Unveiling its six-month interim results last week Orange claimed it was now winning 46.6 per cent of contract customer growth and had achieved the lowest churn in the industry of 18.7 per cent. However as the proportion of pre-pay customers increased average revenue across the base fell 39 to 424.

Orange now has 2.96 million customers at the end of the period up from 2.16 million at the end of last year.

Overall market share increased from 16.6 per cent to 17.6 per cent. Contract market share increased 1.9 per cent to 18.4 per cent

Turnover at Orange UK increased 63 per cent to 645.5 million with network revenue up 62 per cent to 512.7 million. Operating performance pushed profit up 40.7 million to 46.2 million.

Orange has achieved record growth in customers and record growth in value. We added 800000 customers in the first half three times more than for the same period last year. This growth has continued in July and Oranges customer base is now 3.14 million said Orange CEO Hans Snook.

Everyday 50 has provided a major stimulus to the consumer contract market and today we have 173000 customers on this tariff.

The growth has fed through to our financials with Group operating profit up from 2 million to 36.9 million.

Loss before tax was reduced 65 per cent to 17.1 million or by 35 per cent to 32.2 million before allowing for an exceptional item.

We have maintained our network lead increasing our core base station sites to more than 5800. This gives us a 28 per cent lead over our nearest competitor and a 75 per cent lead over our weakest competitor.

Snook said Orange will also launch High Speed Circuit Switch Data technology which will increase data speeds from 9.6 kbits/s to 28.8 kbits/s equivalent to todays fixed line data rates and using advanced compression techniques take speeds up to ISDN levels.

Orange will sell wirefree radio cards which can be inserted into computers.

The network will also become an internet service provider. Its third-generation UMTS services will not become commercially available until 2003.

Orange also last week launched the Orange Developers Forum to gather experts to develop integrated wirefree products and services using data and messaging.

Dealers are being absolutely slaughtered by the Tescos and Asdas of this world who are just using a pre-pay phone as a sprat to catch a mackeral said JWE Telecom chairman John Weatherill.

I appreciate that it is difficult for the networks to intervene. But they ought to make it a bit more difficult for them to slash prices and use phones as a loss leader. Supermarkets are using mobiles as pawns in their own market share wars.

Unfortunately the whole mobile comms industry is going to have to suffer because of this. This latest development will be a killer for a lot of dealers unless the networks do something about it. It is in the networks interests to do something. If they dont the whole thing will back fire because at the end of the day the supermarkets dont give a damn. The networks have to look after the dealers today because dealers will be looking after the customers two and three years down the line when the supermarkets have lost interest.

We spend half our time answering questions from people who have bought phones in Asda and who cant or wont read the instruction book. Its costing us money and Im tempted to put the phone down on these people. So its costing us in profit terms and in time spent when we could be doing other things

The Carphone Warehouse managing director Charles Dunstone was dismissive of the supermarkets abilities to properly sell mobiles.

Its essential that customers are given independent and impartial advise. This is something supermarkets will never be able to offer. There are over 20 pre-pay packages alone.

Ahmed Rashid from Fones Etc in Ilford East London said:

They are selling the phones at much the same price as we are buying them. Either they are not making any profit on them or are buying them at much lower prices than us. We are prepared to price match if a customer tells us that he has heard of the offer. There must be a downside to the deal somewhere.

Either they have bought a load of old stock. Or they are selling a model is not very popular and that we would have trouble selling ourselves even if we could offer it at the same price or cheaper. Most pre-pay handsets are pretty ugly. People are prepared to pay a little more for a decent handset. Supermarkets cant offer a choice of pre-pay handsets and any advice on which is the best model.

Adrian Foot branch manager at Talkworld Bexleyheath added:

Im not surprised at all by this. Over the last few months the supermarkets have been jostling for position in this market and this was inevitable. They are potentially opening a can of worms here because they are taking on a product that is troublesome and that requires customer service that they are not geared up for.

How are they going to deal with phone returns warranty claims handset faults and most importantly give advice on a customers needs? I know local garage owners that have stopped selling pre-pay simply because they are fed up with all the hassle they get on a product which yields very low profit margins.

