Revenue slips 10% at mobile operator Three

Second largest mobile network reports increase in customers moving to rivals

A ‘3’ logo sits on the shirt of an employee as he works at a sales counter inside a Three Ireland  mobile phone store. The group has reported a 10 per cent fall in sales and increased customer churn in the first half of the year. Photographer: Aidan Crawley / Bloomberg

A ‘3’ logo sits on the shirt of an employee as he works at a sales counter inside a Three Ireland mobile phone store. The group has reported a 10 per cent fall in sales and increased customer churn in the first half of the year. Photographer: Aidan Crawley / Bloomberg

 

Revenue dropped 10 per cent at mobile operator Three Ireland in the first-half of the year as subscribers jumped ship to its rivals on the back of price rises.

Turnover was also negatively impacted by the introduction of reduced roaming fees last year and from lower mobile termination rates.

The company recorded total revenues of €298 million for the six months to the end of June, versus €330 million for the same period a year earlier. It generated earnings before interest, taxes, depreciation and amortisation (ebitda) of €77 million and an ebitda margin of 29 per cent, up from 28 per a year earlier. Ebitda less capital expenditure (capex) rose 15 per cent to 31 per cent.

Three is Ireland’s second-largest mobile operator following the completion of the €850 million buyout of O2 Ireland from Telefónica in July 2014.

The operator, which saw its customer base decline 2 per cent to 2.03 million, is close to completing a €300 million investment in its network. The operator’s integration of O2 has led to a number of network outages that have upset customers.

Earlier this year, the company caused further upset after raising monthly prices for bill pay customers by up to €5, blaming rising costs and new roaming regulations for the increases.

In addition, Three announced it would not give customers a full “roam like home” data allowance after a new EU law came into effect in mid-June. It later backtracked on the plan to dramatically restrict free data roaming for users travelling overseas in favour of a “fair usage” policy.

“Due to the implementation of price changes on contract customers, 3 Ireland has experienced an increase in voluntary churn customers in the first half of 2017, resulting in a lower ebitda and ebit of 6 per cent and 18 per cent compared to the same period last year,” Three Ireland said in half-year accounts for its parent CK Hutchison.

“The churn rate has now stabilised and the operation is expected to improve its performance in the second half,” it added.

Net customer revenue at Three was down 10 per cent to €234 million from €256 million a year earlier. However, the service margin was down just 3 per cent.

Handset revenue fell 21 per cent to €33 million from €42 million over the same period.

The operator said 56 per of its customers are on contract with their contribution accounting for 65 per cent of its revenue base.

Active customers as a percentage of the total registered customer base fell to 66 per cent from 71 per cent a year earlier, the accounts show.

The company said its blended 12-month trailing net average revenue per user (ARPU) was €22.51 at the end of June, down 7 per cent on last year. Bill pay customers’ ARPU totalled €27.89 with non-contract customers revenue of €15.42.

The Irish unit accounts for approximately 6 per cent of Three Group Europe’s total registered customer base.

The company said revenues were also down in part due to lower mobile termination rates, which are charges which one operator charges to another for ending calls on its network. Three has been phasing out rates charged from Three to O2 and vice-versa, with the cost now down to 0.8 cents from 2.6 cents. It added that the introduction of lower roaming rates ahead of the full regulation in June had also hit revenues.

“Our large scale investment in our network is ongoing with capex of €46million. This investment is delivering great results for our customers and we now have over 90 per cent population coverage for 4G. We also continue to carry more mobile data on our network than any other operator, with data traffic up 45 per cent year-on-year,” said Three chief executive Robert Finnegan.

Three secured 100MHz of 5G spectrum in a recent auction, which Mr Finnegan said demonstrated its ongoing commitment to customers.

The company intends to introduce a number of new services over the coming 12 to 24 months including VoLTE (voice over long-term evolution) which allows mobile users to make phone calls over 4G rather than on traditional cellular voice networks.

Vodafone recently said it intends to launch a VoLTE service early next year after completing a round of technical trials.