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March 12, 1997updated 05 Sep 2016 12:39pm

ORANGE LOSSES IN LINE WITH BROAD MARKET EXPECTATIONS

By CBR Staff Writer

Hutchison Whampoa Ltd’s 50.5%-owned cellular phone operator Orange Plc announced its preliminary results for the year to December 31 with pre-tax losses of 229m pounds. This is broadly in line with the market’s expectations, with analysts not expecting profits before 1999. Orange is not unhappy with this forecast although it declined to add any further detail. The expectation of continued losses in the short term stems mainly from Orange’s continued investment in the expansion of its network and customer base. Orange now claims to cover 92% of the UK population, which is a substantial increase from the 85% of a year ago. This continued investment appears to paying off, given the expanding size of Orange’s customer base. Orange declared a year end total of 785,000 subscribers rising to 850,000 by the end of February 1997. Hans Snook, the group managing director is very keen to emphasize not just the quantity but also the quality of this customer base. Orange is currently boasting the lowest churn rate in the industry at 18.6%. Churn is a measure of the number of subscribers who leave the network either by choice or by disconnection due to non-payment – competition for custom is so fierce that networks are loth to pursue bad payers, knowing that they will simply vanish and pop up on somebody else’s network. The Orange philosophy is to build the highest quality customer base, which in turn will enable Orange to build up higher revenues per customer. Snook was also bullish about the prospects for further increases in the size of the UK market and for Orange’s place within that market. Orange claims to be expanding faster than the market by attracting customers from other networks and in particular by attracting customers who are leaving the old analog technology and switching to digital systems. Orange says it has no intention of slowing down its expansion process, and says a further 200m pounds of investment in capital assets are programmed for 1997. The source of this finance is the continued draw down of debt from a 1.2bn loan facility. The company will not pay a dividend.

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