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					     The Future is Bright, but is it Orange?
        In my essay, after a brief introduction to the company, I will analyse its external marketing
environment (including Orange's socio-cultural, economic, technological and political
environment). Then I will conduct a scan on the internal environment (discussing the oligopoly of
the UK's mobile telecommunication companies) that will be followed by Orange's SWOT analysis
and strategic recommendations based on the company's environment scans.

       Orange is the UK's third largest mobile network operator, providing its services to 21.7% of
the whole market with 18 million subscribers (Key Note, Mobile Telecommunications, 2007). The
company was founded at the dawn of the telecom revolution in 1994 by a Hong Kong-based firm
Hutchison Telecom. In 1999 it was bought by Mannesman AG, however in 2000 Vodafone bought
Mannesman and, due to legal regulations, they had to sell one of their mobile companies. They
decided to sell Orange, which was acquired by France Telecom and has been operated by it since
2000.

                                       External Environment

         Those, who were in their early teenage years during the mid-90s (when the usage of the
internet had started to grow and arrive to western households) would have just left higher education
and entered the employment market. They were the last wave of the so called Generation Y and
they were the first ones growing up with the internet in their households. This generation was the
engine of the Web 2.0 boom in the mid-2000's; with creations such as Flickr, Myspace, Facebook,
Twitter and YouTube, and they were the ones who first started to use the internet as a tool for active
communication (online networking sites, blogging, sharing videos and photos) instead of the older
e-mail and Instant Messaging technologies. For them their mobile phones were not just for talking
and texting, they became an essential part of broadcasting every important moment of their lives.
         There is another relevant change in society:
even though Britain's population is slowly growing
(as well as the number of households) – with more
than 500,000 immigrants each year - it's ageing as
well. According to the Office for National
Statistics (ONS) by 2033 the age structure of the
UK will go through dramatic changes. The number
of people in retirement age will be higher than the
number of children under 16, while the rate of the
working age population will fall from 65 percent
to 59 percent. The trends in age will not be the
only factor that changes during the next few
decades; the ONS's statistics on migration, the rate
and the number of non-EU immigrants has been            ONS Population Estimates and Projections
increasing since the early 90s and this tendency
still hasn't stopped. The net migration of the UK in the last ten years was 150,000 in each year, and
most of the average 500,000 people were coming from outside of Europe.

       The British economy has suffered one of the biggest losses in the world during the Credit
Crunch causing a significant slowdown in consumer expenditure. The latest GDP figures published
by the ONS on the 23rd of October have shown that British GDP has contracted by 0.4% in the last
three months. This was the sixth quarter of negative growth in a row. In the last 12 months the
unemployment rate has risen to 7.9% from 5.8%. These values affect every single business in the
UK, regardless of its size or sector, however “consumers are less likely to cut back on their mobile-
phone spending than they are on other forms of entertainment” (Key Note, Mobile Marketing,
2009). Other segments of the Mobile Communication sector might be affected more negatively.
Purchases of new mobile phones and increasing of subscription levels have slowed down and
change in these negative tendencies can not be expected until the end of the recession, which is
currently predicted by 2010 by the ONS's GDP figures. However there are promising tendencies as
well, such as the surprisingly quick recovery of Britain's most important trading partner, the Euro-
Zone. As well as this, the US economy has started to expand back as well. Global growth is still
projected to be weak, but most economists (such as the Irish Central Bank Governor Patrick
Honohan) announced that “global recession has reached bottom” (Reuters).

        Mobile communication is one of the most technologically innovative industries in the world.
“3G - the generic term for the next generation of mobile wireless communication networks, often
referred to as universal mobile telecommunications system (UMTS) - now has widespread coverage
among all the major networks.” (Orange.co.uk) Orange's 3G network is claimed to cover 93% of
the UK's population in order supply the demand of 21st century's consumers. At the same time that
3G was first introduced commercially, a new generation of mobile devices appeared as well. After
the heavy and slow smartphones of the early 2000's, in 2007 Apple released its iPhone with its 3.5”
display and impressive touch screen technology. Many new products have followed the iPhone;
some of them (such as the HTC Hero and Palm Pre) could even take the user experience – speed,
interface - to the next level. As new competitors enter the market, these products are getting more
affordable even for middle class households. All of these devices have a GPS chip and connection
to mobile broadband. Each mentioned brand is running a different OS and two of them (Palm,
HTC) are open-source software. There is a great selection of applications for these devices and most
applications generate network traffic as well, causing a massive growth in revenues and importance
for the non-voice services.