The networks talk about reducing churn but this price war will increase churn from contract to prepay and ultimately back onto contract again as customers become dissatisfied with a cheap handset and expensive call charges.

Steve Bellamy from Fleet Communications also believes that the pre-pay war will have a detrimental effect on contract sales:

The networks are creating their own churn by doing this and we feel that they are forgetting their existing contract customers in the process.

Its bad news for us because we cant match those prices but it gives us even more incentive to highlight the better value of contract deals and push much harder the contract side of our business. We will try to highlight our superior service and also match the right product to a customers needs. But if at the end of the day they only want to pay 39.99 or 49.99 for pre-pay phones then we are going to have to tell them where they can go and get it. I dont believe the claims that we are all buying this stock at the same prices although the networks say we are.

Vodafone spokesperson Corrinne Norris said:

Increasing distribution and outlets was always part of our strategy for prepay. Supermarkets are prepared to work on tighter margins. Multiples account for 60 per cent of the pre-pay market and more than 10 per cent of these are through supermarkets. We can cope with growth.

Oranges group sales director Gareth Jones told Mobile News:

No one can stop this happening It is inevitable. We cant influence the retail price. Our main interest is still focusing on getting the value sector of the market which we will continue to do. I dont believe the retail price point will impact our ability to do that. The value of the market will still come from the dealer channel. Thats why we always try and focus on that channel as much as we can. What will happen with pre-pay is you will see low-end handsets sold at those prices but better quality handsets at higher prices.

Dealers will continue to focus on the higher-tier handsets in the pre-pay range. You will get basic products in the self service environment such as supermarkets. But more sophisticated products will continue to be sold in the dealer channel Jones said.

Brilaw was presented with bills by network operators for 12 mobile phones which had been delivered to private addresses in the South.

Our high credit rating makes us a prime target for this type of fraud. However we have clear pre-set guidelines on purchasing which mean we can prove none of our staff ordered the phones said Brilaw marketing director Brian Pennington.

Until now independent service providers have been able only to .distribute BT Cellnets own pre-pay brands U Easylife Pay and Go and Business Pay and Go. Independent service providers have been unable to provide their own separate pre-pay packages to customers using BT Cellnets network.

Oftel launched an initial investigation in October 1998. It also received a complaint from an independent service provider in May that BT Cellnet was not willing to supply wholesale pre-pay services. Oftels investigation confirmed this. Following Oftel intervention BT Cellnet has now agreed to supply the necessary services to independent service providers so that they are able to offer pre-pay packages to their own customers.

Pre-pay has been the primary source of the recent enormous growth experienced in the mobile telecommunications sector. It is vital that service providers can acquire services from BT Cellnet in order for them to market their own retail products. This should boost competition increase choice and drive down prices said Oftel director general David

The deal involves purchase of the companys 140 stores and 50 concessions in Powerhouse stores.

BTCellnet director of sales and service and managing director of Martin Dawes Telecommunications Hugh Logan will assume overall responsibility of DX.

DX founder Richard Emanuel told Mobile News:

Im very happy. It was a very good deal for all parties involved. Were pleased with whats happened and we are looking forward to the future.There is no truth at all to the rumours that DX were heavily in debt to BTCellnet. We have positive trading relationships with all four networks.

DX is split into several divisions. The one that BTCellnet has bought is the key retail business which includes the DX stores and the infrastructure in Glasgow. Several other parts of DX remain. I will want to spend some time with the companies that remain in the future because they are growing rapidly and represent tremendous opportunities with European goals to attain.

For the time being Im remaining with DX as MD working closely of course with Hugh Logan. He and his team are very focussed. Well review the situation at the end of this calendar year when were in a better position to see the way forward though I believe very much that the DX brand will remain a retail force.

I would envisage DX continuing to work with all four networks for the foreseeable future though ultimately Hugh Logan is better placed perhaps to tell you about the long term strategy.

I think its true to suggest that the buyout has been on the cards for the greater part of 1999. The initial 26 per cent investment by BT set the scene but I dont think it was part of a bigger picture two and a half years ago when the investment was made. At the time Cellnet were trying to secure some routes to market.

Over the past nine months or so BTCellnet seems to have got more of a strategy together and has become more open as an organisation both with the investment in DX and Dawes together with investment in some of their other routes to market said Emanuel.

