France Telecom has cut the price range for the Orange IPO.
France Telecom has cut the IPO valuation range of its mobile phone subsidiary Orange from E55.2-64.8 billion to E45.6-52.9 billion. The sale of 10-15% of Orange will now only raise around seven billion euros for France Telecom, compared with the E11.2-12.9 billion it had anticipated when the IPO was first planned.
It’s not an ideal situation for the French firm, which needs the money to pay Vodafone E6.6 billion this March as part of the original purchase of UK mobile operator Orange last year. Still, Orange is not in a bad position. It is Europe’s second-largest mobile operator, with over 30 million subscribers in 19 countries. The Orange brand is also a major asset, since it is globally seen as non-corporate, quirky and providing good value for money. As the new company tries to build networks and subscribers outside its core UK and French markets, these associations should be positive for growth.
The market pessimism is worse news for firms such as BT and Deutsche Telekom. They also aim to float their mobile businesses this year to help pay the huge debts they have incurred in bidding for 3G licenses, but do not have many of Orange’s advantages. Neither is even the dominant operator in its home market – Vodafone is the UK’s number one, whilst Vodafone’s D2 unit is also number one in Germany. And neither brand is even close to Orange in mindshare; some observers might even describe BT’s brand as a liability.
It’s clear who the real winner in European mobile telecoms is: the largest player, Vodafone. Its cash problems are much less acute than its rivals, at least in part due to the Orange sale. It leads in two of Europe’s markets, as well as having a large global presence. And whilst its brand is not as consumer-friendly as Orange’s, it is certainly well respected by the markets. Orange is a worthy number two and should continue to do well, but has little chance of catching up with the world’s leading operator.
