Three’s chief executive has plans to double the company’s subscriber base inside 5 years, as Three begins to role out the UK’s only “true” 5G offering
Earlier this week, Three launched its first 5G offering in the UK with a home broadband fixed wireless package that could put serious pressure on ISPs in the fixed line sector. With speeds of around 450Mbps for just £35 per month, Three’s home broadband product is sure to make quite an impact.
As far as the company’s CEO, Dave Dyson, is concerned, home broadband is merely the tip of the spear in Three’s 5G arsenal.
With 10 million mobile network subscribers across the country, Three is currently the UK’s fourth biggest mobile network operator. But Dyson has EE, Vodafone and O2 in his sights and intends to "double the size of the business" within 5 year, using Three’s 5G offering as a massive lever for growth.
Earlier this week, I sat down with Dyson to discuss his plans for growth, as Three looks to dramatically scale up its mobile network operations in the UK.
What was the thinking behind kicking off your 5G launch in the UK with a home broadband offering rather than mobile network services?
"Firstly, we know that home broadband is an enormous opportunity for us. If you look at the levels of customer satisfaction in the fixed line broadband market, they are pretty poor. Its pretty obvious what the issues are: Paying for line rental; waiting for delivery; download speeds not being where people want them to be. We felt that there was a really obvious opportunity there.
"A lot of people, when they talk about 5G, they are looking for that silver bullet. I’m not sure whether that silver bullet really exists but for us home broadband is a big opportunity.
"We have no legacy business to worry about in the home broadband market, unlike EE and BT who have a big fixed line business that they are trying to protect.
"Secondly, on the mobile side, we felt that it was important to have more sites. By nature, it’s a mobile product. Having more sites before we launched was important to us. Having the right transmission in place so that people get the full impact of that 100MHz of spectrum was important. Making sure the core is up and running is critical – we’ve gone live with that but there is still a little bit of work to do in terms of getting it ready for 5G. It’s not quite ready for 5G yet, so there is still a bit more work to do on that front.
"Some of the IT capability that we are currently building we will use for 5G and that’s not quite ready either.
"We’ll be there by the end of the year. For us its not really important to be first -it’s much more important that you give people a good experience because in six months’ time no one will remember whether [we launched] in October or November but they will remember if you mess it up. So, it’s about getting it right and not falling over before we have started."
It seems like Three is determined to use 5G as a lever for growth. You are at 10 million subscribers at the moment, what are your targets for the near to mid-term?
"We haven’t set any specific time-based targets but what we have said is that we want to double the size of the business. We need to achieve scale – at the moment we are sub-scale compared to our competitors, EE, Vodafone and O2. The fixed cost base in our business should not be dramatically different to anyone else’s and if we add another 5 million customers the cost base doesn’t really change.
"It is important to get scale. I’d really love to double the size of the business but realistically that is probably going to take 5 years. Double the revenue, double the consumer base and that should flow down to the bottom line and give us more than enough to be able to invest in our future capabilities.
"Over the next few years, we’ve got a real opportunity to grow faster than we have over the last 12 months. The last 12 months has been slowed down by market competition, there has been some regulatory changes that have affected the financial performance for all the operators. Most importantly for us, we’ve been going through a huge transformation process where we have changed pretty much everything about the business – the technology, the capabilities, who we partner with. As you go through such a fundamental change, it is hard to deliver flawlessly at the same time. That being said, I’m delighted to say that our net promoter score for customers and employees has gone up but still we are not firing on all cylinders."
What sorts of speeds can we expect on Three’s network? How will they compare to those of your competitors?
"Eventually, once we are using 140MHz of spectrum, we are looking at download speeds of 2.15Gbps. When we launch 5G mobile services later this year, we will be launching with 100MHz of spectrum. That’s one hundred contiguous megahertz of spectrum. The key thing to note is that, because we have got twice as much spectrum as everyone else, the theory and the practical reality is that our capacity and peak throughput speeds will be twice as fast as everyone else’s. On a like for like basis, in a direct comparison with the other operators, we should be twice as fast.
"Of course, it’s very hard to predict what speeds our customers will get because in a real-life situation it depends on things like how far away from the mast you are; how thick the walls are in your house; etc.
"What we can say is that our first home broadband customer Tweeted this morning that he was getting speeds of 450Mbps.
"So, if we take him as an example, as an existing 4G home broadband customer he was averaging speeds of 14.1Mbps. That’s a bit below the industry average.
"When we upgraded him to the first [5G] hardware that used 60MHz of spectrum he was getting speeds of 220Mbps. Towards the end of the trial we released the full 100MHz of spectrum and then he was able to get speeds of around 450Mbps. Now, that’s not a prediction of what everyone will get but it does give a really good indication.
"The only thing you can predict with a reasonable degree of certainty is that we should be roughly twice as fast as anyone else when we launch, based on our superior spectrum holding. So, if you’re getting 100Mbps on EE, you’ll be getting 200Mbps on Three. If you’re getting 200Mbps with EE, you’ll be getting 400Mbps from us.
"When we did the tests, we got speeds of over 1Gbps but as I’m sure you are aware, it’s very circumstantial when you are looking at speeds in a real-world environment."
Your advertising slogan, "If it’s not Three, its not real 5G", seems to have ruffled a few feathers with your competitors, particularly EE. What are your thoughts on this?
"This claim is grounded in fact but its also a little bit tongue in cheek. It’s quite a typically Three way of communicating. The ITU has said that in order for 5G to really deliver on its potential, you need at least 100MHz of spectrum. Quite simply, we are just lifting that and saying, we have 100MHz and nobody else does, therefore we have true 5G and nobody else does. We’re not saying that they haven’t got 5G but it’s not true 5G.
"EE have had a leadership position on 4G, we don’t dispute that, they had better spectrum than everyone else from the start and they managed to exploit that very successfully. Now it’s our turn.
"It feels like it’s our time now. Historically we have had one hand tied behind our back because of the spectrum position we have had. Now we own 52 per cent of the 5G prime real estate spectrum, the waterfront spectrum, and we are going to make the best use of it.
"To sum up, launching with a home broadband offering just shows how we do think a little bit differently than our competitors and we are trying to offer our customers something a little bit different.
"The broader strategy on 5G is very much mobile lead. The 6,000 sites that cover 80 per cent of the traffic. It’s about putting ourselves in the position where our 10 million customer base has room to grow.
"When we deploy 5G on those 6,000 sites, just because of the amount of spectrum we’ve got and the new technology that we use, there is so much spare capacity, that gives us an easy and low-cost opportunity to get into the home broadband market. We know that we’ve got a good couple of years to run with that before we ever have to start worrying about capacity again. When that happens, we’ve got more spectrum we could deploy, we’ve got some 3.9GHz, we’ve got some mmWave. We could even put more sites in. We could even sell some fibre to the home type products in the future – that starts to make sense once you’ve got a bit more scale."
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