Solid Q2 results as Three builds 100th Shared Rural Network site

Just as it was reporting a second quarter of 2023 in which its revenue rose 4% annually to £1.23bn as a result of an increase in the active customer base and net customer service revenue up 8% to £816m, UK operator Three UK has completed the construction of 100 sites as part of the UK’s Shared Rural Network (SRN), marking what the company said was a milestone that will transform connectivity for residents and businesses across the UK.

After years of complaints by mobile consumers and businesses that the major political parties had consistently failed rural firms by lacking a credible plan to improve mobile 4G and 5G coverage, the SRN programme is designed to wipe so-called notspots from the map, providing high-quality 4G coverage to 95% of the UK by 2025. It comprises a £1.3bn project with the UK’s four mobile network operators (MNOs) – EE, Virgin Media O2, Three and Vodafone – to improve 4G coverage and level up connectivity across the UK.

The four major telecoms operators are investing in a shared network of new and existing phone masts, overseen by a jointly owned company called Digital Mobile Spectrum Limited (DMSL), and their £532m investment is supplemented by more than £500m in government funding to eliminate total notspots. The coverage commitments are being enforced by UK communications regulator Ofcom. The principle of the project is that through both public and private investment, the SRN is seeing new and existing phone masts built or upgraded across the UK to close down rural mobile notspots. These are areas of poor or patchy coverage that cannot receive a 4G signal from all four MNOs, or any signal at all, which holds back rural communities from experiencing the full benefits of digital.

Three UK has now delivered sites across England, Wales, Scotland and Northern Ireland, which will provide new 4G connectivity to over 37,000 premises, with coverage spanning 2,800km². While the SRN programme is being delivered across the four home nations, the largest commitment is to Scotland. So far, 65 of Three’s 100 SRN sites have been deployed across Scotland and will provide coverage for 12,500 premises across nearly 2,000km² of the UK’s most remote locations.

The Isle of Colonsay, located in the Inner Hebrides close to the Scottish mainland, previously had no 4G coverage, yet Three UK said following its commitment, there is now 93% 4G network coverage on the island, transforming connectivity capabilities for over 150 premises in an area of 41km².

“With mobile connectivity becoming increasingly critical to everyday life, it is vital that we provide a network capable of supporting local economies and communities in every part of the UK,” said Three UK chief network operator Iain Milligan. “The 100th site in Three’s SRN network is another significant milestone and will transform rural access to 4G. We continue to deliver on our commitments, but the locations we are focusing on are remote and challenging, and we continue to work with local authorities to try and progress as best as possible.”

In addition to the 4G coverage improvement afforded through SRN network deployments, following Three UK’s agreement with Vodafone UK to combine their businesses, Three UK said connectivity will be further enhanced. The combined business will deploy high-capacity 5G to 86% of the UK’s population by 2030, boosting local economies by bringing advanced 5G technologies to cities and towns, including around 400 small towns that the two operators say could benefit from earlier access to high-capacity 5G.

In addition to the revenue increases, the second-quarter results to 30 June 2023 also showed the telco’s margin up 9% on an annual basis to £808m due to growth in the active customer base of 7%, driven by new business areas: B2B, SMARTY and 5G Home. The B2B customer base increased by 86% year on year, reaching the milestone of half a million customers. while the SMARTY base grew by 36% year on year. The 5G Home base increased by 174% compared with the same time a year earlier.

However, operational expenditure increased by 19%, largely as a result of inflationary pressures, and the increased costs outstripped margin growth, seeing EBITDA decline by 19% annually to £163m. Reported capital expenditure (capex) fell by 18% to £275m as a result of Cellnex funding passive infrastructure of new sites. Capex spend predominantly focused on meeting regulatory requirements including SRN and high-risk supplier swap outs.