Three UK agrees £250m deal for UK Broadband

By:
James Pearce
Published on:

Hutchison's UK subsidiary will buy PCCW's mobile broadband firm, giving it access to potential 5G spectrum

CK Hutchison subsidiary Three UK has agreed to buy UK Broadband Limited from PCCW for £250 million.

UK Broadband Limited owns and operates Relish, a mobile broadband provider based in London. Overall, the company supports 15,000 customers across the UK.

It also gives Three access to a chunk of additional spectrum, understood to be around 40MHz across the 3.4GHz, 3.6GHz, 3.9GHz bands. This spectrum cannot currently be used for mobile services, but has been earmarked as possible bands for 5G services.

The transaction will see UK Broadband become a wholly owned subsidiary of Three UK, although the mobile operator declined to discuss if this will result in the firm or subsidiary Relish being rebranded.

Three will pay £250 million for the acquisition, should the deal be approved by regulators, although a deferred £50 million will be made available as a credit towards an MVNO agreement on Three’s network.

Dave Dyson, Chief Executive of Three UK, said: “UK Broadband gives us an opportunity to expand our ambition to provide high quality and great value internet connectivity for UK consumers.”

The deal marks an expansion of Three’s mobile based, fixed line replacement service which was launched last year under the name Home-Fi. It aims to offer home Wi-Fi services in areas which have poor internet connectivity using Three’s additional mobile service.

Home-Fi launched across 135 stores based in non-congested areas of the mobile operator’s network, and sees a router connected using a SIM for connectivity.

Another key reason for the acquisition is the spectrum holdings of UK Broadband, which includes several bands that have been identified for possible use during the development and implementation of 5G.

Three has already complained about the distribution of spectrum holdings in the UK, launching a campaign challenging Ofcom CEO Sharon White to “Make the Air Fair”. The campaign, launched last year, included a petition which has received more than 200,000 signatories.

In the campaign, Three accused BT and Vodafone of harming competition by holding on to a high proportion of spectrum, some of which the Hutchison subsidiary claims is being left unused.

CCS Insight principle analyst Kester Mann claimed the acquisition will do little to address the concerns expressed in the Make the Air Fair campaign, but removes a likely bidder from future spectrum auctions.

Mann said: “Although Three will acquire new spectrum, the acquired band is not compatible with most of today’s mobile devices, meaning that it cannot be put to immediate use. It is likely to be a key band for 5G services, which will launch in the UK from 2020. Therefore, today’s deal does little to address its immediate concerns.

“Three remains in a precarious position as a mobile-only provider in a UK market rapidly evolving to multiplay services. It does not have the share of spectrum or scale of operation to challenge bigger rivals such as BT and Vodafone. UK Broadband has a tiny customer base of just 15,000, a fraction of the more-than-20 million it would have gained had its bid to acquire O2 been successful last year.

“The deal removes a likely bidder at the UK spectrum auction, anticipated for later in 2017. UK Broadband was almost certain to take part given its aspirations to expand its service beyond London, Swindon and Reading. A successful outcome is vital for Three’s long-term UK future and has spurred a strong recent campaign aimed at securing more favourable conditions.”

Three failed in its last acquisition attempt, a bid to buy O2 from Telefonica, after meeting resistance from European regulators.