Three UK’s latest financial report reveals a concerning swing to a loss, underscoring the company’s pressing need for a merger with Vodafone, as articulated by its chief executive. Despite experiencing growth in both revenue and customer base last year, the mobile operator faced increased capital spending and operating costs, leading to its first earnings loss in over a decade. This financial downturn has been a pivotal factor in advocating for the proposed merger with Vodafone, according to Three UK’s CEO, Robert Finnegan.
Finnegan expressed satisfaction with the year’s progress, noting a rise in customers, revenue, and margin. However, he quickly pointed to the significant investments in the rollout and maintenance of the 5G network and the overarching commitment to enhance UK connectivity as primary reasons for the company’s diminished profitability. With an EBIT loss of £117 million, compared to a £147 million profit the previous year, Finnegan labeled the financial outcome as unsustainable, especially in light of reduced 5G investment.
The CEO emphasized the competitive disadvantage at play, with the current market dominated by four major network operators (MNOs), where only two possess the scale and investment capability without sufficient competitive pressure. In contrast, Three UK and Vodafone lack the necessary scale to effectively challenge the market, potentially causing the UK to fall behind in 5G deployment and performance.
Finnegan reiterated the merger’s potential benefits, including job creation and acceleration of the UK’s digital transformation, despite skepticism from unions and repeated assurances that have begun to wear thin. He pointed out Three UK’s modest revenue increase and customer growth as indicators of the company’s struggle to scale effectively, especially when compared to larger competitors.
As the UK’s Competition and Markets Authority (CMA) conducts its investigation into the merger, with a decision expected by September, the dialogue surrounding the £11 billion network investment pledge continues. Both Three UK and Vodafone stress the merger’s importance for their future and the broader digital landscape in the UK, despite the growing monotony of their appeals.
