War and rumours of war

6 June 2003

Deepdiscounting voice calls was the 3G pioneer’s weapon of last resort. It has deployed it after just three months of operations. The Hutchison outpost may have unleashed a price war that will damage all mobile players if it doesn’t collapse first.

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Three, the 3G mobile startup in the UK, has announced new price plans that undercut competitors for voice calls by up to 50%. It is to offer 500 minutes of voice calling for £25 a month, and 750 minutes for £35 a month.

The new UK mobile operator is reported to have some 25,000 customers after three months of operations. Its Italian sister company has 60,000 subscribers. Both had set themselves a target of around a million subscribers roughly a 5% market share by the end of 2003.

Three UK is 65% owned by Hong Kong conglomerate Hutchison Whampoa, with NTT DoCoMo and KPN owning 20% and 15% respectively. It recently raised £1bn through a shareholder loan to which KPN declined to contribute. KPN has already written the value of its stake in Three UK down from E1.5bn (£1bn) to E0.3bn (£0.2bn), while DoCoMo wrote off about threequarters, of its investment.

Colin Tucker, Three's cochief executive, said in May that the company was well ahead of its business plan. A number of senior executives have been removed from the company following its initial marketing launch.

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