Feature Article

December 04, 2013

Hutchison Whampoa 3 is Sacrificing LTE Revenue and Profit to Grow its Business

Will fourth generation Long Term Evolution profit margins be sacrificed to speed mobile operator global growth? One might draw that conclusion from Hutchison Whampoa’s “3” expansion effort. The broader worry, in some circles, might be whether 4G LTE investments will pay off.

Three has added an additional four countries (United States, Indonesia, Sri Lanka, and Macau) to its U.K. “Feel at home” roaming plan, which allows United Kingdom-based consumers access to their respective voice and data allowances abroad. These new territories make a total of 11 countries where free roaming is available.

The obvious implication is that 3 is deliberately sacrificing potential revenue to grow its global presence, since roaming fees are a high-margin service.

The use of free 4G LTE roaming is part of Hutchison Whampoa’s effort to create a bigger global network. Three operates in Indonesia and Sri Lanka, but the U.S. market is the first country offering free roaming where 3 does not have a facilities-based presence.

But pressure on LTE profit margins is evident elsewhere as well. EE in the United Kingdom is bundling unlimited calling and texting when roaming in some European countries on 4G.

T-Mobile US also offers unlimited calling, texting and data access in over 100 countries, albeit offering data service at 2G speeds, a limitation that makes the feature next to useless, one might argue.

Three also does not charge a premium for use of 4G on its home network, though it is not clear what might happen as competitive offers in the U.K. market change. So far, though, 3 has remained committed to the “no incremental cost” approach for 4G access.

The “Feel At Home” program  now operates in 11 destinations around the world.

Three increased its total active customers to 7.8 million, a 9.7 percent increase, since the third quarter of 2012, adding about 300,000 net new customers in the third quarter of 2013.

Three aims to cover 50 U.K. cities with 4G by the end of 2014 and 98 percent of the population by the end of 2015.

The “no incremental cost” approach will gain 3 customers, at the expense of monetizing the LTE investments as much as might otherwise be possible. 

Edited by Cassandra Tucker

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