Three UK says merger is necessary to invest in mobile network

Investment in Britain’s mobile phone network is “unsustainable”, Three UK has warned as it seeks approval from the competition regulator for a planned £18 billion merger with Vodafone.

The lossmaking Three UK said its revenue had risen by 9 per cent from £1.23 billion to £1.33 billion in the first half of its financial year, with a pre-tax loss narrowing to £30 million from £76 million in the same period last year.

However, Robert Finnegan, 62, the chief executive of Three UK, said that “despite scaling back our capital expenditure, we continue to make a loss, driven by the escalating inflation costs of operating our network. Our cashflow has been negative since 2020 and our costs have almost doubled in five years, meaning investment in the 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.”

Three UK is seeking to merge with Vodafone in a deal that would create Britain’s biggest telecoms company with more than 27 million customers. The combination was first announced two years ago and is under investigation by the Competition and Markets Authority, which expects to report in December.

Vodafone and Three UK have argued that they need to combine operations to achieve the scale required to compete against EE, which is owned by BT, and Virgin Media O2, itself the product of a merger in 2021. The companies have promised to invest £11 billion in networks if they are given the go-ahead.

BT has warned that the deal will create a combined group with “a disproportionate share of capacity” that would be “unprecedented” in the UK and European markets.

Three UK,which is owned by CK Hutchison,the Hong Kong-based investor, said it had completed the construction of 311 new sites for the UK’s rural network,a project delivering shared infrastructure with investment from EE, Three VMO2 and Vodafone totalling £532 million. The UK government is also providing investment of £500 million to construct masts in hard-to-reach areas with no mobile coverage.

The company also has completed a successful pilot for switching off the 3G network, which is expected to start taking place in September. The operator expanded its 4G and 5G networks in London Underground stations, with 44 stations and 45 tunnels now able to access the network.