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Carrier Scorecard: Orange

Orange (NYSE: FTE)'s mobile business, Orange, showed in its third-quarter results that there is still room to boost average revenue per user (ARPU) in mature European markets where growth is hard to come by for some mobile operators. (See FT's Q3 Revenues Grow and France Telecom Boasts Q3 Growth.)

Since Unstrung started grading the performance of European mobile operators, Orange has consistently scored a B- for the last three quarters. But with strong revenue growth reported in highly competitive European markets -- and as we near Orange France 's launch date for the iPhone this week -- it's a good time to review the operator's numbers and see if it earns a better grade this quarter. (See Carrier Scorecard: Orange, Carrier Scorecard: Orange, Carrier Scorecard: Orange, France Unlocks the iPhone, and iPhone Déjà Vu.)

The mobile operator's third-quarter revenues increased 5.6 percent to €7.5 billion (US$11 billion), compared to €7.1 billion ($10.5 billion) in the same period last year. Orange increased its customer base by 15.4 percent to 106.9 million subscribers, but overall ARPU was down 8.6 percent. (See Table 1.)

The really positive numbers for Orange in the third quarter are the ARPU numbers for the U.K. and Spain, where ARPUs actually increased year-on-year -- albeit slightly -- by 0.7 percent and 0.4 percent, respectively. Like its peers, Vodafone Group plc (NYSE: VOD) and T-Mobile International AG , Orange has struggled with steadily declining ARPUs in competitive European markets. So, a turnaround in the U.K. and Spain is encouraging. (See Carrier Scorecard: Vodafone and Carrier Scorecard: T-Mobile International.)

In the U.K., the positive result is due to subscriber growth and an increase in contract customers, which were up 1.7 percent and 10 percent, respectively, year-on-year. Contract customers now represent 35.1 percent of Orange UK customers, which is up from 32.5 percent in the third quarter last year. Also, UMTS customers nearly doubled to 1.6 million. (See Table 2 -- also Alexander Squeezes Into Orange UK Job, Orange, The Cloud Team, Bebo Goes Mobile, and Vodafone & Orange Share 3G.)

In Spain, Orange Spain 's efforts to increase its contract customer base also seems to be paying off. The number of contract subscribers increased by 10.9 percent, accounting for 53 percent of the customer base in the third quarter. Also, UMTS customers totaled 1.2 million in the third quarter, which is an increase of 33.2 percent in just three months.

In France, Orange reported encouraging broadband data growth, but ARPU was down 3.2 percent. Orange reported that third-quarter non-messaging data services grew by 26.2 percent, year-on-year, representing more than half of data service revenue in the quarter. EDGE and UMTS customers make up 26.7 percent of the customer base in France.

Orange also continues to grow its fixed/mobile convergence service, Unik, in France. (See Orange Builds on FMC Base.)

Overall, Orange nearly tripled its mobile broadband customer base, which includes EDGE and UMTS. Orange reported 10.5 million mobile broadband customers in the third quarter, of which 6.3 million are in France, compared to 3.9 million in the third quarter of last year. (See Table 3.)

Emerging markets continue to be strong revenue growth drivers for Orange. The operator reported that "markets with high growth potential" accounted for almost half of the revenue growth in mobile services in the third quarter.

Orange continues to expand into these markets. In Kenya, a France Telecom-led consortium bought a controlling 51 percent stake in incumbent operator Telkom Kenya for $390 million. In Niger, another FT-led consortium won a license for fixed, mobile, and Internet services for €48 million. (See FT Lands Niger License, FT Buys Again in Africa, and FT Adds to African Assets.)

The improvement in ARPU in the U.K. and Spain is enough to raise Orange's grade from a B- to a B+. Other positives this quarter for Orange are the growth in mobile broadband subscribers and expansion into new emerging markets.

— Michelle Donegan, European Editor, Unstrung

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