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Orange Boosts Q3 Revs, ARPUOrange Boosts Q3 Revs, ARPU

Revenues were €4.7B, up 8.1% from the prior quarter, due to strong ARPU; customer base increases 2.9% to 46.9M, with 1.325M net additions

October 29, 2003

7 Min Read
Orange Boosts Q3 Revs, ARPU

PARIS -- After nine months of significant improvement, Orange has delivered an excellent third quarter performance with accelerating top line growth. Orange third quarter customer and revenue numbers exceed market expectations, showing strong customer and revenue growth across all its businesses, as the strategy announced in June by the new management team continues to gain momentum and deliver results.

Key Highlights

  • Strong growth acceleration quarter-on-quarter for revenues and customer base

    • Q3 2003 Orange Group revenues up 8.1% to €4.7 billion on Q2 2003, due to strong ARPU, and;

      • Customer base increases of 2.9% to 46.9m, with 1.325m net additional subscribers in Q3 2003 (249k in France; 113k in UK and 963k in Rest of World)

      • Year on year, total revenues up 6.3% to €13.3 billion from €12.5 billion (Pro forma basis underlying revenue growth was 9.8%) and total group customer base increases 8.6% to 46.9 million

        • Orange France’s total revenues up 5.7%. Orange UK’s total revenues up 7.9% on a pro forma basis. Rest of World (“ROW”) operations revenues climb 21.1% to €3.2 billion representing 24% of total Group revenues. On a quarter to quarter basis, Orange France revenues grew 9.8%, Orange UK revenues grew 3.8%, and revenues for Rest of World were up 10.7%.

          • ROW customer base exceeds the UK for the first time reaching just under 14 million customers. ROW account for 82% of group customer growth in first nine months

            • Strong growth in non-voice services across all European markets. Non-voice revenues accelerate by 25.5% to €1.51 billion, representing more than 12% of network revenues. Non-SMS revenues represented 22.8% of non-voice revenues.

              • Excellent operating metrics demonstrate quality growth:

                • Voice usage is increasing in France and the UK

                  • Improvement in contract/prepay mix of customers across the Orange Group: contract customers account for 33% of base in the UK, and 57% in France

                    • Confirmation of positive ARPU trends in key markets: sustained annual rolling ARPU growth in the UK with a 5.9% increase to £270 and a second consecutive quarterly increase in France to €377· Very confident to achieve financial targets for FY 2003

                  All comparisons throughout this press release are with reported numbers for the three-quarters ended 30 September 2002 – unless otherwise stated.

                  Commenting on these third quarter figures to 30 September 2003, Sol Trujillo, Chief Executive Officer of Orange SA, said: ”I am delighted by the continued improvement in performance through the third quarter and by the figures that we are announcing today. Net additions of 1.3 million customers and an 8.1% hike in revenues in the third quarter highlight that Orange is beginning to accelerate growth, as I believed it could when I became CEO earlier in the year. We are on track or ahead of everything we committed to in our June strategy presentation. We have the right team and these results provide the evidence with the whole group motoring. In particular, I am pleased that we have demonstrated over the past seven months that with careful management of costs and appropriate investment, excellent growth can be achieved throughout the Group. And this is just the beginning.

                  “A strong performance in France is key to Orange. Revenue growth of almost 10% and customer growth near to doubling in Q3 2003 versus Q2 2003 is excellent. Orange UK’s performance has been strong too, recording a 7.9% pro forma revenue growth and increasing customer numbers despite operating in a fiercely competitive marketplace.

                  “The real value and importance of our international portfolio also shines through in today’s figures, with strong customer growth bringing its base to just under 14 million, overtaking the UK for the first time, and providing Orange with 82% of its customer growth in the last nine months. All Group-controlled businesses have continued to achieve the financial targets that we set for them in June. We believe our international footprint holds a huge potential for Orange.”

                  Strategy and the next phase of the Orange Experience: On 24 June 2003, Orange SA announced its new Group strategy and today’s strong financial figures demonstrate the traction that is being gained by Orange’s unique strategy, namely of building financial growth through:

                  • Focus on customer intimacy through needs-based market segmentation to drive usage

                    • Delivery of a unique end-to-end customer experience

                      • Developing its intelligent network

                        • Developing key industry alliances

                          • Leveraging group assets

                            • Implementing a new group structure to fully utilise the power of the Orange group

                            In a separate announcement today, Orange is launching a series of initiatives in the UK and France next week and across other countries in Q1 2004, intended to make it easy to access new compelling, personalised Orange services and increase adoption. This next phase of the Orange Experience will continue to differentiate Orange and drive real business growth.

                            New Performance Metrics: With Orange’s strategy focused on delivering a unique customer experience and driving financial growth, performance can no longer be measured simply by the numbers of subscribers and devices sold, but should also be measured by non-voice usage and adoption rates. Orange is today announcing a number of new key performance metrics by which it intends to manage its business and judge its performance. These are :

                            • average revenue per customer for non-voice;

                              • rates of uptake and usage of services, and;

                                • rates of uptake and usage of personalisation.

                                FY 2003 guidance and new Capex guidance: With today’s strong reported performance, Orange remains very confident that it can achieve its FY 2003 financial targets of:

                                • Revenue growth of at least 5% on reported 2002 figures

                                  • Operating income before depreciation and amortisation of at least €6.3 billion

                                  In addition, Orange is reducing its capital expenditure forecasts for FY2003 to between €2.1-2.2 billion (vs. €2.4 billion previously) due to deferred spend and further price reductions from suppliers.

                                  Orange’s cumulative capex and operating free cash flow guidance for FY2003 - FY2005 remain unchanged at €7-8 billion and at least €14 billion, respectively.

                                  Commenting on these third quarter figures to 30 September 2003, Chief Financial Officer, Wilfried Verstraete added: “Our results demonstrate that the strategy we announced in June is starting to bear fruit. I am particularly pleased with our Q3 2003 results: all our top line growth metrics are showing solid trends and the growth acceleration in the last quarter of 2003 is supportive of our view for the rest of the year and for 2004.

                                  “Orange is achieving excellent results with annual rolling ARPU growth in the UK of 5.9% to £270 and a second consecutive quarterly increase in France to €377. At the same time, overall usage has been increasing in our key markets for six consecutive quarters. Those trends on ARPU and usage, coupled with excellent customer growth across our footprint, are the foundations for Orange future financial performance.

                                  “We believe that in mature markets that are evolving towards new models of growth there needs to be some new operating metrics of performance that complement traditional metrics such as ARPU and customer subscriptions. Today we have highlighted some of the measures we intend to adopt in the management and judgement of our business. We believe they will become yardsticks for the wider industry in general.”

                                  Sol Trujillo concluded: “Today’s great results speak for themselves – we’ve had two strong quarters and the whole group is firing on all cylinders. We are laying the foundations for accelerating growth, and the announcement of the next phase of the Orange Experience is one more step on our growth path. We believe passionately that what our customers want is real ease of use and functionality that is appropriate to them individually, rather than ‘one size fits all’. Our dedication to customer intimacy and a consistent global strategy, delivered locally, will be the real drivers for the business going forward.”

                                  Orange SA

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