Mobile operator Three Ireland last year posted its strongest performance since entering the Irish market in 2005, swinging into profit on the back of a 7 per cent rise in its customer base and higher market share.
Detailed accounts for the company for 2018 show that, while its turnover slipped marginally by 2 per cent to €590.5 million on lower roaming rates, its bottom line performance improved with profit after tax of €19.2 million. This compared to a loss of €4.5 million the previous year.
Operating profits spiked by 46 per cent to €93 million, while the company said it boosted its margins with stringent cost control as it shapes up to bank gains in coming years after a period of heavy network investment.
Robert Finnegan, Three Ireland's chief executive, said last night that the company's performance has continued to improve in 2019.
The scale of the financial backing that Three Ireland has received from its Hong Kong parent group, CK Hutchison, on the local unit’s long road to sustained profitability is laid bare in its balance sheet.
Since it entered the market, Hutchison has pumped at least €780 million of equity into the Irish business and has also funded accumulated losses of about €840 million. The Irish unit, which in 2013 swallowed its rival O2 Ireland, is backed up with close to €1.6 billion in borrowings from the parent.
Mr Finnegan said the parent group is “very happy with its investment”, as it receives a return on the loan interest while the overall value of the business is equal to the capital that its shareholder has pumped in.
Capital expenditure
“On average industry multiples of five or six times Ebitda (a standard financial earnings metric), the valuation is right up there with what has been invested,” he said.
The company says it spent €115 million in capital expenditure last year, including about €91 million on new software as it marries the old O2 network to Three’s original network and upgrades the entire network for high-speed 4G.
It employed an average of 1,172 staff over the year who were paid mean average salaries of more than €60,000 each, although there there is likely to have been a major disparity between the earnings of top grade staff such as network engineers, who would skew the average, compared to its lowest earners.
Three increased its market share over 2018 to 35.1 per cent from 34.2 per cent.
“We are investing 20 per cent of revenues in capital expenditure,” said Mr Finnegan. “That is high for the industry, where the average is 15 per cent.”
Mr Finnegan said he believes the scale of its ongoing investment vindicates the decision of competition regulators to allow the O2 deal to proceed.
Three is gearing up for next generation 5G services, but Mr Finnegan said it would be “evolution rather than revolution”, as appropriate handsets are not yet widely available and will not be until the end of next year.