Ive invested a lot of my working life in DX. Im very keen to see the business go forward and it has in place a very solid stable management team to make sure that it does. The days when everything to do with the company rested on my shoulders are long gone. The team that is in place are very well able to take the business on and into its next chapter. I cant see any significant management changes taking place See Dx Communications Feature.

This policy comes in a letter from Cellnets general manager for distribution Peter Gibbard in a reply to a letter written to BTCellnet managing director Peter Erskine by Ron Miller of Norfolk Telecoms.

Gibbard wrote:

We will not be offering price protection to distributors and retailers adding that independent retailers re an important source of new business to BTCellnet and have an important role to play. We are most certainly not abandoning them but at the same time we cannot force any retailer to sell BTCellnet products at a particular price. Similarly BTCellnet can not refuse to supply retailers with whom we have a contractual relationship.

Miller remains unmoved:

Im not impressed in the slightest in his reply. Hes missing the point that it is his own BT Shops which are selling at prices below the net price that we have to pay for equipment. He seems quite happy to shrug his shoulders and see us sell his product at a loss.

Miller says he is now boycotting BTCellnet phones as a protest against the network not offering price protection.

Miller wrote to BTCellnet managing director Peter Erskine saying:

We were devastated to see BT advertising Pay & Go and U packages at 49.95. We have stocks on these items but have had to withdraw them to sell at the new figure. One 2 One have always given us price protection and so we stock and sell those products with complete confidence said Miller.

If BT are going to drop us in it we have no choice but to take the product off our shelves and your company is denied the revenue from calls to and from Cellnet phones.

If our plight is repeated up and down the country perhaps it might make you think you ought to take more care of the specialist dealers on whom you depend when there is not a BT shop in a town.

My company is struggling to survive in a market with the ever-reducing prices on all products. If BT wants to finish off the independents and sell through the supermarkets or multiples then carry on with your present policies of leaving us to carry the losses resulting from your trading and pricing practices Miller tells Erskine in his letter.

Erskine passed Millers letter to Gibbard.

The operation is being headed up by ex-BTCellnet deputy commercial director Tom Alexander who will be based in Trowbridge.

Virgin Group is converting several of its Our Price stores into Virgin Mobile-branded outlets. Another 220 Our Price stores will stock Virgin phones alongside music CDs games and videos.

Virgins 85 Megastores will also sell the phones and 4.5 million Virgin Atlantic passengers a year will be offered mobiles on board. Phones will also be sold directly from the Trowbridge call centre as well as over the internet.

All customers will be offered a handsfree earpiece. Details of phones tariffs distribution and marketing will be revealed later this year.

Our vision is for people to book air and rail tickets find information buy music and financial services and whatever they choose on-line and on the move said Virgin founder Richard Branson.

This joint venture will offer a value-for-money mobile multi-media experience Branson added.

One 2 One matches our own philosophies and business practices which makes us ideal partners.

We know their infrastructure. Their high-capacity network will provide us with the level of quality and service we must deliver.

Said One 2 One managing director Tim Samples: this joint venture is not only a natural fit but is also testament to the way in which we have built our network.

UniqueAir has 430 employees and approximately 291000 customers some 70 per cent of whom are connected to the Vodafone network.

David Jones remains Managing Director of Vodafone Connect. He also becomes Managing Director of UniqueAir.

UniqueAir MD Peter Edwards resigned his position but will remain at the company to ensure a smooth changeover. As Mobile News went to press neither was available for comment.

Commenting Peter Bamford Chief Executive of Vodafone UK said UniqueAir is one of the leading independent service providers and will form a valuable part of the Vodafone UK business portfolio. We have had a successful relationship with UniqueAir for many years and will be integrating the business into our UK distribution structure.

John Neill Group Chief Executive of Unipart Group Companies added The decision to sell UniqueAir was not easy but we were convinced that the company would have a more secure future as part of a global mobile telecommunications company. A fundamental part of our decision to sell to Vodafone was their commitment to maintain the Abingdon site and provide continuing job opportunities to our people.

