11/12/2008 12:01:00 PM
It's a long road ahead for Orange boss Alexander
Even before starting at Orange in January this year, Tom Alexander knew the scale of the operator’s problems. It had lost its leadership of the UK market, falling further adrift of O2 and Vodafone in terms of customer numbers and revenue. The company’s once envied brand had been severely weakened in the process.
Nine months on and there are small signs that the sleeping giant is waking. Arpu and revenue are ticking over (thanks largely to Sim-only deals and dongles) during testing market conditions. It has been just enough to maintain the upbeat mood surrounding CEO Tom Alexander.
Alexander is aware that the spotlight is on him to show he has made an immediate impact, while the cogs slowly turn as he makes long-term changes to resurrect the company. One of the biggest tasks has been low morale within Orange, and Alexander and ‘chief of staff’ Steven Day have identified this as a key battle. Alexander says: ‘I want everyone to come into work and enjoy being there, and feel they’ve done a fantastic job when they’ve gone home.’
There is a small improvement in the financial numbers but, since Vodafone and O2 have yet to produce their results at the time of writing, it is difficult to gauge how Orange has performed compared with its rivals. Is this lift in numbers purely a result of the broader industry success from dongles and Sim-only? If so, Orange has been a follower in both areas.
The operator added 160,000 new contract subscribers during the current quarter, with 55,000 from mobile broadband. Revenue has gone up by 6% over one year – the mobile business delivered £4.3bn in the first nine months of the year. Orange also claimed its average customer’s spend was up by £12 over the last year. But the results failed to give any indication on profits or margins – two areas that would be just as important to the headline figures on revenue and new customer additions.
In previous years, Orange has been accused of being the operator most prone to burning cash, with relatively high spending on customer acquisition and marketing.
Alexander says that ‘efficient spending’ has been a priority. The company was reshaped after several roles were duplicated, 500 head office jobs were removed, and the same number created in retail and customer service. Alexander’s stated aim is to make Orange ‘the most loved communications company’, which is a goal that involves considerable work and cash.
Orange has lagged far behind in three areas that are fundamental for a network operator: network, brand and customer services. These have now been given top priority.
Launching the ‘I AM’ campaign is arguably Alexander’s most significant landmark in his tenure at Orange so far.
He has backed brand director Justin Billingsley’s rebrand campaign with well over £10m between July and Christmas this year.
Alexander firmly believes in the power of a brand to build lasting and emotional relationships between company and customer. It is a conviction he has already put to the test – he was responsible for building the most successful MVNO in the world (Virgin Mobile) solely through branding. It has also been recognised that, during Orange’s heyday as the market leader in the late 1990s, its brand was not just the best in the mobile industry, it was also high in the ranks of broader consumer brands.
Alexander is gambling on ‘I AM’ and ‘together we can do more’ to emulate the success of ‘the future’s bright…’ in capturing the zeitgeist and building that intangible consumer interest that is based on something more than ‘how many minutes and texts do I get for £30?’
Orange disputes assertions made by several sources within the advertising world about its ad spend this year, but relaunching the brand has clearly been expensive. Separately, Orange is also believed to be among the highest spenders for deal and promotion advertising.
Alexander insists the downturn in the broader advertising market has enabled Orange to strike some favourable deals with advertisers, securing better value in the context of what the operator is actually spending.
Day says: ‘We’ve spent time and resources in making things consistent, thought-provoking and very “Orange”.’
The collapse of Orange’s network share deal with Vodafone was a major frustration for both parties amid a failure to agree on the value of their networks’ assets. Reports claimed the existing site sharing – a diluted agreement of the original proposal – was only salvaged by Alexander one month into the job.
Vodafone has claimed it has the strongest network in the market, while T-Mobile and 3’s network share venture is in full swing, and O2 has jumped straight to HSDPA rollout after being behind rivals in terms of 3G coverage.
Alexander says a robust network and ‘being known for quality’ is the central pillar in his ‘most loved’ strategy and, as a result, has been ploughing £1m per day into upgrading since the start of the year. He has also set his stall out to have strong 2G coverage in rural areas and is aiming to achieve ‘the biggest and best network’. He is likely to be spending more here than many of his rivals.
Even more than brand value, customer service was the biggest factor when it came to Orange surrendering its leading position, and is at the top of Alexander’s to-do list.
Online forums are awash with anecdotes describing terrible customer service. What makes things worse is that Orange has made a point of saying it is a premium network brand, unlike 3 and T-Mobile, which are generally perceived as budget brands.
Customers complain of Orange’s long waiting times, complicated IVRs, having to deal with poorly trained or powerless off-shore call centres and being passed through different teams.
The operator’s retail staff say that waiting times on phones for customers were ‘a minimum of half an hour, and more typically closer to an hour’ – an exasperating amount of time for a customer to resolve a query. That waiting time has drastically shortened in recent months. One retail staffer says: ‘It’s getting a lot faster now.’
AOL veteran Jackie O’Leary was drafted in from Carphone Warehouse in September to overhaul customer services – both in the mobile and broadband divisions, and Alexander has shut down the overseas call centres, bringing everything back to the UK. Virgin Mobile invested heavily in customer services under Alexander and it looks as if the same will take place at Orange.
Orange makes return to home broadband
Orange’s home broadband business was attracting a string of bad publicity in 2007, in fact ever since it was absorbed and rebranded by sister company Wanadoo.
Alexander attempted to take the pressure off the home division, by effectively pulling out of the market with a freeze on advertising, and not pushing it through Orange’s channels since the start of the year. The company was losing customers quarter on quarter and continued to do so in the last quarter, with the exact number not declared.
The UK chief said he had decided to pull out of the market while service issues were being fixed – both call centre-related and those affecting broadband speeds and reliability.
Group chief Olaf Swantee advised the UK business to slow down its broadband business while it fixed the business in light of the customer service problems.
This move has led to a redirection in two areas: the technical business of unbundling (exchanges) and the commercial business of bundling (mobile and broadband consumer packages).
Orange has been caught up with ‘unbundling’ the exchanges that carry services into people’s homes. The aim