[Everything Goes]

The EU have approved Three's acquisition of O2 in the Republic of Ireland. This makes Three the second largest in the country behind Vodafone. However Vodafone aren't happy and are considering legal action. Hutchison Whampoa paid €850m for O2 and plans to overtake its rival and will invest €300m to build a 4G network.

Quote:

The EU had initially opposed the deal but ceded based on a couple of provisos: Three has commit to provide network capacity and mobile virtual network operator (MVNO) services to two companies, and give them the option to buy spectrum.

The first of these deals, with UPC, which is owned by Liberty Global, has already been struck. The cable TV and broadband operator will use the newly enhanced Irish Three to offer mobile services to its customers in 2015.
Vodafone has hit back at the EU approval, saying:

“Vodafone also has significant concerns that the proposed remedies will distort healthy competition rather than preserve it, and will act as a barrier to future investment in next generation communications in Ireland.”

http://www.theregister.co.uk/2014/06...ree_to_buy_o2/

[d123]

Quote:

“Vodafone also has significant concerns that the proposed remedies will distort healthy competition rather than preserve it, and will act as a barrier to future investment in next generation communications in Ireland.”

Says the company that bought up half the world's mobile companies in their expansion .

[japaul]

I think normally Vodafone would have (silently) welcomed the reduction in competition but in general they seem to have a bee in their bonnet lately about authorities not showing enough favour to real network operators compared with MVNOs. In this case the new MVNOs that will be created get dedicated capacity from the new Three (up to 30%) for fixed payments rather than the the usual pay as you go MVNO arrangements. This means they'll have a bigger incentive the fill the capacity quickly so are likely to offer lower prices.

The MVNOs do have the option of taking spectrum from Three later but I think it's a pretty good outcome for Three. The Irish regulator ComReg seem to think the EC hasn't done enough to keep things competitive but it's not their call. Now on to Germany and the next 4 to 3 decision. Maybe the EC see MVNOs as a way to allow this. The UK already has a competitive MVNO landscape...

[wavejockglw]

Three networks are the norm in many countries and it's more than likely that the EU is moving towards this also in major markets. It's complex though as it means network sharing arrangements may be affected with two networks making cost savings against one. MVNOs may be the key but to be truly competitive they would have to have a similar wholesale arrangement to the one which BT has with it's LLU providers.

Ireland is a small market in comparison to many others and perhaps three separate companies can provide effective competition.

[japaul]

Quote:

Originally Posted by wavejockglw

Three networks are the norm in many countries and it's more than likely that the EU is moving towards this also in major markets. It's complex though as it means network sharing arrangements may be affected with two networks making cost savings against one.

Existing network sharing arrangements that might be affected always seems to get close attention from the Commission. So Three gave commitments that the network sharing agreement between O2 and Meteor would continue but on improved terms.

It was the same in the UK with the T-Mob/Orange merger where the Commission had concerns that Three could potentially be screwed over the network share with T-Mob and 2G roaming on Orange. Because of this Three got an improved agreement with T-Mob involving the integration of the networks, a cancellation of some of the early termination rights in their existing sharing agreement and an extension in length and reduction in cost of the 2G roaming agreement on Orange.

[enapace]

This was always going to go ahead after Three made there revised concessions in late February. Surprised of took so long to get approved. Will be interesting to see O2 Germany decision which should be known later this month early next. France is looking to become a Three network country as well.

In some countries three networks have made things completely lopsided. Austria is a prime example Telekom Austria has so much spectrum that even with the highest stages of LTE-Advanced they couldn't use it all. Then Three who weren't allowed to bid on 800MHz at all because of merger suffered quite bad they had to give up some 2600MHz as well. Telekom Austria has 2x20MHz of 800MHz and majority holder in all the other bands it is crazy,

[Thine Wonk]

Quote:

Originally Posted by enapace

This was always going to go ahead after Three made there revised concessions in late February. Surprised of took so long to get approved. Will be interesting to see O2 Germany decision which should be known later this month early next. France is looking to become a Three network country as well.

