Will Hutchison sell 3UK?

Hong Kong conglomerate Hutchison Whampoa has been doing the rounds on the rumour mill in the past 24 hours, following speculation that the company is planning to offload mobile unit 3 UK.

The rumour looks to have been sparked by Vodafone CEO Arun Sarin, who, at the Vodafone investors conference on Tuesday, said that the UK was a prime market for consolidation, which may see smaller operators, including 3, putting themselves up for sale.

Sarin further fuelled speculation by commenting that Vodafone would consider the European assets of 3, should they become available.

Vodafone has previously said that it expected to be involved in a low level of merger and acquisition activity going forward, but potential opportunities would have to fit strict criteria.

3, which is the smallest of the UK’s five operators with 3.7 million customers representing 5.5 per cent of the market at the end of June, has been dogged by speculation that it may be put up for sale for some time.

The operator’s customer base grew sharply during 2004 and 2005 off the back of an aggressive handset subsidy policy and low priced voice and data services for heavy users. But in recent quarters the operator has suffered high churn levels.

In the most recent quarter, 3 added only 143,800 customers, according to figures from Informa Telecoms & Media, compared with 162,500 in the corresponding period last year.

“It has been incredibly tough for 3 to get a foothold in the UK market,” said Mark Newman, chief research officer of Informa Telecoms & Media. “We haven’t seen a fifth mobile operator run a profitable business anywhere in the world. And 3 has tried to do this using a new untried technology with much higher handset and network costs than its rivals,” Newman said.

A spokesman for 3 could not be reached at time of publishing.

Mark Newman has written an analysis looking at 3’s performance in the UK market since its arrival in 2003.