Hutchison's 3 mobile operator seeks network sharing partner to cut losses

3 UK is in talks to strike a network sharing agreement with a rival operator as the Hong Kong-owned mobile phone operator continues to drive down its cost base to reduce its losses.

3, the UK's fifth-largest mobile phone company with 4.1m users, has substantially cut costs over the past six months by investing in its direct sales channel and sourcing cheaper handsets, cutting losses in the UK and Ireland before interest and tax by 96 per cent over the past year.

The company said it was "reviewing network sharing and other infrastructure sharing joint venture opportunities", and is believed to be already in talks. It already shares network equipment with rival operators in Sweden and Australia, and has a network capacity deal with Orange in the UK to connect its customers to its rival's network when they are outside 3's coverage range.

Mobile operators have started exploring network sharing as a way to reduce costs by avoiding network duplication. Vodafone and Orange have started exploring the feasibility of sharing 3G infrastructure.

Kevin Russell, head of 3 UK, will lead the drive to stem losses. He previously ran 3's Australian division, and took over from Bob Fuller as head of the UK operation in June.

Hutchison Whampoa, the Hong Kong-based conglomerate which owns 3, has spent billions building a third-generation network in the UK but has yet to turn a profit on its investment. It ditched plans to float the 3 UK and 3 Italia businesses last year, and instead unveiled plans to move more customers on to advanced new services that link mobile phones to home computers and televisions.

With the bulk of its network investment now complete, 3 UK has focused on improving its margins. It has expanded its retail chain and renegotiated its agreements with third-party distributors such as Carphone Warehouse. Those actions reduced its spend on customer acquisition and retention by 43 per cent - some £160m - compared with the same period last year.

The company has 210 high-street stores and expects to add another 40 stores to its chain by the end of the year. It also has around 130 kiosks within Superdrug stores and is rolling out sales desks within HMV stores over the coming months.

The company sources 32 per cent of its revenue from data services and expects to continue to grow its non-voice revenue over the rest of the year after launching a mobile broadband package for £10 a month.