Mobile network 3 reports second operating profit in 11 years

UK arm of business increases customer base to 8.2 million and reports 14% increase in revenues

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Mobile network 3 reports second operating profit in 11 years

The UK arm of mobile network 3 Group has reported its second annual operating profit since launch 11 years ago and has increased its customer base by 18% to 8.2 million.

Revenues were up 14% to £1.787bn, as customers with smartphones signed up for unlimited mobile broadband tariffs.

"Consumer demand for mobile data has exploded and smartphones now make up over 99% of our handset sales," said the firm's UK chief executive, David Dyson. "This combined with our all-you-can-eat data offers means we are well placed to continue our growth trajectory."

The smallest and newest UK network, 3 has struggled since launch in March 2003 to make a profit. In 2010 it recorded its first ever full-year operating surplus, but the numbers were flattered by a one-off gain recorded when Orange joined 3's network-sharing agreement with T-Mobile, contributing 3,000 masts.

The operator's financial recovery only began in the second half of 2010, when 3 was able to sell the iPhone for the first time and mast-sharing agreements started to deliver cost savings and better coverage.

Annual results for 2011 published on Thursday show the company achieved underlying earnings before interest, tax, amortisation and depreciation (EBITDA) of £191m, up 16% on 2010.

After depreciation and amortisation, EBIT earnings fell 83% from £173m in 2010 to £30m. Without the one-off gain, 3 would have made an EBIT loss in 2010 of £15m, and the company lost £89m in the UK in 2009.

Improvements in the UK were not enough to mask problems elsewhere in the group, which has five other European markets and a half share in Vodafone Hutchison Australia.

Customer numbers in Australia fell 7% as poor reception and capacity problems prompted mass defections and forced the company to fast-track a costly infrastructure upgrade.

In Italy, 3 Group's largest market with 9.2 million customers, the total subscriber base grew by just 1% as tough economic conditions took their toll.

Although revenues at group level increased 20% to HK$74bn (£6bn), the firm reported an EBIT loss of HK$1.481bn, down from a profit of HK$2.9bn the year before.

The chief financial officer, Richard Woodward, said profits were set to increase in future years and reiterated the target, set out in 2010, of doubling the size of the business by 2015.

"We've spent years building the right network, building the right regulatory environment, and we are now starting to see the fruits of some very hard work," said Woodward.

The number of lucrative contract customers jumped by 721,000 or 18% to 4.6m, representing a similar 55% of the total to the year before. All mobile networks are working to convert subscribers from pre-pay to contract, as these generate higher levels of income.

At 3, contract customers contributed 86% of service (non-handset) revenues in 2011, but this is down from 90% in 2009 because the number of pre-pay customers grew faster in 2010.

Average revenue per user across both types of subscriber fell 3% to £21.87 per month, which a spokesman said was due to cuts in the regulated cost of calling a mobile from a landline.

Article taken from The Guardian.