Three UK makes gains in H1, but laments continued losses

For the first half of the year, Three UK’s active customer base grew by 3% YoY, and total contract customers by 5%. It also completed construction of 311 (of which 269 are now live) additional mobile sites as part of the Shared Rural Network programme, and it now has 4900 5G sites – compared to 4,400 for the same period last year – now claiming a 62% population coverage.

It also replaced equipment on more than 600 sites in order comply with HRV requirements – in other words removing Huawei kit from networks – and equipment has now been replaced on more than 900 sites. It says it has now achieved a July 2024 target of less than 35% of ‘HRV traffic’ on its radio network.

Elsewhere, it pointed to an expanded 4G and 5G network in London Underground stations, with launches at Paddington, Whitechapel, Canary Wharf and Woolwich stations during the period.  44 stations and 45 tunnels are now live on its network.

In terms of the financials, revenue was up 9% to £1.3 billion, with net customer revenue up 6% and handset revenue up 10%, thanks to customer growth in SMARTY, B2B and 5G Home Broadband segments.

Total margin was up 9% to £879 million, though operating expenses were up 5% to £548 million, driven by ‘an enlarged network and cost inflation.’

Reported EBITDA was up 31% to £213 million, but it clocked an EBIT loss of £30 million, though on the upside in the same period last year it lost £76 million. All in all this hinders its ability to invest, says Three, with the CEO’s commentary also highlighting the ‘abysmal’ rankings of UK networks in general.

“We have made progress in the first of half of the year with growth in certain segments such as SMARTY, 5G Home Broadband and B2B,” said Robert Finnegan, Chief Executive Officer of Three UK. “Despite scaling back our capex, we continued to make a loss driven by the escalating inflationary costs of operating our network. Our cashflows have been negative since 2020 and our costs have almost doubled in 5 years, meaning investment in network is unsustainable.

“UK mobile networks rank an abysmal 22nd out of 25 in Europe on 5G speeds and availability, with the dysfunctional structure of the market denying us the ability to invest sustainably to fix this situation. Our merger with Vodafone will unlock £11 billion worth of investment in digital infrastructure, creating a best-in-class 5G network for the UK and helping to grow the UK economy.”

Financial statements are selective in the metrics they choose to elevate and comment upon. In most cases this is to paint the best picture possible to shareholders in particular – highlighting any wins that can be plucked out from the spreadsheets and not overly dwelling on the less flattering columns.

However the permanent caveat overshadowing all of Three comms at the present moment is that it must be allowed to merge with Vodafone, so even when it clocks wins the spin is that regardless of upticks in particular areas, the forward looking financial outlook is grim, and the only remedy is that Ofcom green lights the deal.

They’ll have to wait a little longer than expected to find out if that’s going to happen – earlier this month the CMA announced it had pushed back its deadline to decide whether or not it can go ahead to 7 December. The regulator cited the ‘very wide scope of this enquiry’, the technical and regulatory complexity of the sector, the amount of technical material provided by Vodafone and Three as part of a joint business plan, and the need to look into the proposed spectrum sharing deal with VMO2, as reasons for the delay.