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Dave Dyson says merger would unlock capacity, efficiencies needed to offer competitive prices.
3 will resume its role as the U.K.’s maverick operator if it successfully acquires O2, said CEO Dave Dyson on Thursday.
Speaking on his company’s full-year results call, he said 3UK is beginning to experience spectrum and capacity constraints that are limiting its ability to act as a disruptive force.
3UK "is no longer playing that role in the U.K. market," Dyson said.
3’s parent CK Hutchison is fighting hard to win the European Commission’s approval for its £10.25 billion acquisition of O2. Brussels is concerned about the potential for price rises if the number of mobile network operators in the U.K. is reduced to three from four – concerns shared by U.K. regulator Ofcom.
Dyson said on Thursday that merging with Telefonica’s O2 unit would unlock capacity and generate scale efficiencies, putting 3UK in "a brilliant place to get back on the front foot," in terms of providing value for money.
"Absent the merger, the key thing for us is what happens in the next spectrum auction," he said.
Indeed, Ofcom is preparing to free up 40 MHz of 2.3-GHz spectrum and 150 MHz of 3.4 GHz-spectrum for mobile services.
The process was originally due to start in early 2016, but in December, Ofcom decided to postpone it until the Commission has come to a decision on the 3/O2 deal.
During the last auction, which finished in February 2013, 3UK paid £225 million for 2×5 MHz of 800-MHz spectrum; it also picked up 2×15 MHz of 1800-MHz spectrum divested during the Orange/T-Mobile merger that created EE.
"Right now we’ve got some [capacity] constraints," Dyson said on Thursday, explaining that it is trying to address these issues through the O2 transaction; failing that it will look to address them at the next spectrum auction.
Dyson’s comments were made alongside the publication of 3UK’s full-year results.
In the 12 months to 31 December 2015, 3UK generated revenue of £2.2 billion, up from £2.06 billion in 2014. The performance was driven by service revenue, which grew 8% to £1.57 billion, offsetting a 5% decline in handset revenue, which came in at £549 million.
Data traffic continued to climb, with the average 3UK customer consuming 5 GB per month, compared to 3.3 GB at the end of 2014 and 500 MB at the end of 2010.
Dyson said 50% of 3’s data traffic is carried by its 4G network.
"3G is quickly becoming yesterday’s technology," he said.
EBITDA jumped to £686 million from £547 million in 2014, while earnings before interest and tax (EBIT) increased to £461 million from £314 million.
3UK ended 2015 with 10.79 million subscribers compared to 10.29 million a year earlier. Of that total, 6.19 million are contract customers, up from 6.06 million at the end of 2014.