         As a Key Note analysis (Key Note, Mobile Marketing, 2009) highlights, “Proposals outlined
in new mobile legislation proposed by the European Parliament in autumn 2008 (known as the
Telecom Package) seek to unify Europe's telecommunications market for the 27 EU member
states.”

       The main features of the proposed reforms include (Europa.eu, 2009a):
      Stronger consumer rights
      More consumer choice by reinforcing competition between operators
      Promoting investment in new communication infrastructure by freeing-up radio spectrum
       for wireless broadband services
      Strengthening the independence of national telecom watchdogs, freeing them from control by
       dominant operators and governments alike
      Better supervision of deregulated markets where EU-driven market opening has already led
       to competition
      Making communication networks more reliable and secure, especially to withstand viruses
       and other cyber-attacks

        According to the latest publication of the European Commission on the Telecom Package
(Ec.europa.eu, 2009b), an agreement on the Reform has been recently reached by the European
Parliament and Council of Ministers on the 4th of November 2009. The new regulations are
expected to enter into force on the 18th of December 2009; however the member countries still have
until June 2011 - the deadline of transposition into national legislations. The new regulation will
also establish a new organisation in order to provide the above mentioned “better supervision of
deregulated markets”; the European Body of Telecoms Regulators.
                                       Internal Environment

         Orange offers a wider variety of services from traditional text and voice technology to the
latest 3G mobile TV service. Key Note's Top Markets: IT, Telecommunications & Security 2008
recognises two main ways in which the mobile telecommunications market is segmented; pricing
tariff and type of traffic. In terms of pricing tariff, the subscriber base is divided into two broad
sectors: pre-pay contracts and monthly contracts. Key Note's Mobile Telecommunications research
(Key Note, 2007) based on Ofcom's statistics shows (labelled as Table 29) that in 2007 Orange had
nearly the same number of Pre-Pay subscribers as contracted ones and 3 out of the 4 UK network
operator rivals had a higher number of subscribers than Orange.




         On the other hand if we take a look at both categories of traffic: voice traffic and non-voice
traffic (SMS, IP, MMS, WAP and 3G Services), Orange looks more competitive than most of their
rivals. While in 2007 Orange had a 23.6% share of the mobile voice services sector (Compared to
Vodafone's 28%, O2's 24.1%, T-Mobiles 17.0% and 3's 7.3%), the company has the second largest
share (26.1%) in the non-voice services sector after O2, and followed by Vodafone, T-Mobile and 3.
       The numbers of the market shares clearly show that the British mobile telecommunications
market is an oligopoly of 4 huge and a medium size (3) company. As such the British mobile
companies' revenues and number of subscribers are slowly growing; Key Note described stability
among the networks. (Key Note, Mobile Telecommunications, 2007)

        In 3 years – by the end of 2012 – Orange will change due to a merger with T-Mobile. On the
8th of September 2009 the leaders of T-Mobile and Orange announced that “[They] are merging
their UK operations to create the country's largest mobile phone operator, with 28.4 million
customers, or 37% of the market, leapfrogging rivals O2 and Vodafone.” (Guardian) The owners
(France Telecom and Deutsche Telekom) will have a 50%-50% share in the new company.

