3/6/2007 11:46:00 AM
Cost savings for 2007 at Orange
Orange UK said it would focus on reducing costs and increasing direct sales after a difficult 2006.
Executive VP Bernard Ghillebaert predicted an ‘extremely competitive’ 2007 with early first quarter market sales and churn indicators ‘suggesting the “washing machine” could be slowing down’.
In the UK, the business expects a 20% operational expenditure reduction due to the Vodafone 3G network share deal.
It is also to see further cost savings from redundancies made last year, in which the mobile and broadband businesses were combined. Orange said the restructuring would deliver a further 7% headcount cost savings this year.
Ghillebaert said Orange would build on a ‘differentiated segmented tariff position’ with a focus on retention activity and would build new wholesale partnerships following the 3 roaming deal.
Orange UK said over 80% of new customers were taking an 18-month contract, with monthly churn down 5 points in December 2006.
237,000 pay monthly net additions in the second half, the highest since 2002, helped Orange lift its customer base by 3.2% to 15.3 million in 2006.
The business bought 47 new stores from The Link, taking its retail estate to 340 shops at the end of the year, and increasing direct sales by 17% year-on-year for December. A spokeswoman said the Link shops were an ‘important step towards direct distribution’.
But parent company France Telecom said costs were high due to ‘intense competitive environment in mature countries’ such as the UK. UK gross operating margin in Personal Communication Services fell 16.8% to €1.4bn, while revenue increased by just 0.7% to €5.87bn.
Orange plans to pursue the increase of shared broadband and mobile customer base. France Telecom said in mature countries, ‘convergence will drive growth’ due to new content and broadband services.