Orange to miss sales targets as demand lags

By Liz Vaughan-Adams
Wednesday 30 October 2002 01:00
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The mobile phone operator Orange yesterday warned it would miss its sales growth target of 15 per cent for the year in the face of slowing customer growth.

"Top-line revenue target will be slightly lower than we said before," said Graham Howe, Orange's deputy chief executive and chief operating officer. He predicted Orange was now more likely to produce sales of about €17bn (£11bn) for the year – an increase of more like 13 per cent over the previous year – thanks, mainly, to slowing equipment sales.

The alert came as Orange announced it had won 2.5 million new customers in the first nine months of the year, taking its total base to 43.2 million. It won another 673,000 subscribers in the UK, boosting its base there to 13.1 million, while another 972,000 joined in France, increasing its customers there to 18.8 million.

Orange also announced third-quarter sales of €4.48bn, a jump of 11 per cent from a year before, and had good news to share on its closely watched ARPU, or average revenue per user, figures.

In the UK, annual ARPU rose 3.2 per cent to £258 while in France the figure fell 3.8 per cent to €380 – although Orange said that was its smallest ever quarterly decline.

"Our results continue to demonstrate the strength, growth and increasing quality of Orange's customer base," Mr Howe said "They also continue to show the enormous untapped potential of our existing voice and non-voice services."

Orange said that non-voice revenues had now hit €1.2bn, or roughly 10.5 per cent of its recurring network revenues. In the third quarter, they made up 14.2 per cent of revenues in the UK.

Most City analysts were impressed with Orange's financials, particularly the ARPU growth, but pointed out the stock would suffer from uncertainty until its parent, France Telecom, made its plans known. But the troubled French telecoms giant, weighed down by some €70bn of debt, gave no indication yesterday of how it will cut its debt pile despite speculation it might cut its stake in Orange.

France Telecom also cut its forecast for full-year revenue growth to 8 to 9 per cent, having previously predicted double-digit growth. It posted a 9 per cent rise in nine-month sales to €34.4bn including a third-quarter contribution of €11.97bn.

Analysts at Investec said they continued to rate Orange shares a "reduce" until France Telecom's intentions towards its stake in Orange were known.

Mr Howe also warned that Orange did not plan to commercially launch third generation (3G) mobile phone services until 2004 and warned that early 3G launches from rivals could damage the market.

"I think they [Hutchison] can be a positive for 3G as they're going to come in on a platform of 3G services and help us educate the market," he said. "What I don't want them to do is launch too early and disappoint. That's the balance they've got to wrestle with themselves."

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