Orange UK CEO May Leave In Shakeup Over Profitability Slide; Launches Subscription Service With Bebo

The FT is reporting that Bernard Ghillebaert, the CEO of Orange UK, is leaving his post and will be replaced by “a Briton from outside the France Telecom (NYSE: FTE) group”, as the company tries to get a better grip on sliding profitability in the face of intense competition. Orange reported operating profit of 712 million euros ($1 billion) in the six months to June 30, a decline of 8.6 percent compared to the same period in 2006. For the full year 2006, operating profit was 1.4 billion euros ($2 billion), down 17.1 percent. Orange — the UK’s third-largest mobile operator with 15.2 million mobile customers — had an operating margin of 23.4 percent in 2006. That was lower than margins at O2 and Vodafone, and the worst of France Telecom’s four biggest mobile operations.

What’s gone wrong? Yes, price competition definitely is contributing to Orange’s problems. But could there also be something more dysfunctional within the company itself? Orange was one of the first movers in mobile, and was for a long time its market leader. But it seems to have lost its way. Anecdotally, I was told by a mobile analyst who tracks traffic for all the mobile operators in the country that Orange’s UK subscriber base currently is skewed to older users. This is unsurprising, if you think about it, since many of the earliest adopters, who would have been twenty-somethings fifteen years ago, are still with Orange now. But the problem is that the oldies don’t use premium data services, and phones in general, like the younger crowd. Orange knows this and is furiously trying to market to the under-thirties to keep up with the times, particularly in some of the buzziest areas of mobile content, like social networking (the analyst tells me that this is mostly used by 24s). Today Orange announced an extension of its relationship with Bebo, where users get unlimited use of the site via their phones for a flat rate of £3 ($6) per month. But already this seems outdated, considering that O2 has done a deal with the much bigger MySpace and to allow free usage for the rest of this year.

Mobile data — specifically mobile content — is still the poorer relation to voice services in operators’ revenue, but if it is the future, then it’s instructive to see how operators are approaching growing this strand of their business now.

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