3 UK determined to break even by year-end |
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Fri, 26 Aug 2005 19:05
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LONDON - Mobile network Hutchinson, owner of the brand 3 has announced that it is determined to hit the crucial parameter of breakeven by the end of this year. 3 is the latest entry into the UK mobile market and was launched only three years ago.
The group, which is controlled by Hong Kong billionaire Li Ka-Shing’s Hutchison Whampoa, entered the third-generation mobile market in March 2003. Initially the customer base was nothing to write home about. But that is true of any new entrant in any field in the market. However, 3's subscriber base has more than tripled in from 1.2 million to 3.2 million over the last year. It is estimated that Hutchinson spent a total of £13 billion to set up the 3 network in the UK. Out of this amount £4.4 billion went towards obtaining a license to operate in the country and it is beginning to look like a good investment.
The fact that more than 2 million subscribers have opted for 3 this year has boosted the group's market share to almost 5 percent. Bob Fuller, the chief executive of 3 UK was confident that the break even target would be achieved, "After just 30 months of trading, we have built a strong and sustainable business that is underpinned by a robust, quality customer base," he commented. He added that customers were beginning to take notice of its pay-monthly contracts. "These are much more valuable because we have certainty of revenues for 12 or 18 months," he observed. Rivals Vodafone and Orange have just about a third of their customers on fixed-contracts, but 3 has managed to rope in 53 percent of the subscribers to sign up for its monthly payment plans. The average spend per user of a 3 customer is £34, easily the highest in the market.
The parent group Hutchinson issued a statement saying, "3 Italy is on target to achieve breakeven, after all customer acquisition costs, on a monthly basis in August while 3 UK is expected to achieve this milestone later this year." The fact that the group is on the verge of profitability has prompted analysts to speculate that the 3 UK was preparing a float. However, there was no confirmation about this news, but 3 Italy is said to be working on the logistics for stock market floatation.
The aggressive marketing strategy has caused 3 UK to report a loss of HK$6.3 billion, even though overall revenues for the first six moths quadrupled as compared to the last year.
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