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Features - Michael Garwood
March 19, 2015
Dyson may stick with EE network share deal should parent Hutchison’s £10.25bn O2 acquisition complete
Three CEO Dave Dyson says the operator has no plans to end its “long term’ mast share agreement with EE should Hutchison’s proposed £10.25 billion acquisition of O2 complete.
Three and EE signed a three year deal, said to be worth £1 billion (joint investment), in February last year to help spread the rollout costs of their respective 4G networks.
Dyson, who was speaking at a recent media business update event in London, ducked questions related to the buyout plans, but insisted he would be happy for the “long term” relationship – which includes boosting mast numbers 14,200 to 17,000 by 2017, to continue.
“All of our current sites, and all of our planned sites are currently shared with EE,” explained Dyson.
“Our relationship with EE is pretty good and we’ve entered in to a long-term relationship with them that works for both of us.
“From a standalone perspective, we’re very happy with the way it works and we’re both incentivized to minimize the cost within that network which is why if there was a sensible, pragmatic solution to sharing small cells then we would both look at that.”
Long-standing partner
Three has a long standing affiliation with Deutsche Telekom, (currently) 50pc owner of EE. The operator partnered with T-Mobile in 2010 to form Mobile Broadband Network Limited (MBNL) in 2010, as part of a 2G and 3G network share deal.
O2 and Vodafone teamed up in 2012 for a network equipment share deal (Cornerstone), which, like EE and Three, is designed to help spread the costs and speed up the rollout of 4G.
Should Hutchison’s acquisition plans complete, Three would gain access to 18,500 masts, potentially providing it with 35,500 masts in total.
Reliability is priority
However, Dyson made it clear he does not back EE’s position regarding the importance of 4G speeds – instead backing recent comments made by O2 and Vodafone that reliability was his biggest priority.
EE currently provides the fastest 4G in the UK with speeds up to 40Mbps as part of its ‘4G Extra’ packages. Vodafone CEO Jeroen Hoencamp insists “no one” needed more than 20MBPS.
EE chief commercial officer Marc Allera, who was reacting to such comments, hit back claiming 50 per cent of new 4G customers were now taking the double-speed plans – despite the £5 additional fee.
Dyson revealed Three currently offers average 4G of 18Mbps and, like Hoencamp, insists it was more than enough for “majority” of its users.
“We offer average 4G speeds of 18Mbps. For most things, people don’t even need more than 2Mbps so it will be adequate for the majority of things that people need it for the majority of times,” Dyson explained.
“Our underlying objective as a network is to be the most reliable. We could have chosen to try to be the most high speed or to be the largest but research we’ve looked at shows that reliability is what customers really value.”
“Coverage is king. People will always find different ways to access content so if you can serve it up in a really user friendly way then that helps to stimulate the take up of that content but as long as you have access to the internet, you have access to content. Coverage would be the main thing you have to address.”
Three’s 4G users rocket
Three’s 4G coverage has also increased significantly over the past 12 months. Dyson revealed more than 3.5 million customers (just under a third of its base) had accessed its 4G network in the last 90 days.
Three switched on its 4G network in December 2013 – four months after Vodafone and O2 and more than a year after EE, which has almost eight million subscribers.
Unlike its rivals however, 4G for Three customers is not charged at a premium, with all customers able to access the network provided they have a 4G supported smartphone.
Dyson explained since its 4G launch, which was restricted to London, coverage has grown from 14 per cent of the UK population to 55 per cent. Three has a customer base close to 10 million.
Whilst Three’s coverage is substantial, it is still dwarfed by EE which has the widest 4G coverage, with 80 per cent of the population covered. Vodafone (as of January) and O2 (as of November) both cover around 50-57 per cent.
Both Vodafone and O2 expect to have 90pc 4G coverage by mid-2016.
Dyson defended the rollout and lack of 4G access in parts of the country.
“That’s not an admission of defeat because our network isn’t good enough,” said Dyson. “All mobile operators will have places where their signal doesn’t reach but what we’re trying to do is make sure our customers get connected as much as they possibly can, not just for data, but for text and voice as well.”
