Three says it needs merger after first loss in 13 years

THREE has suffered its first loss in 13 years as the mobile network warned that its £15bn merger with Vodafone was the only way to safeguard continued investment.

Three UK swung to a loss of £117m in 2023 amid surging inflation and the growing cost of running its 5G network.

That compared to a profit of £147m the previous year and marked the first time it has been in the red since 2010.

The company slashed its capital expenditure by 40pc last year to £454m as costs jumped by almost a quarter to more than £1bn.

Three, which has more than 10m customers in the UK, warned it lacked the scale to continue investing in its mobile infrastructure as it renewed its lobbying for a merger with Vodafone.

The pair have been seeking a deal for months but have faced competition concerns and scrutiny of Three’s ties to China.

Three reiterated its arguments that the merger was needed to secure future investment and challenge BT, which owns EE, and Virgin Media O2.

A merger of Vodafone and Three would create the UK’S largest mobile network and the pair have vowed to invest £11bn in their combined 5G network over the next decade if the deal goes ahead. Robert Finnegan, chief executive of Three, said: “This financial performance is clearly unsustainable despite scaling back our 5G investment.

“With the current market structure of four mobile network operators, where there are two scaled players who have the ability to invest but do not face enough competitive pressure to do so, and two players [Three UK and Vodafone] who lack the scale to be credible challengers, the UK will continue to lag behind on 5G.”

The competition watchdog has launched an investigation into the tie-up between Vodafone and Three amid concerns that reducing the number of UK mobile networks from four to three will push up prices for consumers.

The regulator is expected to refer the deal to a phase two investigation today.

The merger is also being examined on national security grounds because of fears that Three’s Hong Kong-based owner CK Hutchison could gain access to critical national infrastructure. Vodafone holds a number of sensitive contracts with government departments.

Both companies have dismissed these concerns, pointing to CK Hutchison’s long presence in the UK through other investments such as Superdrug.

The Hong Kong conglomerate will hold a 49pc stake in the joint company.