Three clocks H1 wins but inflation bites earnings

UK operator Three’s revenue, customer and margin numbers for the first half of the year are all up, but EBITDA was down 19%, blamed largely on inflationary pressure.

Three’s revenue was up 4% to £1.23 billion YoY which it attributes to an increase in the active customer base, and net customer service revenue up was 8% to £816 million.

Margin was up 9% to £808 million, thanks to a 7% growth in active customer base, driven by new business areas such as B2B, SMARTY and 5G Home. The B2B customer base increased by 86% YoY reaching 500K customers, while SMARTY grew by 36% and 5G Home by 174%.

However Opex increased by 19%, largely as a result of inflationary pressures. These increased costs have outstripped margin growth, says Three, so EBITDA (earnings before interest, taxes, depreciation, and amortisation) declined 19% to £163m.

“We have successfully grown the business in the first half of the financial year and I’m proud that we have added to the customer base and delivered an increase in margin,” said Robert Finnegan, Chief Executive of Three UK. “I’d like to take this opportunity to thank all my colleagues for their hard work and ongoing commitment to the business.

“While the ongoing rollout of 5G is a success, we have been clear that we are now at an inflection point. As strong connectivity continues to be critical to how we live and work, we’re planning for the future. Our EBITDA continues to be below our capital expenditure, which is unsustainable going forward.

“In June we announced an agreement with Vodafone to merge our businesses. This marked a significant step in our efforts to create a business that will build the UK’s digital future and create a leading 5G network in Europe. Not only will it create a best-in-class network for coverage and reliability, it will also provide the necessary scale to invest, grow and compete, as well as drive economic growth, innovation and jobs across all parts of the UK.”

Company financials can be slippery things. While everything must be presented, highlighted stats can be carefully cherry picked and others nudged into a corner in order to try and paint the best picture possible.

In most cases you wouldn’t expect a firm to go out of its way to direct attention to the less than positive aspects of a budget sheet – quite the opposite. But as with earlier financial reports this year, these wins are presented alongside some caveats.

For a while now, Three’s comms have been fused with the meta-narrative of the merger with Vodafone, which is still waiting regulatory approval. Three’s message is and has been for a while now that either the deal goes ahead or its position is untenable – so if there’s something in fiscal reporting that can back that up, it understandably gets the spotlight thrown on it.

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