Capital T or lowercase? D

[enapace]

Quote:

Originally Posted by Thine Wonk

Capital T or lowercase? D

Capital I was referring to the company in regards to former in regards to later lower. Honestly was kind of shocked Three didn't bid for SFR would of been a pretty smooth deal and they said they were expanding in Europe.

[enapace]

Not sure if anyone is interested but I figured I would mention heard from a friend today that Three Italy is looking to buyout/merge with Wind. This would not be the first time a merger in Italy has been on the cards Three was looking to buy Telecom Italia last year but Telefonica vetoed that. Talks have only just started up properly but there was preliminary discussions late last year which I imagine because of Three Ireland deal being given permission become a reality.

This leads more evidence to what me and others have been saying for a while Four networks isn't viable any longer due to spectrum and costs.

This merger would make Three Italy the second biggest in Italy behind Telecom Italia but ahead of Vodafone.

[Thine Wonk]

Quote:

Originally Posted by enapace

Not sure if anyone is interested but I figured I would mention heard from a friend today that Three Italy is looking to buyout/merge with Wind. This would not be the first time a merger in Italy has been on the cards Three was looking to buy Telecom Italia last year but Telefonica vetoed that. Talks have only just started up properly but there was preliminary discussions late last year which I imagine because of Three Ireland deal being given permission become a reality.

This leads more evidence to what me and others have been saying for a while Four networks isn't viable any longer due to spectrum and costs.

This merger would make Three Italy the second biggest in Italy behind Telecom Italia but ahead of Vodafone.

The viability of a fixed number of operators isn't so much of a factor as the fact that as I previously stated Three planned to clear many billions from the sale of businesses in Hong Kong in order to buy European telecoms. They'll likely be more action from HWL in Europe too.

This week HWL have sold a share in their retail group to make the listing of AS Watson on the stock market more viable. AS Watson, is a big retail group which owns retail outlets like Superdrug in the UK and other chains throughout many countries. HWL will be investing more in European Telecoms I'm sure.

[wavejockglw]

Ireland represents a reasonable opportunity for consolidation and returns through economies of scale. Big European markets are less fertile with more aggressive competition and regulators demanding lower margins. Being the smallest player in a market makes little sense now as the opportunity for growth is limited so HWL have to look at ways to make something of their considerable investment in 3 across Europe. That could mean acquisitions, mergers or disposals and each market has it's own specific characteristics. HWL are shrewd and have a history of developing telecoms markets and disposing of holdings or merging them. Their business is diverse (owners of ports, power companies, retail businesses and property), and not like Vodafone, France Telecom, Telefonica, etc who are purely telecoms operators.

The big question has to be, having achieved consolidation and developed a stronger business, how long will HWL retain it? Has the purchase of O2 Ireland and it's integration with 3 marked a new dawn of a long term commitment to the mobile telecoms market by HWL in Ireland?

[Thine Wonk]

Quote:

Originally Posted by wavejockglw

Ireland represents a reasonable opportunity for consolidation and returns through economies of scale. Big European markets are less fertile with more aggressive competition and regulators demanding lower margins. Being the smallest player in a market makes little sense now as the opportunity for growth is limited so HWL have to look at ways to make something of their considerable investment in 3 across Europe. That could mean acquisitions, mergers or disposals and each market has it's own specific characteristics. HWL are shrewd and have a history of developing telecoms markets and disposing of holdings or merging them. Their business is diverse (owners of ports, power companies, retail businesses and property), and not like Vodafone, France Telecom, Telefonica, etc who are purely telecoms operators.

The big question has to be, having achieved consolidation and developed a stronger business, how long will HWL retain it? Has the purchase of O2 Ireland and it's integration with 3 marked a new dawn of a long term commitment to the mobile telecoms market by HWL in Ireland?

