Orange to delay 3G rollout

Orange to Delay 3G Rollout

6th December 2002 by By Rebecca Harrison and Dan Lalor of Reuters.co.uk

France Telecom-controlled mobile phone firm Orange has said it is delaying its rollout of third-generation services, as its parent firm slashes investment to help mend its battered balance sheet.

Orange also said it expected to beat market forecasts in coming years and that its chief executive Jean-Francois Pontal would retire next spring.

A day after its parent firm France Telecom FTE.PA announced a massive rescue plan that included hefty cuts in investment, Orange said the rollout of the new services, such as video on mobile phones, in Britain would kick-off in 2003.

But rollout elsewhere would not come until later and plans to launch the technology in Sweden were on hold, as the group's parent seeks cost savings to pare down its 70 billion euro debt.

"There will be delays outside of the UK," Deputy Chief Executive Officer Graham Howe told a conference call.

Shares in Orange gained as much as seven percent on Thursday as investors cheered France Telecom's rescue plan. The stock was trading up 2.6 percent at 7.38 euros by 1130 GMT, outperforming the DJ Stoxx European telecoms index .SXKP .

THREAT TO COMPETITIVENESS

Analysts fretted that France Telecom, which said on Thursday it would shave 10 percent off next year's investment budget, was relying too heavily on Orange ORA.PA to save cash, arguing crimping 3G development could compromise the mobile firm's competitiveness.

"It's a worry that they might underinvest in an area that is still growing and still going through reasonable upheaval," said a buy side analyst at a London-based asset manager.

"To a certain extent they need to keep spending on the business -- so there are concerns about their competitive position."

Howe said Orange's Swedish 3G operation was "on ice", but declined to give further details.

An industry source said the threat was due to a standoff with the Swedish telecoms regulator over 3G coverage. Sources told Reuters on Monday that Orange may axe its Swedish operation.

Orange is one of four companies that won a Swedish licence for 3G services for a symbolic fee in 2000 and is sharing rollout costs with competitors Vodafone VOD.L and Hi3G 0013.HK INVEb.ST .

The company asked the Swedish telecoms authorities in August to extend a deadline for the rollout by three years to end-2006 citing administrative delays with permits, weak demand for data services and the immaturity of the technology.

Orange declined to comment further on which next-generation services would be delayed outside Britain, but said the firm did not currently foresee 3G licence writedowns.

The firm's main suppliers -- industry giants Nokia NOK1V.HE , Ericsson ERICb.ST and Alcatel CGEP.PA -- would be hit by delays in the rollout outside Britain, Howe said.

AIMS TO BEAT FORECASTS

Howe also said the phone firm should be debt free in the next two to three years and said it would axe 1,000-2,000 jobs as part of planned cost-cuts.

Orange said separately it would strengthen its financial position over the next three years and expected to beat market forecasts in coming years.

"This is expected from a combination of a continued higher rate of EBITDA growth, lower than previously estimated capital expenditure and from other factors, including improvement in working capital," Orange said in a statement.

Net cash flow generated from 2003-05 should be 5-7 billion euros higher than the current market consensus, it said.

Orange Chief Executive Pontal would resign in the spring, the statement added. France Telecom chief Thierry Breton told a news conference a successor to Pontal, who is approaching retirement age, would be named in mid to late February.

Howe, or Orange's French mobile activities boss Didier Quillot, are tipped to take over at the top, sources close to the situation said.

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