Three U.K. CEO Says Size Matters in Push for Spectrum

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Three UK, the smallest of the country’s four wireless carriers, needs to double in size to effectively compete with larger players in the market -- and it can only do so if the British government tightens spectrum-ownership rules, Chief Executive Officer Dave Dyson said.

The company, owned by billionaire Li Ka-Shing’s CK Hutchison Holdings Ltd., is pursuing organic growth after European Union regulators blocked its merger with Telefonica SA’s O2 earlier this year. While Three has captured 10 percent of the marketplace, up from 5 percent five years ago, it’s still much smaller than competitors BT Group Plc and Vodafone Group Plc. At 10 million customers, Three is reaching the limits of its current network capacity, Dyson said in an interview with Bloomberg News in London.

Three is lobbying Ofcom, the British regulator, to set aside a batch of 2.3 gigahertz spectrum that only Three, O2, or potential new market entrants like Liberty Global Plc’s Virgin Media or TalkTalk Telecom Group Plc would be allowed to bid on, Dyson said.

“There are a lot of things you can do to grow your capacity but none of them replaces what you can achieve with spectrum,” Dyson said. If he can’t convince Ofcom to impose restrictions on BT, which operates the EE mobile service, and on Vodafone, “20 percent would be unrealistic" for Three to achieve, Dyson said.

Each of the other U.K. mobile-phone providers have more customers. BT Group’s EE has about 33 percent of the market, followed by Vodafone at 21 percent and O2 with 18 percent, according to Statista. Three has also acquired less capacity than its rivals.

The company wants Ofcom to impose a 30 percent cap on the amount of spectrum that any one provider can possess, Dyson said. This could have the effect of forcing BT to sell spectrum it already owns if it wanted to buy new wireless spectrum in the coming auction.

Ofcom will publish rules for the sale later this year, said Joe Smithies, an Ofcom spokesman.

“We will design the auction to maximize the best use of this spectrum,” Smithies said. “But as to how the auction will work, we can’t say yet."

To get to the 20 percent goal, Three is taking a number of measures. It’s upgrading its computer system, spending somewhere in the range of 100 million pounds ($131 million) so it can better use the data it has on customers and be more nimble in responding to market opportunities.

The company is discussing how to market new services to niches it’s not targeting now, such as businesses, ethnic customers, and people over 55, Dyson said. The company also would consider more deals to give resellers, called MVNOs, space on its network once its spectrum issues are resolved, he said.