In an unconnected deal announced on the same day Vodafone UK Ltd confirmed that it had awarded an exclusive contract to Unipart Group of Companies under which Uniparts Demand Chain Management Division will supply a wide range of warehousing distribution and logistics services for all mobile phones and accessories sold by Vodafone in the UK.

The five year agreement is expected to involve sales in the region of 125 million and under it Unipart will undertake the receipt of handsets and accessories from manufacturers stock control and storage picking and packing and the management of distribution sub-contractors to deliver the phones to businesses home addresses and retail outlets.

One senior independent service provider (SP) told Mobile News Weve been expecting an announcement for some time so it doesnt come as a surprise. It does however reduce still more consumer choice in the marketplace.

Continued the SP Im pretty certain you can count on the fingers of one hand the few remaining independent service providers who have a material influence on the market. We are very concerned with the current state of affairs and have been furiously lobbying the Government in the shape of the DTI and Oftel.

Despite a 57 per cent increase in turnover from 18.36 million to 28.84 million and overall connection volumes up some 45 per cent on a like for like basis and excluding acquisitions pre-tax profits were down from 1.51 million in 1998 to a less than satisfactory 531000.

Much of the market growth was unforeseen and unplanned fuelled by a new product – the pre-pay handset. This product was responsible for the industrys first real and substantial drop in margin as people bought pre-pay phones to the detriment of higher margin contracted business.

Continues Weatherill As announced in May the Group is in dispute with one of its service providers. This relates to commission arrangements on customer bill spend the records for which are controlled by the relevant service provider and not ourselves.

The company has undertaken a strategic review of future operations including the reorganisation of operating divisions and a reduction in costs of approximately 700000 compared with 1998/1999. It intends to focus on key elements of customer service and satisfaction. An industry source close to the company indicated to Mobile News that much of the proposed savings would come from staff rationalisation. Jeff Lucas recently appointed as Marketing Director is already understood to have left the company as part of the cutbacks. Both Lucas and JWE were unavailable for comment as this issue closed for press.

Concludes Weatherill An interim dividend of 0.65p per share was paid to shareholders on 6 April 1999. In view of the overall result for the year the Board has decided not to recommend a final dividend. The Board considers it unlikely that an interim or final dividend will be proposed in respect of the current year.

The judge upheld complaints from Orange and One 2 One that the Government was acting illegally in trying to force existing networks to carry traffic on behalf of new players. If the government is unsuccessful in its attempt to overturn the ruling it may have to significantly lower forecasts of the amount of revenue it is likely to raise from the licence auction.

Potential bidders for the new licence including a consortium headed by Carlton Communications and another led by Dolphin have indicated that they must be allowed access to existing network infrastructure in order that they may establish profitable businesses.

DTI minister Helen Liddell said We are determined to promote competition for third generation mobile phone services. This will be good news for consumers and will help make the UK the best place for e-commerce in the world.

Increased competition will mean lower prices and a faster rollout of innovative services. Without roaming a new company will be at a significant disadvantage to existing operators added Liddell.

The Government has launched its appeal because it wants to put into place fair conditions for both existing operators and potential new entrants. The Government expects roaming to take place on a commercial basis.

But according to Government insiders it is important that if agreement cannot be reached then the director general of telecommunications should be able to step in and determine a fair and reasonable rate for both parties. Existing operators will not be at a disadvantage because their spare capacity will be used by roamed traffic enabling them to receive extra income.

Commenting on the DTI appeal One 2 One said that The Government has sadly once again missed the point of both our case and the judgement of Mr Justice Moses.

The network continued We support increased competition in the mobile market because it is in the best interests of the consumer. Thats why we argued that the Government should auction off five third generation licences.

This case is not about increased competition said One 2 One. Its about regulatory certainty. If mobile operators are to invest millions of pounds into the UK economy they need to know that ministers will follow the rules laid down by Parliament. Three weeks ago the High Court found that they had not.

Concludes the network Mr Justice Moses made plain in his comments last month that he did not think an appeal had any chance of success. It is therefore sad that the Government has taken a decision that will almost inevitably delay the auction of UMTS licences and the introduction of this important new technology to the UK.

There is no reason to delay the UMTS auction process. If the Government had followed the correct procedures from the beginning of this process the issue would not have had to be resolved in court said One 2 One.