I love how you say the opportunity for growth is limited, yet Three have been the fastest growing network 2 years running, out performing all the others in the market. We're talking about a group that took Orange in 1991 into to a $33 billion company when sold in 1999.

Three has 10 million customers in 10 years and is growing. In 5 years they could have 15 million customers, which means that the others by definition could have 5 million fewer. If you noticed O2, and EE both lost customers year on year net figures this year. Those customers haven't given up their mobiles, they have gone elsewhere. Three only report 6 monthly, so we'll see how they are doing in the next report in 3 months.

With 3 deals in the top 10 of all time in HotUkDeals, Three are really shaking up the market and gaining customers. That and reports like most reliable network in the Root Metrics surveys. They now have a decent amount of 4G spectrum, 800mhz and potentially VoLTE getting rolled out next year.

[wavejockglw]

Off topic re Ireland but to clarify, 3 UK had 7.529 million active customers reported in the last official HWL Interim report and they only reported a 2% increase in their customer base during the 6 month reporting period. It is totally unrealistic to imagine 3 gaining 1 million new customers a year (15% net growth annually) whilst retaining all existing ones, even they would not make such an ambitious forecast! The only way they could achieve that would be to merge with another network operator! 3 don't have the distribution scale now to make huge gains as they are no longer sold by the largest independents like phones4U or Carphone Warehouse. 4G with or without VoLTE is the least available coverage of any UK network presently so hardly likely to be a positive factor to drive growth.

Interestingly 3 Ireland only had 508,000 customers at the last count so it needed to be merged with another operator to make financial sense. Mature markets are not great prospects for growth so I expect further consolidation of the smallest network operators just as has happened in Ireland.

http://202.66.146.82/listco/hk/hutch...013/intrep.pdf (Page 14 details customer numbers by market).

[Thine Wonk]

Fair point Wavejock on the 10m figure, my error I was quoting the registered, but not active customer number.

Three added 565,000 new customers in 2013, driven by a 12% increase in contract customers. Three now has 7.9 million active customers, although that data is from February.

Their revenue is now topping £2 billion, their costs are falling and their operating profit has doubled recently. So far from the smallest operator struggling to survive as you make out.

[jabbamk1]

Quote:

Originally Posted by wavejockglw

Off topic re Ireland but to clarify, 3 UK had 7.529 million active customers

Stopped reading at this point.

If you're going to quote out of date figures then what's the point in discussing anything if you're just not going to accept new figures released back in Feb.

Three have over 7.93m active customers and over 9.85m registered customers as of December 31st 2013.
If you want to compare to other networks then registered customers is the correct number to quote.
Three added over 780,000 registered customers in 2013.

[enapace]

It's official Orange are looking to buy Bouygues Telecom this was always on the cards as Bouygues has been annoyed with its position in the French market reason why they were looking to buy SFR to build a stronger one. As obviously that has failed it meant they were likely wanting to sell.

Imagine an official bid won't happen till July 10th at earliest when EU decide on O2 Germany Deal. Though imagine this wouldn't have as much of a problem getting past commission as from what I've heard French government want it to happen and Orange intends to sell spectrum to Illad and fair bit of Bouygues masts which would only boost competitiveness.

[mogzyboy]

Quote:

Originally Posted by wavejockglw

Off topic re Ireland but to clarify, 3 UK had 7.529 million active customers reported in the last official HWL Interim report and they only reported a 2% increase in their customer base during the 6 month reporting period. It is totally unrealistic to imagine 3 gaining 1 million new customers a year (15% net growth annually) whilst retaining all existing ones, even they would not make such an ambitious forecast! The only way they could achieve that would be to merge with another network operator! 3 don't have the distribution scale now to make huge gains as they are no longer sold by the largest independents like phones4U or Carphone Warehouse. 4G with or without VoLTE is the least available coverage of any UK network presently so hardly likely to be a positive factor to drive growth.

