GENEVA-Despite a subdued initial public offering (IPO) that saw the company reap a modest US$9 per share-near the bottom end of an already hastily reduced US$8.7 to US$10 range-the future is looking good for Orange, the former U.K. operator that now forms the cornerstone of France Telecom’s mobile activities after being acquired by that carrier in May last year.
Since beginning life in 1994 as a subsidiary of Hutchison Telecommunications, Orange has gone from strength to strength, thanks to a courageous strategy of fighting U.K. market leaders Vodafone and BT Cellnet on their own ground-the business and high-spending consumer markets-rather than cherry-picking niche segments like fellow U.K. GSM 1800 MHz operator One 2 One.
This tactic, combined with an intensive effort to build what has become Europe’s most-recognizable telecom brand and a renowned commitment to quality on both its network and at the customer coalface, has paid off handsomely, with Orange effectively doubling its U.K. subscriber base each year to reach today’s total of more than 10 million users.
Add to that France Telecom’s front-running position at home, where its Itineris-soon to be re-branded Orange-network boasts more than 14 million users, together with holdings in operators in all major European markets except Spain and a presence in fast-emerging markets in Africa and Asia. Most analysts agree that Orange is set to join Vodafone as one of the first of a new breed of pan-global mobile giants.
“While the impact of France Telecom’s takeover of Orange is largely confined to Europe for the moment, it’s an important long-term step in the growing trend toward internationalization of mobile brands,” said David Wilkins, a principal analyst with U.K. consultancy Analysys.
Balanced Portfolio
Orange’s recent history has cast it as Europe’s “hot potato,” with the company changing hands three times in just 12 months. Impressive U.K. growth saw the operator quickly seized by Mannesmann in October 1999 and even more quickly become the property of arch-rival Vodafone when that company succeeded in its hostile bid for the German carrier in early 2000. Regulatory constraints then obliged Vodafone to look for a buyer for Orange, which it found in the shape of Michel Bon, France Telecom’s chief executive officer (CEO).
Bon’s decision to buy Orange for US$38 billion was widely welcomed by investors and analysts, who saw exceptional synergy in the two operators’ mobile portfolios. The new Orange boasts an impressive footprint extending across 20 countries worldwide, including controlling interests in operators in Belgium, Germany, the Netherlands, Slovakia and Denmark, a 17.45-percent stake in Connect Austria, 42.5 percent of Orange Switzerland, 50 percent of a joint operation with KPN in Belgium, 24.5 percent of Italy’s Wind, 20 percent of Portuguese operator Optimus and a 28.5-percent interest in Germany’s MobilCom. Outside Europe, Orange also has a presence in Cote d’Ivoire, French Guiana, Guadaloupe and Martinique and is further extending its brand through agreements with Israel’s Partner Communications and Hutchison Telecom in Hong Kong and Australia.
Meanwhile, Hans Snook, Orange’s visionary CEO, has made no secret of the fact that the newly amalgamated company is looking further afield with a view to strengthening an already imposing position. Speaking to French financial daily Les Echos early in February, Snook ruled out a U.S. buy, but said France Telecom’s sizeable acquisition war chest could be used to seize new opportunities in Europe and Asia.
“With plans to build a presence in around 50 countries over the next five years, they’re undoubtedly Vodafone’s most viable challenger,” said Farid Yunus, senior analyst with The Yankee Group Europe.
No slouch, Orange has also been busily securing minority holdings and building alliances with content and service providers. In July 2000, it announced US$250 million worth of deals, including the US$140 million acquisition of voice recognition developer Wildfire; a US$144 million deal to buy Ananova, developer of the world’s first virtual newscaster; and a US$6.1 million deal to secure a 25-percent stake in U.S.-based NewsTakes, which reformats Web pages for mobile devices. A US$224.8 million deal with European cable giant NTL will also guarantee ample broadband fiber capacity for forthcoming 2.5-generation (2.5G) and third-generation (3G) services.
3G Strategy
When it comes to Universal Mobile Telecommunications System (UMTS) licenses, Orange is also better placed than most. The company kept its nerve in the high-stakes U.K. auction, picking up a license for
