Orange set for pounds 2.45bn valuation on float day
Saturday 23 March 1996
Demand from institutions has exceeded expectations, with applications in for eight times the number of shares available. More than 135,000 prospectuses have been sent on request to small private investors, many of them Orange customers, although no incentives are being offered to participate in the sale. The retail offer closed last night with the offer to institutions running until Monday evening.
Orange, the newest of the four mobile telephone network companies, is owned by Hutchison Whampoa of Hong Kong and British Aerospace. Following the sale of 25 per cent of the shares, Hutchison will own 50.49 per cent of Orange and BAe 22.92 per cent.
Orange refuses to say when it will be in profit, but City analysts expect it to break even next year. The proceeds from the sale are likely to be used to repay debt to shareholders.
Orange has been credited with raising public awareness of mobile telephony with pricing packages aimed at the average person rather than company executives. The company pioneered the notion of bundling a number of "free" call minutes in return for a set monthly charge. It also offers the ability to have two "lines" on one telephone so that some customers can use one for business and one for personal calls.
Orange has a tiny market share with 443,000 subscribers at the end of last month compared with almost 2.5 million for Vodafone, the leading player, and a similar number for Cellnet. However the company points out that its entire network is digital - which is where the industry's future growth lies. Vodafone now has 500,000 digital subscribers with the remainder still using the older analogue network.
The flotation received a boost earlier this year when the Government opened the way for further expansion of the mobile telephone industry by making available to all four existing operators more capacity on the airwaves. The limited spectrum available makes it increasingly unlikely that a fifth company will be licensed to compete in the mobile market place.
Unlike the other newcomer, Mercury One-2-One, Orange has been taken seriously by Vodafone and Cellnet, both of which are poised to introduce similar types of bundled tariff packages for the consumer market. However in spite of what appears to be an emerging price war, Orange denies that it will need to drop its charges in response to the challenge from the major players. Hans Snook, Orange's group managing director, said the company would not be forced into competing primarily on price rather than on "quality and value for money".
There is a view that Orange will nevertheless be forced into increasingly innovative pricing as competition continues to bite. Recently the company announced a service which allows customers with two lines on their mobile to make unlimited calls at weekends on one of the lines for 5p per minute. The low-cost deal will be in exchange for an extra monthly fee of pounds 2.50.
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