Corporate Profile: The colour of money
The future is bright once again for Orange, the mobile phone company. After a period in the doldrums, it has achieved a remarkable turnaround thanks to Hans Snook, its backpacking chairman. Although last into the market, it has even started to make a profit
Wednesday 15 September 1999
One such change, launched by Orange in July, is Wildfire, or what the company calls a "virtual wirefree personal assistant". This disembodied companion dials phone numbers on voice commands, issues schedule reminders in its computerised female voice, and helps users to get the most out of the bewildering array of features being packed into mobile handsets.
But that is just the beginning. Midway through the next decade, Mr Snook sees a mobile phone - he calls it The Stud - being worn 24 hours a day. The tiny radio device resembling a stud earring, will be a voice-activated radio communications mobile teleportal. It will wake you up, perhaps by playing a favourite piece of music. As you shower, a voice - Mr Snook calls her Mary - will read out e-mails and other messages, and will be on standby to take dictations for e-mails or message replies. Waterproof Mary will also scan the road network to warn of the worst traffic delays and the best alternative route to work.
To some, this vision of the future sounds like just so much dreaming, or, for the technophobe, perhaps downright horrifying. For Mr Snook, the idea provides a framework for understanding how the world is changing and what that means for Orange. "You must have a clear vision of where you think the world is going, why it's going that way and what is going to be important to customers, not just today but tomorrow," he says. "You have to do things in advance so by the time the world gets there you're leading rather than following, which is where we are and I think that's very important."
In coming weeks, Orange will become Britain's first wireless Internet service provider which, with new model Internet-compatible "wireless application protocol" handsets, will give access to on-line services such as ticket booking and train times. But the focus isn't the technology. "It's another way for our customers to work faster, better and easier," he says, adding delightedly: "It would allow you to find the best Chinese restaurant in Minsk."
Two years ago the future of mobile communications looked less than glittering. Subscriber growth was slowing and Orange, the last of the four networks to launch, was losing millions of pounds a month, and its shares were trading at a discount to their 1996 flotation. Sceptics sniffed at Mr Snook's vision of the wireless future. Now that fervent belief in the future is paying off handsomely. Through share options, Mr Snook holds or has potential rights to Orange stock worth pounds 4.8m in addition to an annual salary and performance related bonus that paid him pounds 780,000 last year. Shareholders have done exceedingly well, too. Orange stock, floated at 205p in the spring of 1996, is 1085p, near the all-time high, and the company has been in the top five performers on the London market in recent years.
Mr Snook's rise to the top echelon of British business is at once a tale of unconventional triumph and a healthy reminder to twenty-somethings of the futility of planning careers in carefully calibrated five-year stages. He was born in Dissen, Germany in 1948 to a German mother and an English father, and the family emigrated to Wimbledon, south-west London in 1950 before economic opportunity beckoned them to western Canada in 1957. Mr Snook went to the University of British Columbia in Vancouver then spent six years with Westin Hotels, ending as general manager. In 1983, after a brief stint in property sales and a return to hotel management, this time in the oil and cattle capital Calgary, Mr Snook, then 35, and his Macau-born wife Etta Lai sold everything and set off on what was meant to be a two-year back-packing tour of south-east Asia.
He still smiles about the experience. "It was fun, the best trip I ever did," he says. But it lasted only a few months. While in Hong Kong, he took on what was meant to be a one-month consulting job - "to make some quick money for travelling" - but was then convinced to sign a one-year contract to carry out his recommendations. That led to a second year with Young Generation Group, a locally owned firm that offered paging, computer and other communications services.
Enter Hong Kong's Hutchison Whampoa, one of Asia's biggest conglomerates with interests ranging from property development to telecommunications in Asia and the UK. It had just introduced mobile services and in 1986 bought Young Generation's paging operation where Mr Snook was an executive.
He oversaw the sale to Hutchison, and prepared to resume the backpacking trip. Two days before he was to leave Hong Kong, Hutchison called and persuaded Mr Snook to come aboard and help reorganise and integrate their cellular and paging operations. "They needed a brand, an operating structure and a business focus, and I had some retail distribution ideas that hadn't been tried in Hong Kong. I thought this would be interesting and agreed to a one-year contract."
This would be his last one-year deal. The freedom Hutchison gave to directors invigorated Mr Snook. He helped extend the company's interests into India and mainland China, but had no involvement in Hutchison's initial foray into Britain. That changed permanently in 1993. Once again Mr Snook found himself parachuted into an unfamiliar business that head office knew needed a revamp, even if it was unsure of how to go about it.
Hutchison's British arm was losing, Mr Snook says, "tons of money". There was a paging business, a mobile data network being set up and Rabbit, a mobile phone service that - incredible as it may seem - allowed users to place but not receive calls. Rumour had it that Rabbit was the phone of choice for philandering executives, since their wives couldn't phone them.
Mr Snook's pleasant Canadian demeanour, may have disarmed Hutchison's UK management. His sweeping recommendations to head office in Hong Kong were resolute, and more than a little ruthless: sack most of the management; stop building and close the mobile data network; kill off Rabbit and write down the value of a mobile airtime reselling venture. All told, Mr Snook's proposals added up to a pounds 250m write-off for Hutchison. That wasn't all.
