Digital costs push up losses at Orange

The costs of building a digital mobile phone network pushed losses at Orange up by more than 40 per cent to pounds 125m in the first half of the year, the company announced yesterday. But Orange, which floated on the stock market in April, also revealed better than expected figures for the growth and profitability of its customer base; news which helped to boost its flagging share price.

Orange's customer base grew by 51 per cent in the first six months of the year, from 379,000 to 573,000. This was a significant improvement on competitors Cellnet and Mercury One2One, though short of the 225,000 increase for the market leader, Vodafone. Orange's share of the digital mobile market rose slightly, from 24.5 per cent to 25.8 per cent, though Vodafone's share improved by a bigger margin, to 32.2 per cent.

Other statistics suggested Orange customers have remained loyal as the network expanded. The "churn" rate, which measures the percentage of customers who switch to other networks, fell from 18.1 per cent in the year to December 1995, to 17.6 per cent in the year to the end of June.

This compares with a rate of 25.6 per cent reported by Vodafone in the spring, though some of this represented customers who move from one retail "service provider" to another while staying with the network itself.

One surprise was the slight increase in average monthly revenues earned from each subscriber, from pounds 36.51 per month to pounds 36.86. Jim McCafferty, telecommunications analyst at stockbroker ABN Amro Hoare Govett, said: "Everyone was expecting revenue per month to fall as Orange expands. These figures suggest it's succeeding in its strategy to concentrate on higher- spending customers."

Orange continued to roll out its infrastructure expansion programme, adding 366 base stations in the first half of the year, and investing pounds 160m. It said the service now covered over 90 per cent of Great Britain. The workforce almost doubled to 3,700.

Shares in Orange have fallen heavily in recent weeks.Yesterday they rose 6p to 193p.