Three UK signals towards telcos consolidation
Three UK chief signalled towards market consolidation this morning after the mobile giant reported humble revenue growth, despite hitting its strongest contract boom since 2012.
Revenue was up four per cent to £2.44bn, whilst its active contract customer base was up seven per cent, adding more than half a million subscribers to its network.
However, as telecoms expert at Enders Analysis Karen Egan explained, it is difficult for Three to translate this subscriber growth into a solid revenue one because of the way the sector is structured.
“Mobile operators have realised that their ability to make returns in this sector is hinged on scale. ‘Scale’ players, like Virgin Media O2 and EE, make returns, but ‘sub-scalers’, like Vodafone and Three, struggle to”, she told Morning Wire
“The idea is that consolidating from four networks to three might lead to lower prices rather than higher ones as customers are only having to fund three networks across the country rather than four”, she said.
In turn, this would allow all of the operators to make a return without driving up prices for customers – and customers would still continue to have considerable choice.
Three UK chief Robert Finnegan echoed this sentiment, stating this morning that the UK market, made up of these four major operators, continues to be “dysfunctional” . He said it “requires a structural change to improve the overall quality of infrastructure that UK customers should expect.”
Vodafone chief Nick Read has also banged this consolidation drum, suggesting that investors would find UK firms more attractive if they were more profitable when combined.
Last month he confirmed the mobile operator was speaking to rivals in the UK, Germany, Italy and Spain.