Hutchison and British Aerospace also had a licence to run a mobile phone network though a company called Microtel. Mr Snook told both companies' boards that pounds 700m should be invested to build a nation-wide network before launch and develop a new mobile phone brand. Mr Snook was far from certain how the British and Hong Kong bosses would receive his near pounds 1bn proposal that meant they would have to tear up their existing operations and start anew. "To their credit they believed me," he says, with evident satisfaction.
Although launching a mobile company was, even then, not particularly new, what set Orange apart from earlier startups was Mr Snook's determination to build and establish the brand before launch through an innovative advertising campaign. Unlike some rivals, Mr Snook clearly understood that customers bought mobile as a service, to improve their lives. The brand, he believed, had to encapsulate that promise. "You need technology as the enabler, but it's what you do for the customer in terms of service that is the focus," he says. That emphasis has helped Orange, which launched its network in April, 1994, to overtake its most obvious rival, One2One. With 3.3 million subscribers, Orange is smaller than Vodafone and BT Cellnet, each of which has more than 5 million customers, but it leads in recruiting higher use contract subscribers, landing nearly half of new contract users. Even among the less lucrative pay-as-you-go users who make up the lion's share of recent mobile growth, Orange subscribers spend pounds 19.20 per month compared with an average of pounds 13.30 per month for Vodafone and BT Cellnet, shows research by Salomon Smith Barney,.
But in the fast-changing mobile phone market, Orange is a relative minnow and it has only just begun to make monthly profits. In addition to competition from behemoths with deep pockets such as BT Cellnet and Vodafone Airtouch, Orange also seems likely to face tougher competition from One2One, acquired for pounds 8.4bn last month by Deutsche Telekom, Europe's biggest phone company.
Mr Snook is far from worried. "If you look at Deutsche Telekom in Germany, they are a bureaucratic, slow-moving, autocratic, arrogant organisation," he says. "If you look at what they've done in cellular, it's exactly analogous of what Vodafone did to Cellnet. Cellnet always had a few less subscribers (than Vodafone) and they focus on trying to get more market share. They've always been far less profitable and had far fewer quality customers. The same has been true of Deutsche Telekom. They don't understand their home market, so how are they going to understand the British market, or other markets around the world? It's going to be difficult for them."
If being scathing about competitors, and fellow Germans, comes easily enough to Mr Snook, he's considerably more enthusiastic promoting the mobile future, which by his account has a long way to run. Mr Snook fully expects 80 per cent of the population to have mobile phones, and as many wireless devices again deployed in homes and cars.
"What the British Telecoms, Deutsche Telekoms and AT&T's are today is where we get to tomorrow," he says. "They start being in a different business, more in the entertainment and broadcasting business, interactive 3D television and video into the home. Mobile telephones will take 90 per cent of the voice traffic."
Market capitalisation: pounds 13bn
Turnover: pounds 1.27bn in 1998
Pre-tax Loss: pounds 98.1m
Main business: Orange offers mobile phone services over a GSM-1800 network of 6,000 base stations in Britain and Northern Ireland for 3.3 million users and operates mobile service provider businesses in Germany and France. Since 1997, Orange has taken 17.5 per cent of Connect Austria, 50 per cent in KPN Orange of Belgium, and 42.5 per cent in Orange Communications of Switzerland. The main shareholders are Hutchison Whampoa with 45 per cent, and British Aerospace with 5 per cent
Key Executives: Chairman, Canning Folk; Chief Executive, Hans Snook; Deputy Chief Executive and Group Finance Director, Graham Howe; Colin Tucker, Chief Operating Officer.
Number of employees: 5,600
the seeds that grew into an orange revolution
1989: Hutchison Telecom UK (HTUK) is established and buys Quadrant Communications, a mobile service provider to Cellnet and Vodafone.
1990: Acquires Nokia Mobira and Millicom Information Services, both service providers. DTI awards mobile licences to Microtel, formed by British Aerospace-led consortium. HTUK buys BYPS, which is developing CT-2 Telepoint Transmission Network.
1991: BAe sells Microtel to Hutchison Whampoa in exchange for 30 per cent of HTUK.
1992: HTUK launches CT-2 Telepoint service in April under Rabbit brand.
1993: Restructuring of HTUK leads to pounds 250m writedown; Rabbit terminated; pounds 700m capital investment approved and development of network begins. Orange chosen as brand name.
1994: Orange launches, advertising: "The future's bright. The future's Orange."
1996: Orange floats in March with market capitalisation of pounds 2.5bn. Offer at 205p is 10 times over-subscribed and shares soar 20 per cent on first day. Orange in FTSE 100, first company to join before making a profit.
1997: UK customers top 1 million.
1998: Agrees 50-50 joint venture with Dutch telecoms group KPN and wins licence in Belgium. Takes a 42.5 per cent in Orange Communications of Switzerland with venture partner Viag.
1999: Belgium and Switzerland services commence. By second quarter, Orange is making monthly profits. UK customers top 3 million
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