Interestingly 3 Ireland only had 508,000 customers at the last count so it needed to be merged with another operator to make financial sense. Mature markets are not great prospects for growth so I expect further consolidation of the smallest network operators just as has happened in Ireland.

http://202.66.146.82/listco/hk/hutch...013/intrep.pdf (Page 14 details customer numbers by market).

Aren't Three IE buying O2 Ireland? So an acquisition, not a merger...

[enapace]

Quote:

Originally Posted by mogzyboy

Aren't Three IE buying O2 Ireland? So an acquisition, not a merger...

They have brought it and technically it is both as they have taken control of it and it's spectrum. Merging the masts and new spectrum into Three Ireland and customers of course. Similar to what T-Mobile US did with MetroPCS but easier as they are both GSM instead of GSM and CDMA.

[wavejockglw]

If the German deal gets clearance and a French deal follows the likelihood is that a UK deal will be hot on their heels. HWL need to reap some economies of scale and 8 million paying customers just isn't a workable proposition. 3 UK have vastly reduced their distribution and have been rolling out 4G LTE very slowly. 3 UK have also been raising prices on contract deals and there is no sign of any big PAYG initiative to gain new customers. All of that suggests they are treading water awaiting the outcome of the bigger picture which will only become known when the decision of European regulators becomes clear re major markets reducing competition from four players to three. MVNOs may be the key as has been stated and with a tightening up of wholesale practice they could provide the same type of 'market shaking' clout that 3 UK had some years ago when they were hungry for 3G adopters. Most likely scenarios are a merger with Vodafone UK and an equity share based on revenues, similar to what has happened in Australia. That would give Vodafone around 27 million customers and HWL about 25% share in the venture. A sale to Telefonica is possible but the red ink on HWL's balance sheet would be horrific as they would get a tiny return in comparison with the £12 Billion approx they have invested to date. HWL buying O2 UK is another possibility and merging it with 3 UK, they have the cash but it would be a big gamble and it's questionable HWL want to be in UK mobile telecoms for the long haul. The other possibility is BT who are forging ahead with a new mobile network using a very different strategy from the norm. BT could acquire 3 from HWL but again the balance sheet issue arises as the value of 3 UK now is nowhere close to what it cost to develop. An equity deal with BT to merge with 3 UK might give HWL a share in something they could trust to deliver and give BT a mobile network of their own to compete head on with EE, Vodafone and O2.

Lots of possibilities, biggest priority must be for HWL to solve the issue of 3 UK which has little chance of growing to the level it would need to, to compete effectively with the majors. T-Mobile and Orange's parent companies are both highly experienced and respected telcos and they recognised the law of diminishing returns in terms of customer acquisitions in a developed and saturated market and got their 14 and 13 million customers together to form EE and have since been competing from a position of strength. That's not to say they have done everything right and have managed to retain all the merged customer base but they have a clear strategy and after the dust of the merger disturbance settles they will make gains again.

Ireland now has a very stable three company mobile market with experienced players who will compete and make a good return from the market they have available. The same will happen in the UK but it will require some consolidation to reach the same point.

I expect the usual unrealistic '3 UK press release' stuff to be posted below by the usual well known 3 UK supporters but the reality is far from the dancing horses and grinning girls on bikes that is output on TV.

[Thine Wonk]

Quote:

Originally Posted by wavejockglw

If the German deal gets clearance and a French deal follows the likelihood is that a UK deal will be hot on their heels. HWL need to reap some economies of scale and 8 million paying customers just isn't a workable proposition..

Why do you keep posting this. Three have doubled their profits in the last year, revenues are over £2BN now and they are adding large customer numbers year on year. How hard is this to understand?

[Thine Wonk]

Quote:

Originally Posted by wavejockglw

. A sale to Telefonica is possible but the red ink on HWL's balance sheet would be horrific as they would get a tiny return in comparison with the £12 Billion approx they have invested to date.

