Orange S.A.

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Orange S.A.

50 George Street
London, W1U 7DZ
United Kingdom
Telephone: (44 870) 376 8888
Fax: (44 207) 984 1601
Web site: http://www.orange.com

Wholly Owned Subsidiary of France Telecom
Incorporated: 1994
Employees: 31,259
Sales: $21.5 billion (2005 est.)
NAIC: 517212 Cellular and Other Wireless Telecommunications

Orange S.A. is one of Europe's leading provider of mobile telephone and Internet access services. Based in London, the company is part of France Telecom, which owns more than 84 percent of Orange's shares. Since 2005, Orange has become the global brand for France Telecom's mobile and Internet operations in 13 countries, including the United Kingdom, France, Spain, Switzerland, the Netherlands, Romania, Slovakia, Poland, the Dominican Republic, Cameroon, Ivory Coast, Botswana, and Madagascar. Orange oversees mobile and Internet operations in Austria (One), Portugal (Optimus), and Belgium (Mobistar), as well as in Moldova, Jordan, Guinea, Mauritius, Senegal, and Mali.

Orange also operates Orange Business Services, formerly known as Equant, which provides services to more than 3,750 companies. Altogether, Orange counts more than 88 million mobile telephone customers, including eight million corporate accounts. The company is the number one mobile telephone provider in France, with 21 million customers, and is the fastest-growing of the top three in the United Kingdom, with 14 million customers. Orange is also a founding member of the Freemove alliance, linking the company with the networks of Telecom Italia Mobile, T-Mobile and Telia Sonera.

REVOLUTIONIZING THE U.K. MOBILE LANDSCAPE IN 1994

Launched in 1994, Orange represented a revolution in the United Kingdom's sluggish mobile telephone market. Much of Orange's early success was directly due to the efforts of its chief architect, Hans Snook. A native of Canada, Snook, a self-described hippie, had been enrolled in university but left before graduation. Instead, Snook became a credit manager at a Westin hotel in Vancouver. His attraction to the hotel industry came in large part because of the people-intensive nature of the business, and the fact that the hotel industry operated 24 hours a day. Both features were to come into play in Snook's later career.

Within a year, Snook stood out in the hotel chain, posting the best credit management in the entire group. This earned Snook a promotion to the Westin group's flagship hotel in Vancouver. Before long, Snook had been promoted again, becoming controller for an entire group of Westin hotels.

Snook later left the hotel chain and moved to Calgary—to woo his future wife—and worked in real estate for some time before returning briefly to the hotel industry. The decision to travel with his wife on a round-the-world backpacking trip, however, changed Snook's destiny. After a time, the Snooks arrived in Hong Kong, where he was offered a job with a startup paging and computer company. Snook agreed to stay for a year, and then stayed for two. As he was preparing to leave Hong Kong, however, he was approached by Hutchison Whampoa, which had been struggling to launch a cellular telephone service in the mid-1980s.

After Snook agreed to take over direction of the service, he installed a new generation of computer equipment, boosted customer service, and, most importantly, set out to build a strong unified brand covering the whole Hong Kong market. To accomplish his goals, Snook bought a series of 15 storefronts, which were quietly renovated, in order not to disturb the group's existing operations. All 15 stores were unveiled on the same day, under the same brand—Blue—and featuring staff wearing the same uniforms. The effort electrified the Hong Kong mobile phone market and into the late 1980s, the Hutchison operation became the fastest-growing and most-profitable paging services and cellular phone provider in the world. Before long, Hutchison had expanded the network into other markets, including Australia, Malaysia, and Thailand.

Hutchison also attempted to enter the U.K. market, with far less fortunate results. For this, Hutchison teamed up with British Aerospace (BA), forming the Microtel consortium in 1990, and winning a mobile telephone license in 1991. Microtel also bought the Rabbit cellular paging service, overpaying for what turned out to be a failed venture. By 1992, BA sought to unload its share of the Microtel venture, and found no takers. Indeed, the British cellular phone market appeared saturated at the time, with two providers, Vodafone and Cellnet, dominating the market, and a third provider, One-2-One, ready to join them. The British market remained tiny, burdened by bulky and expensive telephones and unreliable and limited networks, barely capable of supporting three providers, let alone a fourth.

