Original URL: http://www.theregister.co.uk/2008/02/07/orange_broadband_losses/

Customers peel away from Orange broadband

Operator pipped to new business

By Christopher Williams

Posted in Broadband, 7th February 2008 15:06 GMT

Orange has bucked the broadband market growth trend to report a net loss of 4,000 customers in the last three months of 2007, despite a high-profile TV advertising campaign*.

It ended the year with 1,138,000 broadband customers, parent company France Telecom's latest financials revealed yesterday - making for a mediocre gain of 75,000.

However, the group finished the third quarter with 1,142,000, so it has actually started going backwards.

For comparison, the fastest growing provider Sky broadband added 260,000 customers in October, November and December. BT Retail reported today that it attracted 177,000 new subsrcribers. TalkTalk meanwhile snagged 118,000 in its fourth quarter.

The news it is struggling even in a growing market comes at an unsettled time for Orange. In October a new chief executive was parachuted in when France Telecom decided its UK arm had lost its sparkle.

There have been suggestions that the broadband adoption market is now saturated, and that it is becoming a switcher's market. Although Tiscali and Virgin Media are yet to report their Q4 numbers, such statements are seemingly premature, and there are still new customers to be won - if you have the right offering.

Tim Johnson, chief analyst at broadband research firm Point Topic, said that Orange has failed to capitalise on the customer base they acquired in the Wanadoo acquisition by creating an attractive bundle. Gimmicks such as the free laptop offer it used to add 50,000 subscribers in a few weeks last year can only be short term measures: "They need to innovate, frankly," he said.

Orange does seem to lack a distinguishing feature. The big six each have their own: BT is an institution, Sky has the best TV offering, Virgin is fastest, Tiscali and TalkTalk are cheap and market aggressively. Orange is, er, orange.

Michael Philpott, prinical analyst at Ovum said: "It just seems to have gone wrong for Orange. Customers don't see the link between mobile and broadband as they do with other bundle services.

"The market is not saturated, but the real dogfight has begun. So far Orange is the loser."

An Orange spokesman said its fall was caused by a deliberate decision not to market aggressively, and to fix the technical issues that blighted its first year. A new team was brought in in August whose priority has been shoring up customer service and reliability, he added..

Orange also missed its self-imposed end-of-2007 target to respond to IPTV offerings from rivals, though the attractiveness of broadband television is still up for debate. "IPTV doesn't actually provide the compelling customer draw they thought it would," Johnson said.

Philpott agreed. "Orange needs to something fairly drastic. By just launching another TV service it will won't distinguish itself. They need to go back to the drawing board."

Orange's drop in subscribers has actually had no negative impact financially. Its proportion of cheaper-to-run unbundled lines rose from 16 per cent to 30 per cent in 2007. ®

*You know the one, where the annoying hipster family make a telephone and a computer out of their furniture for no reason at all.

Bootnotes

Credit goes to ISPreview for spotting Orange's broadband squeeze.