Six Questions on Three, O2 and Sport

What will be the impact on sport in Ireland?
Why is the Irish market worth the investment?
What has been the attitude to sport so far from Three and the parent business?

3MobileThe Irish mobile phone market will reduce from four operators to three once the sale of O2 by Telefonica to Hutchinson Whampoa, the owners of the Three brand here completes regulatory approval.

The two brands are among Ireland’s largest major sporting sponsors with Three adorning the Irish national socccer shirts and O2 filling the same position in rugby.

Today we pose six questions which will be on interest within the Sport for Business community.

1. How big is the deal?

The sale price which Hutchinson Whampoa will pay is €780 million with a possible additional €70 million if certain targets are met. The deal has long been expected as Telefonica sought to reduce a massive debt burden. The final figure is said to represent a 10% discount on what might have been considered fair value which is a positive in that it leaves more money for investment.

2. Will the two brands continue to operate?

No. Once regulatory approval has been given at Irish and EU level, the O2 brand will be phased out. Three will be the brand that survives with an audience of 2 million customers versus Vodafones 2.2 million, and a market share of around 38%. Eircom’s emobile brand will be the third largest player in the market.

3. Has anything been said about sponsorships?

The sale statement has said that O2’s existing sponsorships will be subsumed within the Three marketing portfolio. The largest of the assets will be the O2 arena in Dublin, followed by sponsorship of the Irish senior rugby team, which is contracted to 2016. O2’s sponsorship of the English team will remain as the British arm of the company will remain as O2.

Three is the primary sponsor of the FAI, a deal that was recently extended to 2016 as well,  and also works with Waterford GAA, UL Bohemians in Rugby and Waterford United in the Airtricity League.

4. Is the Irish market considered important enough to merit attention from the Hutchison parent brand?

A key factor will be Ireland’s above average use of mobile internet services. While average revenue per user dropped from €29 to €28 in 2012, 77% of Irish people use mobile devices to access internet services, as opposed to a global average of 69% according to Accenture’s Mobile Webwatch survey of 2012. Over 50’s are also more likely to access via mobile with 60% in Ireland versus 47% globally.

In the same way that Sky is massively upgrading its investment in Ireland, in part to learn why we have much higher propensity to have ‘pay tv’ services than in larger markets, the global management of the Three brand will be keen to leverage the elements that work within the Irish sector and translate them internationally.

The role of sport within the marketing mix is likely to remain strong and could even see some other key assets being brought on board.

5. What other assets could be added?

Three was the headline sponsor of the Irish Open Golf for a short spell but ended the contract ahead of time in order to take on the national soccer team when that opportunity presented itself.

The company has done some imaginative work with Waterford GAA.  With access to the All Ireland Championship precluded by the involvement of Eircom, it may be tempted to take on the next biggest property in gaelic games by taking over the sponsorship of Dublin GAA, where Vodafone is stepping down, though not completely out from at the end of this year.

6. What is the management commitment to sport?

Three CEO Robert Finnegan had trials with QPR in his youth and is a big sports fan. He spent time working with Procter and Gamble in the UK before working with Hutchison Whampoa in Hong Kong for ten years. This long term relationship is a strong positive in a corporate environment where loyalty is a major plus.

“As an ambitious competitor in the market we have been looking at ways to increase customer numbers and grow market share, and acquisition was the natural next step,” said Finnegan yesterday.

“Our combined 37.5% market share gives us the scale and financial strength to compete even more aggressively in the market to the benefit of consumers.”

Full members of Sport for Business will enjoy a more detailed review of the parent company Hutchison Whampoa’s approach to sport and sponsorship in the Members’s Weekly to be distributed on Thursday.

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