Nevertheless, Hutchison was determined to enter the market, and in 1992 the company asked Snook to come to the United Kingdom to take over the Microtel operation. Snook was quickly joined by Graham Howe, who became Microtel's CFO. Soon after his arrival, Snook recommended to Hutchison that it shut down the Rabbit service altogether, and at the same time abandon its ongoing effort to build a mobile data network. Hutchison agreed, writing off nearly £300 million in the process. Instead, Snook asked Hutchison to spend another £750 million establishing a new-generation mobile telephone network. For this the company decided to base the network on the new and untested 1800 GSM standard. The new standard permitted the use of smaller and less expensive telephones. Snook and Howe also took steps to develop the company's network of base stations, with initial plans to install some 10,000 throughout the country—many more than any of its established rivals.

Snook and Howe sought to differentiate the new network by stepping up its service component, enabling users to receive calls inside buildings, and otherwise reducing call dropout and failure rates. In order to accomplish this, Microtel tapped Hutchison for an additional £250 to carry out further improvements to the network.

COMPANY PERSPECTIVES

We have eight values at the heart of our new, integrated group. Five of our values determine the way we behave with our customers and each other. We are refreshing, dynamic, straightforward, friendly and honest. We constantly look to do things differently and in a better way. We give colour to all that we do. We are ready to push the boundaries and take risks. We are always open and honest. We say what we do and we do what we say. We have nothing to hide and we behave responsibly. For us, clarity comes through simplicity. We recognise that we are people communicating with other people. We are always direct and easy to understand. We want to make a difference to people's lives. Our optimism is contagious. We are passionate about what we do and we have confidence in ourselves. We enjoy working and succeeding together by building close relationships. While we have a sense of purpose, we also have a sense of humour. We consider the needs both of our customers and of each other. Three of our values represent our commitment to our stakeholders. We are trusted, responsible and innovative. We build open and lasting relationships. We can be relied upon to do the right thing. We're always here, no matter what. We treat people and the world around us with respect. We behave responsibly. We all contribute to the success of our business. We draw inspiration from everywhere. We help people free their imagination. We are first when it counts.

Microtel was ready to launch by 1994. Yet the company shrewdly decided to abandon the Microtel name in favor of something entirely new. The company ultimately chose the name "Orange," represented by a simple orange square. The launch of the new brand and service proved one of the most notable brand launches of the period. While it was initially met with a great deal of skepticism, Orange soon began to attract customers, especially a growing number of customers from beyond the corporate sector that had been the industry's mainstay at the time.

As part of its launch, Orange teamed up with Nokia to provide its handsets. The partnership not only produced the most stylish phones on the U.K. market at the time, they also permitted the company to add a number of new and highly popular features, such as Caller ID. Orange backed up its service commitment by providing 24-hour customer service, and became the first in the industry to allow per-second billing. The company's customer service offering also helped attract and retain customers. For one thing, Orange became one of the first to link its customer accounts with their phone numbers. In this way, when customers called, they were greeted by their first name, a lesson in customer satisfaction that Snook had learned from his previous career in the hotel industry.

While Snook worked on building the Orange network and brand, Howe set out to improve the company's finances in 1994. After first approaching banks, Howe took his presentation on the road and succeeded in raising more than £1.2 billion ($1.9 billion) over the year. In this way, both Hutchison and partner British Aerospace were able to recover much of their initial investment. By 1996, with Orange one of the fastest-growing mobile telephone providers in the United Kingdom, the company went public, listing 30 percent of its stock on the London Stock Exchange in a public offering worth £2.5 billion ($4 billion). The IPO was considered to be the most successful in the country.

Orange continued to build from strength to strength through the rest of the decade, gaining a strong position in the U.K. market. By then, the European mobile telephone market had become increasingly international, and Orange prepared to join that trend. For this, Orange agreed to be acquired by Germany's Mannesmann in 1999. The deal was valued at £20 billion ($36 billion), representing an 800 percent increase in share value since the group's public offering.