“...the deal is expected to lead to significant job losses among the combined workforce of 19,000 as
the two companies rationalise their networks, axe call centre staff and close high street retail stores
in pursuit of £3.5bn worth of cost savings. T-Mobile UK employs 6,400 and Orange 12,000. It
should, however, lead to a reduction in mobile phone masts, as the new venture will need at least
5,000 fewer than the two companies operate today.” (Guardian)

        The article mentioned that £3.5bn could be saved, however thousands of employees are
expected to be made redundant. The owners of these companies also announced that one of them
will lose its brand and merge into the other. It's not clear yet whether the name of Orange or T-
Mobile will disappear forever from UK markets.

       In October 2006 Orange broadband customers experienced difficulties throughout the whole
country with their connection and BBC reported (BBC, 17 October 2006) that the Company's
customer service has failed for several days to help its customers and provide them with
information. A few months later in March 2007 the BBC's Watchdog was discussing the topic of
broadband internet connection. It published the results of a survey that showed that Orange's
customers are the least satisfied with their service. As a response to the customers’ dissatisfaction
Orange launched a new marketing campaign and also moved back its outsourced customer service
from India to the UK (Cellular News, 2008).

                                                SWOT

        One of Orange's biggest strengths is its current market share; Orange has more than 21
percent of the subscribers on a rich and still growing market. Mobile telecommunication is a
complex market, but the Company is present in almost all segments of it (e.g.: Internet, Music
Store, Mobile TV). In some segments such as the fast growing non-voice mobile traffic (compared
to the stagnant revenues of the classic voice and SMS services) Orange's share is only 4 percent
behind the market leader O2. In recent years they have also built up a 3-3.5G network covering
93% of the UK population. In the event that the merger between Orange and T-Mobile will occur,
the Company would become the market leader in the UK, with more than 34% of the market share,
and could adapt to the context of the economic slowdown and save billions of pounds.

        Among the possible effects of the merger, there is a potential weakness as well. Based on the
Guardian's sources, 1 out of 6 current Orange employees could be made redundant in the following
years. The bad morale that can follow such news could negatively affect the whole Company's
operation without relevant and effective HR management operations.
        The brand itself was harmed by the negative opinions and voices in public media in 2006
and 2007. The new marketing strategies of Orange have tried to rectify its brand, however many
consumer forums are still full of Orange's customers complaints.
        The market share of contract (therefore more loyal) customers (21%) is significantly lower
than O2's 27% and Vodafone's 28%. In a recession this could be a huge risk, because “pay as you
go” customers can simply just stop topping up their SIM cards or topping up significantly less than
before.

        Regardless of these weaknesses, there are important opportunities ahead for Orange.
The population of the UK is still growing, which means there are new customers entering the
market year by year and ONS predicts that this tendency will not revert in the next 20 years. The
rate of people above age 65 will rise by 8%, offering millions of new customers for competitive
businesses. The number of households will grow as well, but their size will shrink. This change will
induce a growth in this marketing segment as well.

       The Company's above mentioned 3G network contains risks too (Key Note, Digital
Communications 2009). The costs of building the network was hoped to be covered by revenues of
following years, however the Credit Crunch has cancelled these plans with slowing growth in
revenues. The economical downturn itself is responsible for 2009's shrinking customer expenditure,
causing smaller profit margins. Other factors are threatening the Company's success from sources
outside of Britain; the new EU regulations (Telecom Package) will be trying to create a single
mobile communication market in the whole European Union and Orange could find itself facing
and even more competitive market than the oligopolistic British one. In the near future the biggest
question that Brussels has to answer is whether the European Union will approve the merger of T-
Mobile and Orange. In case of a disapproval the Company has to stop planning its part as a market
leader Mobile Communication company and has to start finding a way out of its current position –
maybe by taking advantage of its strengths and opportunities.

                                          Recommendations

   1. Orange should invest more in their 3G network, to improve its infrastructure and advertise
      the related services. Unlike the stagnant traditional mobile communication services (Voice
      and SMS), this segment is still growing and Orange already has the second largest market
      share, however it is still far away from O2, while 3 is also quickly catching up.

