Don't Call It a Comeback
By Eric Lin, Mon Jun 14 22:00:00 GMT 2004

3 had a bumpy first half of 2004. Its subscriber base grew at a healthy rate, but with such high customer acquisition costs, many analysts doubt it can sustain the growth. Some analysts have written 3 off, but their death knells could be premature.

Thanks to an underwhelming first year, and rumors (later substantiated) that DoCoMo would pull its money out of 3, analysts have been down on Hutchison's 3G effort, one only giving them 2 years to live. But Dominic White isn't convinced. He takes a look at 3 UK and doesn't think things are as bleak an analysts predict... maybe.

3 has had a good run up in the first half of this year, adding customers worldwide at a good clip. However there still are less than half a million subs in the UK, and most of them are concentrated around London. This may sound dismal, but isn't much different than DoCoMo's FOMA subscriber trends. At first, FOMA handsets were expensive and unwieldy, but as phones and service improved, DoCoMo has been able to add more 3G subscribers, all the while making sure rates are competitive with other 2G and 3G operators. 3 now has added a second small, capable handset, the LG 8110, which should help to continue the trend that Nokia's 7600 started -- echoing previous theories on how handsets effect network adoption.

3 also has the advantage of deep pockets. Its founder, Li Ka-Shing, like many modern billionaire businessmen, is willing to throw money at a problem if money will fix it. 3 is spending four times more per customer to acquire new subscribers than the European average, one of the factors that has turned off analysts, but it is working to some degree. 3 is gaining subscribers, many of them in the UK from Orange and T-Mobile, according to rumors. As a young upstart with relatively few subscribers, 3 can get away with spending big bucks to lure users without capturing too much attention from the big operators. With enough momentum, 3 won't need to spend as much per user, but it will need a plan to compete with the big boys. They are already set up with a solid management team who are capable of developing 3 from a spunky child into a mature carrier, should their efforts to gain subscribers succeed before Li's money runs out.