Phil Sheppard, director of networks, Three
Coverage is extended
Three will also use some of its 800MHz spectrum to launch 4G calling in the third quarter of 2015, according to director of network strategy Phil Sheppard.
The operator will utilise the spectrum bought as part of the 2013 spectrum auction to provide a seamless VoLTE solution, Sheppard revealed at Three’s Network Without Frontiers event in London.
Sheppard explained that the 800MHz band is low frequency, making it good for coverage in harder to reach areas.
“We know that some of our customers do have coverage problems at home,” Sheppard said. “In Q3 this year, we will launch Voice over LTE solution. That spectrum is low frequency and is very good for coverage. It is something we have never had on the Three network in the past.
“This doesn’t just address coverage at home – it also addresses coverage while out and about.
“An illustration of how important this is that it will allow deep indoor coverage.”
4G calling this year
Sheppard described the move as the latest step in Three’s plans to boost its coverage for calls and texts to 85 per cent of the UK (geographically), as part of a recently inked deal between the four major UK operators and the Government. As part of the agreement, the networks will invest a combined £5 billion to improve infrastructure and guarantee voice and text coverage to 90 per cent of the UK geographically by 2017.
Three judges its coverage based on population, and revealed that at the end of 2014, it covered 97 per cent of the UK population. This was up from 90 per cent in 2007, with Sheppard planning to provide 99 per cent coverage by 2017. The rise in coverage since 2007 has been achieved by almost doubling the number of sites that Three transmits from, up from 7,500 to 17,000 by 2017.
CEO Dyson said that introducing 4G calling and improving the network was key to improving Three’s net promotor score (see boxout) and overall customer service record.
Three moved from being the most complained about network in Q2 2012 to become the least complained about network in Q1 2014, according to figures from Ofcom. Three went from almost 0.2 complaints per 1,000 customers to 0.04 per 1,000 customers during that time, surpassing O2 who had been the least complained about network previously.
NPS score for Three’s customer contact centre had risen from +3 in the third quarter of 2013 to +13 for the same quarter in 2014.
This included an increase from 41 per cent of customers asked who gave Three’s customer service a nine or a 10 (out of 10) to 46 per cent. The numbers of those who gave Three a score of five or below (detractors) fell from 21 per cent to 17 per cent.
According to research from uSwitch, better or good coverage is the number one factor for 65 per cent of consumers who are switching provider, and is the main concern for 60 per cent of first time buyers.
uSwitch analyst Ernest Doku said at the event: “Strong network differentiation is more essential than ever. Exclusive devices are a rarity these days,compared with the old days when things like the iPhone were exclusive. Core propositions, network reliability and coverage become key to attracting customers.”
The roaming package
Uncertainty surrounding EU roaming regulations means that extending Three’s Feel At Home roaming package to include more countries is increasingly important, according to Dyson.
Last month Three announced it had added Spain and New Zealand make 18 countries where its customers can use their minutes and texts while roaming for free, but Dyson wants to make it a worldwide offering.
At the end of January, the Latvian EU presidency asked the European Commission to carry out a review of the EU’s wholesale market, meaning that proposals to scrap roaming charges by the end of this year could be delayed until 2018. Dyson feels that roaming is the next major hurdle that the mobile sector needs tackle and said Three’s ability to offer free roaming in 18 countries to customers helped it to stand out from rival operators.
“Roaming is something that needs to be corrected in the mobile industry. What we can do as an industry is to try to fix those charges,” he said.
Dyson revealed the additions of Spain and New Zealand meant that Feel At Home would cover around 65 per cent of all trips that Three customers will take in the next year.
His aim is to provide free calls and texts to customers no matter where they travel to, and said it may be possible to use WiFi calling app inTouch to do so.
“How do we get from covering 65 per cent of trips up to 100 per cent?” Dyson asked. “My ambition is absolutely to make good value roaming a global proposition. Potentially we’ve got the proposition of using in Touch as a global solution. If we can knock over some of the technical and regulatory issues then we hope to allow our customers to use the in Touch product over WiFi while overseas. That is exciting in itself and could give us more leverage to negotiate with the overseas providers for wholesale agreements.”
