Carrier Scorecard: Orange

Orange (NYSE: FTE)'s mobile business Orange leaped from a B- to a B+ in its last scorecard in November, according to the grading system here at Unstrung. Now, we've combed through Orange's 2007 results to see if the carrier still makes the grade. (See FT Reports 2007.)

The key improvement in the third quarter last year that led to the upgrade was better average revenue per user (ARPU) in two of the operator's key European markets: Spain and the U.K. The operator also showed good broadband subscriber growth. (See Carrier Scorecard: Orange, Carrier Scorecard: Orange, Carrier Scorecard: Orange, and Carrier Scorecard: Orange.)

So, what do the full-year 2007 figures tell us about Orange's performance?

Revenues in 2007 were up 5.7 percent to €29 billion compared to €27 billion in 2006. Subscribers grew 12.2 percent in 2007 to total 110 million. But group ARPU was down 6 percent in 2007 compared to 2006. (See Table 1.)

Mobile data at Orange is growing well. Orange's mobile broadband customers (which include EDGE and UMTS) more than doubled in 2007 to 13 million customers, which is 12 percent of the total customer base. In Spain, mobile broadband users quadrupled in 2007 to 1.6 million.

In France, the operator's 7.4 million mobile data customers account for 31 percent of the subscriber base. "Non-voice" service revenues (which includes SMS messaging) accounted for 17.3 percent of network revenues in 2007, which represents a 14 percent increase in non-voice service revenues compared to 2006.

Orange just upgraded its high-speed downlink packet access (HSDPA) 3G network in the city of Lyon to 7.2 Mbit/s and plans to have 71 percent of the French population covered with the faster 3G by the end of this year. (See Orange Does 3G+ and Orange Upgrades HSDPA.)

Orange sold 73,000 of Apple Inc. (Nasdaq: AAPL)'s iPhones at the end of December last year. While the operator did not reveal any data usage stats for those iPhone users (as its neighbor T-Mobile International AG has), the famous phone is at least bringing in new customers. Orange says 48 percent of its iPhone sales are new subscribers to Orange. (See iPhone Data Booms at T-Mobile, France Unlocks the iPhone, and iPhone Déjà Vu.)

But ARPU in France was down 2.9 percent in 2007, compared to 2006. Orange blames the drop in ARPU on regulation. It says the 2.9 percent decrease in ARPU year-on-year is due mainly to reduced call termination rates and roaming charges. Without those regulated cuts, Orange says French ARPU actually increased by 0.9 percent in 2007 compared to 2006. (See Table 2.)

The U.K. turned in a solid performance in 2007. ARPU was up 3.1 percent. And Orange says its contract subscriber acquisitions in the country last year were the highest ever since 2001, which shows that the operator is striving to improve its customer mix of contract and prepaid customers. Out of 15.6 million subscribers, contract customers accounted for 35.9 percent at the end of 2007. (See Vodafone, Orange Revamp Network Share Deal and T-Mobile, Orange Pilot Mobile TV.)

Orange noted greater MMS and data usage among U.K. subscribers in 2007 as well. Non-voice service revenues accounted for 21.7 percent of network revenues in 2007, which is up from 20.2 percent in 2006.

Orange's biggest revenue growth engines in 2007 were its operations in emerging markets. Revenue in the operator's "rest of world" segment was up 12.7 percent, mainly driven by the sheer volume of subscriber growth. Orange had 44.5 million subscribers at the end of 2007 in its "rest of world" category, which is a 33.6 percent increase compared to 2006. (See Table 3 and FT Lands Niger License, FT Buys Again in Africa, and FT Adds to African Assets.)

As for Orange's pioneering dual-mode WiFi/GSM service, called Unik, the operator sold 700,000 dual-mode handsets at the end of 2007. It is understood that the operator plans to launch a 3G dual-mode service later this year when handsets become available. (See Orange Builds on FMC Base and Unik 3G.)

Given the momentum in data revenues and the good performance in the U.K., Orange gets to keep its B+ grade.

— Michelle Donegan, European Editor, Unstrung

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