Three UK plans IT and core virtualisation

Alan Burkitt-Gray
Published on:

Hutchison’s UK operation talking to vendors about virtualising its IT systems and its core network, says CEO

CK Hutchison’s Three UK operation is to virtualise its IT systems and its core network. The company, which has 9.1 million customers, has already asked vendors to quote for the IT part of the project, according to Three’s CEO, Dave Dyson.

The company is planning the project in order to reduce costs of the system, some of which dates back to when Three set up in the ?UK 13 years ago. “We are talking about our complete IT system, and we are looking to do our core network as well,” said Dyson. “We’re completely refreshing the IT, after an 18-month review. It is a large investment and our investor is supporting.”

Dyson was speaking at the company’s presentation of its first half results, at which it reported EBITDA up by 12%, and an EBITDA margin of 33%, on revenue that was down by 2%.

Dyson hit out at the UK regulator, Ofcom, for its spectrum policy, which has left two out of the UK’s four competitors with more than 70% of the bandwidth. BT, which owns EE, has 42% of spectrum and Vodafone has 29%, leaving Three with 15% and Telefónica’s O2 2ith 14%.

“The UK has the most imbalanced distribution of spectrum in the developed world,” said Dyson, who called for bidders to be limited to 30% of all available spectrum in the next UK auction. “The biggest barrier to us is having access to more capacity. Spectrum is critical in terms of performance and capacity.”

The problem is particularly acute for Three because it has promoted itself as a mobile data company. “Our customers use 5 gigabytes a month,” said Dyson.

Ofcom is planning to auction spectrum in the 2.3 and 3.4GHz bands and says it will publish details of its consultation “in the autumn”.

Dyson said: “Our solution is that in the next auction we have asked Ofcom to impose a cap of 30% [on any one bidder] and to set aside spectrum for us. We feel a 30% cap is appropriate. The only impact will be on BT, as all the others have less than 30%.”

Vodafone and BT’s EE “are sitting on 75MHz of spare spectrum” that they do not use, he said, suggesting that both companies had bid independently in previous auctions for spectrum to prevent rivals from using it. “BT EE and Vodafone have tried to get spectrum that they didn’t need to deny it to others,” he said.

Dyson added: “O2 is on board in terms of [auction] restrictions.”

He criticised the European Commission for blocking Three UK’s projected £12.5 billion takeover of O2 UK. “It was the wrong decision,” he said. But even though Hutchison is appealing against, both operating companies – Three UK and O2 UK – have appeared to accept it.

However Dyson raised the possibility of more deals. “Is there another M&A in the pipeline? The answer is No,” he said, but added: “If something else comes along we would look at it.”