GLOBAL BRAND IN THE NEW CENTURY

Soon after, however, Mannesmann itself had been acquired by Vodafone. In order to complete the deal, Vodafone, which already dominated the European mobile telephone market, agreed to sell Orange. This provided the opportunity for France Telecom, then in the process of positioning itself as a leading player in the European telecommunications market. In 2000, France Telecom paid Vodafone £30 million in order to take over Orange. While France Telecom was criticized for overpaying for Orange, the French company justified the purchase price by pointing to its plans to develop the Orange brand as its core operation into the new decade. Orange took over France Telecom's two other major acquisitions of the time, the British Internet provider Freeserve, and the business services group Equant. Next, Orange folded its France-based mobile telephone service, then named Iternis, as well as its other mobile telephone operations, into Orange. In this way, Orange rose to the challenger position in the European mobile telephone market, trailing leader Vodafone with 21 million subscribers in 16 countries.

KEY DATES

1990:: Hutchison Whampoa and British Aerospace establish Microtel.
1992:: Hans Snook takes over as head of Microtel and rebuilds it around the GSM mobile telephone standard.
1994:: Microtel rebrands and launches mobile telephone services as Orange.
1996:: Orange goes public in the most successful European IPO ever.
1999:: Mannesmann acquires Orange for £20 billion ($36 billion)
2000:: Vodafone acquires Mannesmann and sells Orange to France Telecom for £30 billion; Orange takes over France Telecom's Internet and mobile telephone operations.
2003:: Orange forms the Freemove alliance with Telecom Italia Mobile and T-Mobile.
2005:: Orange acquires Spain's Amena and forms an alliance with Cingular Wireless.
2006:: Orange completes the rebranding of its Internet and mobile telephone business under the Orange brand.

Orange began preparing for the so-called 3G market, acquiring a series of licenses—including a license in the United Kingdom for £4.1 billion—for the next-generation high-speed mobile telephone market. The company's rollout of 3G operations occurred only slowly, however, in part because of the collapse of the telecommunications sector boom in the early 2000s.

In the meantime, Orange worked on integrating France Telecom's operations into its own, while integrating itself into France Telecom. The company also became one of the founding members of the Freemove alliance, joining forces with Telecom Italia Mobile and T-Mobile, and, in 2006, with Telia Sonera. By linking its network with its alliance partners, Orange extended the range of coverage for its customers to nearly 30 countries.

At the same time, Orange continued to build its own international presence. In 2005, the company, through France Telecom, acquired an 80 percent stake in Spain's Auna Operadora de Telecommunicaciones, which in turned control Amena, one of the Spanish market leaders. The acquisition cost France Telecom $7.7 billion. Also that year, Orange extended its reach into the United States, forming an alliance with Cingular Wireless.

By 2005, Orange was prepared for the full-scale rollout of its high-speed mobile telephone services. The new network promised a high degree of convergence, particularly between the mobile telephone and Internet markets. In order to position itself as a global player in this future telecommunications market, France Telecom launched a massive rebranding effort, restructuring much of its Internet and mobile telephone operations under the single Orange brand. The company's Equant subsidiary was also rebranded as Orange Business Services.

Largely completed by 2006, the Orange brand spanned 13 countries; including its non-Orange operations, the company's network counted nearly 90 million subscribers on five continents, generating an estimated $21.5 billion in revenues. From a dark horse startup in 1994, Orange had grown into one of the world's leading contenders in the telecommunications market.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Mobistar (Belgium); ONE GmbH (Austria); Optimus (Portugal); Orange Dominicana; Orange Botswana; Orange Cameroun; Orange Communications S.A. (Switzerland); Orange France S.A.; Orange Netherlands; Orange Poland; Orange Romania; Orange Slovensko; Orange U.K.; The Egyptian Company for Mobile Services (MobiNil).

PRINCIPAL COMPETITORS

Vodafone GmbH; Deutsche Telekom AG; Bouygues S.A.; British Telecommunications plc; Telecom Italia S.p.A.; O2 plc; Telefonica Moviles S.A.; Royal KPN N.V.; Telenor ASA; T-Mobile International AG; Vodafone D2 GmbH; SFR S.A.