   2. Orange should also offer special mobile TV packages for its 3G capable equipment owners
      (such as the Company's new iPhone users). Currently those who offer mobile TV services
      (e.g. O2) offer complete TV channels instead of focusing on specific shows and events. The
      only country in Europe where usage of mobile TV could meet the expectations is Italy
      (Rapid TV News, 2009). In Italy the most popular mobile TV channels are the ones offering
      football matches for those who couldn't be at home or go to watch it live in a pub. The
      British population is at least as fanatic about football as the Italian one. This service could
      attract the working classes, aged between 25 and 40, and would provide an incentive for
      them to purchase 3G capable smartphones they otherwise wouldn’t have bought.

   3. Orange should sign up young pop and rock bands from every part of the country, musicians
      without the support of a record label, but are locally influential. Orange should support them
      financially, sell their music in their own Music Store and advertise them using the
      Company's own infrastructure and services. With this step Orange could reach the young
      generation indirectly even before they purchase their own mobile phones and financially
      still rely on their parents.

       Orange UK is currently in a difficult situation with lot of opportunities. Its fate can easily be
turned around with competent management and precise marketing operations regardless of the
negative external factors.
References:
    BBC, Orange broadband hit by outages, 2006
       (http://news.bbc.co.uk/1/hi/technology/6058154.stm), Accessed: 28/11/09
    Cellular News, Orange To Recall Customer Care Functions from India to the UK, 2008
       (http://www.cellular-news.com/story/31577.php) Accessed: 24/11/09
    Guardian, Orange and T-Mobile to create UK's largest mobile phone company, 2009
       (http://www.guardian.co.uk/business/2009/sep/08/orange-tmobile-merger), Accessed:
       22/11/09
    EU, European Commission, Reforming the current telecom rules (2009b)
       (http://ec.europa.eu/information_society/policy/ecomm/tomorrow/index_en.htm), Accessed:
       25/11/09
    EU, European Commission, EU telecoms reform (2009a)
       (http://ec.europa.eu/news/science/071113_1_en.htm), Accessed: 25/11/09Key Note, Mobile
       Marketing 2009 (https://www.keynote.co.uk/market-intelligence/view/product/2289/mobile-
       marketing/chapter/9/pest-analysis), Accessed: 26/10/09
    Key Note, Mobile Telecommunications 2007 (https://www.keynote.co.uk/market-
       intelligence/view/product/2054/top-markets%3A-it-telecommunications-%26-
       security/chapter/8/mobile-telecommunications ), Accessed: 23/11/09
    Key Note, Digital Communications 2009 (https://www.keynote.co.uk/market-
       intelligence/view/product/2207/digital-communications/chapter/7/strengths-weaknesses-
       opportunities-and-threats?highlight=orange%20pay%20as%20you%20go%20segment)
    Reuters, Article: Global recession reached bottom - ECB's Honohan
       (http://in.reuters.com/article/economicNews/idINIndia-43120320091013), Accessed:
       15/10/09
    ONS, Population Estimates for UK, England and Wales, Scotland and Northern Ireland,
       National Population Projections (http://www.statistics.gov.uk/hub/population/aging/older-
       people/index.html), Accessed: 24/11/09
    ONS, International Migration
       (http://www.statistics.gov.uk/hub/population/migration/international-migration/index.html),
       Accessed: 24/11/09
    ONS, Instant Figures (http://www.statistics.gov.uk/instantfigures.asp), Accessed: 27/10/09
    ONS, Economy/GDP Growth (http://www.statistics.gov.uk/cci/nugget.asp?id=192),
       Accessed: 25/10/09
    Orange UK, 3G
       (http://www2.orange.co.uk/servlet/Satellite?pagename=OUKPersonal&c=OUKService&cid
       =1096023564458&t=Service), Accessed: 29/11/09
    Rapid TV News, Italy mobile TV will top 5m, 2009
       (http://www.rapidtvnews.com/index.php/200911265303/italy-mobile-tv-will-top-5m.html),
       Accessed: 27/11/09)
      CSABA SUTO
       Student No: 0933890


The Future is Bright, but
     is it Orange?
      BS1528 MARKETING

				
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