Three UK to acquire UK Broadband Ltd for £250 million

UK mobile operator to acquire broadband provider with substantial spectrum holdings in 3.5 GHz and 3.6 GHz as well as in higher frequency bands

Three UK to acquire UK Broadband Ltd for £250 million

Three UK is to buy UK Broadband Ltd for £250 million. UK Broadband provides broadband access via a combination of licenced spectrum and fibre backhaul. It will continue to operate as it does currently until the deal is completed, which Three expects to happen ‘mid-year’. A deferred £50 million will be made available as a credit toward an MVNO agreement on Three’s network.

Three said the transaction is subject to the fulfilment of a number of conditions before completion can take place. 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.”

UK Broadband provides wireless data capacity, equipment, services and solutions to the telecoms industry, service providers, channel partners and the public sector. It currently delivers broadband access to just 15,000 customers in the UK and will become a wholly owned subsidiary of Three UK. The company is currently a wholly owned subsidiary of PCCW, the holding company of HKT Group Holdings Ltd, the Hong Kong telecommunications provider.

UK Broadband is one of the UK's largest commercial holders of national radio spectrum suitable for 4G mobile services and fixed wireless solutions. It has 124 MHz of spectrum in international LTE bands 42 and 43 (3.5 GHz and 3.6 GHz), as well as additional spectrum suitable for high-capacity point-to-point and point-to-multipoint services in the 3.9 GHz, 28 GHz and 40 GHz bands.

UK Broadband switched on the first 4G LTE system for commercial services in the UK in February 2012. It has largely concentrated its services in London, but has also looked at providing rural broadband coverage. It provides services under the Relish Broadband brand for homes and businesses in London, Reading and Swindon.

Kester Mann, principle analyst, Operators at CCS Insight, offered some ideas on why Three UK has made the move to buy UK Broadband. “The move represents a tentative step into the home broadband and public sector market for a company which, up until now, has almost exclusively offered only mobile services to consumers," he 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.”

Mann continued: “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."

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