigns. It might not be a bad bet to assume Three will edge its nose in front in the first couple of months.

The first six months of 2018 were nothing glorious for Three, though solid would be a fair description. ARPU seems to have been sacrificed for the moment in pursuit of new subscriptions, though whether this has any defining impact in the long-run remains to be seen. Dyson pointed to transformational projects in the core network with Nokia, while reformed IT systems should also improve customer experience. Combined with 5G trials, the next six months should be viewed as very important from an operational perspective for Three.

Three could still be viewed as a challenger in the UK telco space today, though 5G could certainly shake things up.