Three UK publishes H1 2024 results

• Growth in certain customer segments driven by B2B, Home Broadband and SMARTY
• Year-on-year revenue and margin growth but EBITDA less capex remains negative, hindering ability to invest

At Three UK our mission is to provide better connectivity, every day, for every customer. The strategy to deliver this is centred on four key objectives: improve the network experience; grow the business; transform customer experience; and achieve our financial objectives.

Financial highlights

• Revenue up 9% to £1,335m (H1 2023: £1,227m), with net customer revenue up 6% and handset revenue up 10%, driven by customer growth in certain customer segments (SMARTY, B2B and 5G Home Broadband)
• Total Margin up 9% to £879m (H1 2023: £808m)
• Operating expenses up 5% to £548m (H1 2023: £520m), driven by an enlarged network and cost inflation
• Reported EBITDA up 31% to £213m (H1 2023: £163m)
• Reported EBIT loss of £30m (H1 2023: £76m loss), a change of -61% y-o-y
• EBITDA-CAPEX of -£17m (H1 2023: -£112m) as cashflow has remained negative since 2020
• Reported CAPEX of £230m, down 16% y-o-y (H1 2023: £275m)
• Active customer base up 3% or 352k y-o-y bringing the total to 10.9m (H1 2023: 10.5m) amidst strong competition from MVNOs and other operators
• Total contract customers up 5% y-o-y to 9.2m (H1 2023: 8.8m) as a result of increases to B2B, 5G Home and SMARTY base offsetting decline in core business areas

Operational highlights

Network

• Continued focus on capex management with spend focused on regulatory requirements (HRV and SRN)
• Achieved July 2024 target of less than 35% of HRV traffic on our radio network
• Replaced equipment on more than 600 sites to comply with HRV requirements. Equipment has now been replaced on more than 900 sites
• Optical network compliance with 3k miles of fibre and equipment replaced across the UK
• Completed construction of 311 (of which 269 are now live) additional sites as part of UK’s Shared Rural Network which will transform 4G connectivity for residents and businesses in rural locations across the UK
• Average data usage per customer, per month increased by 24% to 30.5GB (H1 2023: 24.5GB)
• 4900 5G sites (H1 2023: 4,400) across 656 towns and cities with 62% population coverage (H1 2023: 61%)
• Successful pilot programme to prepare for the switch off of 3G which will begin in September
• Expanded 4G and 5G network in London Underground stations, with network launches at Paddington, Whitechapel, Canary Wharf and Woolwich stations.  44 stations and 45 tunnels now live

Commercial:

• Launched latest Life Needs a Big Network brand campaign, spanning TV, VOD, cinema, radio, OOH, PR, social, digital and retail to highlight the importance of emotional connection, and celebrating the power of belonging to personal networks
• Became Chelsea Women’s first women’s-only Principal Partner, including sponsorship of the team’s training kit, and continuation as Chelsea Football Club’s Official Telecommunications Partner
• Continued to bolster and grow Three Loyalty platform, Three+, with new offers and 2.2m redemptions that saved our customers more than £7m
• Extended number of countries our customers can roam in 160 locations with introduction of Go Roam Around the World Extra

Support colleagues and customers

• Post-reporting period, improved approach to communicating necessary price rises to give customers greater clarity and opportunity to plan ahead following Ofcom’s new guidance
• Launched major new mental health campaign, #talkmorethanfootball, in partnership with Chelsea, Samaritans and Vinnie Jones
• Awarded 7th consecutive RoSPA Gold award at this year’s RoSPA Health and Safety Awards
• Continued the Connected Communities programme, providing youth groups with free high-speed broadband, smart tablets and digital training sessions
• Ongoing support for schools, community groups, charities and businesses through Discovery which has now supported over 300,000 people since its inception in 2014, through more than 14,000 workshops
• Almost 50,000 people supported by various digital inclusion activities (Reconnected, Discovery and National Databank)

Robert Finnegan, Chief Executive Officer of Three UK, said:

“We have made progress in the first of half of the year with growth in certain segments such as SMARTY, 5G Home Broadband and B2B.

“Despite scaling back our capex, we continued to make a loss driven by the escalating inflationary costs of operating our network. Our cashflows have been negative since 2020 and our costs have almost doubled in 5 years, meaning investment in network is unsustainable.

“UK mobile networks rank an abysmal 22^nd out of 25 in Europe on 5G speeds and availability, with the dysfunctional structure of the market denying us the ability to invest sustainably to fix this situation. Our merger with Vodafone will unlock £11bn worth of investment in digital infrastructure, creating a best-in-class 5G network for the UK and helping to grow the UK economy.”