The Hong Kong-owned network revealed as much as it unveiled a mixed set of first-half figures.
3’s UK customer base rose just three per cent to 4.1 million since December, when it launched its mobile broadband X-Series service.
And more than a million of those hadn’t made or received a call for three months.
Thankfully, losses in the UK and Ireland have almost halved over the past year. It’s partly due to better handset deals, as the price of 3G phones has tumbled, but 3’s investment in its direct sales channel has also started to pay off.
The group’s high street presence has been stepped up and distribution deals with the likes of Carphone Warehouse have been renegotiated. That fed through into an impressive 43 per cent fall in acquisition and retention costs – some £160 million – compared with the first half of 2006.
CEO Kevin Russell now has 210 retail stores and plans to add another 40 by the end of the year. The network also plans to roll out sales desks within HMV shops in the months to come.
Now 3 UK is “reviewing network sharing and other infrastructure sharing opportunities”. Russell, who took over from Bob Fuller as head of the UK operation in June, is thought to already be in talks with competitors.
Russell previously ran 3’s Australian division, which has a network-sharing arrangement of its own, so it’s little surprise he wants to duplicate that deal here.
3G drags Hutchison down
3 UK now makes almost a third of its revenue from non-voice data services. Having launched a mobile broadband package for £10 a month, it expects that to keep rising.
Nevertheless, Hong Kong-based executives used the results to complain that Hutchison’s investors are still too focused on the prospects of its 3G business to the detriment of its many other business interests.
“It’s not correct to have the same focus on 3G as when it was a start-up three years ago,” said Frank Sixt, group finance director. “Hutchison should be looked at more as a whole rather
than from the perspective of one of its parts.”
As a whole, Hutchison – which is also big in ports, oil and retailing – enjoyed a strong 53 per cent increase in first-half net profit to HK$28.8 billion (£1.84 billion).
It was helped by Vodafone chief executive Arun Sarin, whose purchase of Hutchison’s stake in Indian mobile operator Hutchison Essar allowed the Hong Kong group to post a HK$16 billion gain.
Despite this, Hutchison’s shares are down more than two per cent since the start of the year, while the Hong Kong stock exchange is up 15 per cent – a hugely disappointing performance for Hutchison.
“The brake on our share price has always been the 3G business,” admitted group managing director Canning Fok, who parachuted
himself into the UK last year to tackle high churn levels and made sweeping changes to the management during the winter.
“I spent six months doing things I did 20 years ago – detailed management,” he told Hong Kong journalists. “We are in a very strong position today. We are in a position where we can determine our own destiny.”
Perhaps so, but in Italy 3 took a knock from a regulatory decision to ban extra charges on prepay top-ups. There, revenue from prepay users tumbled more than a fifth.
Back in the UK, rumours continue that private equity firms, as well as both Deutsche Telekom and Vodafone, could be interested in taking the business off Hutchison’s hands. But until 3 UK is making serious money, or unless Hutchison chairman Li Ka-Shing is given an offer he can’t refuse, he seems unlikely to let his 3G baby go any time soon.
Why Burch quit Virgin
Finally, some light has been shed on the departure of former Virgin Media chief executive Steve Burch, who quit two weeks ago with a £3.4 million pay-off.
A document filed with the Securities and Exchange Commission in the US has shown that Burch had no role in the company’s plans to auction itself off for more than two months prior to his resignation.
It also shows that Burch has to return to his native US by the end of the year and refrain from criticising the company, which owns Virgin Mobile.
A likeable American, Burch came to a “compromise agreement’’ before his departure, which it is increasingly clear followed a boardroom struggle.
Burch’s relations with US-based chairman Jim Mooney had grown tense, amid reported claims that Burch’s say over the company had been constrained by Mooney and major shareholder Bill Huff.
Earlier this summer, Virgin Media received a bid approach from private equity giant Carlyle and put itself up for sale, but that has subsequently stalled because of the recent volatility in the debt markets.
The future for Virgin Mobile’s long-suffering staff must seem more uncertain than ever.