You're living in a dream world Wavejock, HWL have just acquired O2 Ireland, O2 UK just sold their broadband division and 2 other O2's have been sold of by Telefonica.

Building a brand new network from scratch is expensive, and you lose money year on year for years when you have to build a massive infrastructure and hardly any customers on it. It takes many years until it hits break even point. Every new mobile network went massively into debt to build for the first time, and did so for years.

Three UK is worth an estimated £6-8BN if it were sold today, but it is now making profits, in fact profits doubled in the last year, so as revenue increases the value of the business goes up. It is nowhere near exit time for HWL with Three, it'll be several years at least before they would consider an exit.

[wavejockglw]

Where does the valuation of 3UK come from? £6 billion is utterly ridiculous considering the small profits they report. Simply unrealistic unless a link to that sort of valuation can be provided.....Waiiting with interest. ......

[enapace]

For once I actually agree with you Wavejock. I can see the UK becoming a three network country. You forgot about the deal that is likely to happen between 3 Italy and Wind, Italy is a fairly competitive market so much so that Vodafone are giving the biggest allotment of money to there. Talks about that deal were on the cards since December with the go ahead of the Ireland deal they have resumed.

How it will come about I'm honestly not sure I can't see Three wanting to sell like you said they have put to much money into the UK to really sell. I think the likely scenarios are going to be Three buying O2 UK or as you say a Merger with Vodafone would actually imagine that would be a 50-50 deal as though Three doesn't have a ton of customers it does have some very good spectrum. For example if Vodafone can refarm there 1800MHz which I imagine could happen soon by end of next year they could have 2x20MHz of 1800MHz. Spectrum is surely going to be the most valuable part of a network soon.

Plus there is a massive amount of tax right off which is worth something.

[Thine Wonk]

Quote:

Originally Posted by wavejockglw

Where does the valuation of 3UK come from? £6 billion is utterly ridiculous considering the small profits they report. Simply unrealistic unless a link to that sort of valuation can be provided.....Waiiting with interest. ......

O2 Ireland sold for 800M with £544M of revenue, but O2 were very keen to dispose of assets and I suspect it went at a much lower price, due to the need by Telefonica to dispose of some assets in order to meet debt obligations. Hutchison previously offered £2BN to eircom and it was turned down. This is in the Irish market with a population of just 4.5M people.

We're in a 70M population country, talking about a company with revenues of 2BN of revenue selling a business with extensive assets and 8M customers (nearly double the whole population of Ireland in customers!)

£4-6BN is what I said, I see you chose to misquote and pick the highest figure. You seem to constantly forget that the valuation of a business is not based on profit alone, the business itself and it's assets like spectrum is what values Three UK at 4 to 6 BN.

[wavejockglw]

Quote:

Originally Posted by enapace

For once I actually agree with you Wavejock. I can see the UK becoming a three network country. You forgot about the deal that is likely to happen between 3 Italy and Wind, Italy is a fairly competitive market so much so that Vodafone are giving the biggest allotment of money to there. Talks about that deal were on the cards since December with the go ahead of the Ireland deal they have resumed.

How it will come about I'm honestly not sure I can't see Three wanting to sell like you said they have put to much money into the UK to really sell. I think the likely scenarios are going to be Three buying O2 UK or as you say a Merger with Vodafone would actually imagine that would be a 50-50 deal as though Three doesn't have a ton of customers it does have some very good spectrum. For example if Vodafone can refarm there 1800MHz which I imagine could happen soon by end of next year they could have 2x20MHz of 1800MHz. Spectrum is surely going to be the most valuable part of a network soon.

Plus there is a massive amount of tax right off which is worth something.

Cheers for you reasoned response. Far removed from the comapny press realease mentality. Consolodation looks like a certainty if moves are made in France and Germany. How that affects HWL remains to be seen but I bet some discussion has already take place to take advantage of a 3 network marketplace. As for the valuation of 3 UK. . We await a link to some reputable analyst.