Orange Plc, the youngest of the UK’s four mobile telecommunications network operators, has substantially cut its losses in the last year, and is on track to break even by 1999. But the company would only hint at forthcoming price cuts for its mobile phone tariffs, a possible response to cuts made at the beginning of […]
Orange Plc, the youngest of the UK’s four mobile telecommunications network operators, has substantially cut its losses in the last year, and is on track to break even by 1999. But the company would only hint at forthcoming price cuts for its mobile phone tariffs, a possible response to cuts made at the beginning of this year by Vodafone Plc, the acknowledged market leader in the UK. Net losses for the year to December 31 fell to 139m pounds from losses last year of 229m pounds, while revenue rose 48% to 914m pounds. Managing director Hans Snook said tariff structures would evolve to fit the market but implied that Orange was looking more towards undercutting the high fixed line rental costs charged by British Telecommunications Plc as the impetus behind any cuts. If you take BT’s charges, plus standard residential line rental, you pay around 216 pounds per year to BT without really making any calls at all. With Orange, for the same thing including some calls per month, you’re paying about 212 pounds, he said in comments to Reuters. Subscriber numbers at Orange rose 53% to 1,201,000 at the end of December, and the company is now claiming a market share of 14.2%, up from 11.5% last year. Vodafone Plc claimed 5,173,000 customers at the year end, but declined to give up-to-date market share estimates. Orange’s figures are marginally better than expected, and shares in the company, which is 49% owned by the Hong Kong conglomerate Hutchison Whampoa Ltd, rose 6.5% to 360 pence on Thursday. Orange said it was benefiting from economies of scale as subscriber numbers increased, and gross profits (before administrative and finance costs) jumped to 181m pounds from just 16m pounds a year ago. Sales overheads and customer care costs have remained constant as a percentage of revenue at 5% while administrative costs as percentage of revenue fell from 16% to 13%. Orange continued to draw down on its borrowing facilities in the period, pushing up the annual interest charge by 70% to 88m pounds. Cash was needed for network construction with over 300m pounds spent on increasing base station numbers from 2,600 to 3,501. Orange also purchased a 17.45% equity stake in the Connect Australia consortium in August. This is Australia’s third mobile phone licensee, running on the GSM 1800 network frequency, the same technology used by Orange in the UK. Hutchison Telecom France, the group’s French service provider, contributed 111m pounds to revenues, up 31% in local currency terms, while the German service provider, Hutchison Telecom, contributed 100m pounds, up 14% in local currency. Snook continues to push subscriber loyalty as Orange’s major competitive advantage over its rivals, commenting that Our churn remains by far the lowest in the industry at 15.2%. But figures are not directly comparable as rival networks must contend with migration of subscribers from analog to digital networks, while Orange is purely digital.