Orange Shakes Up Its Organisation in the UK

On 4 June 2008, Orange announced it will create 500 jobs in the UK by bringing call-centre work back from India and taking on more staff for its retail shops. It will also cut about 450 management and administration roles. The reorganisation is part of a focus on what Orange calls “the 21st century customer”. When I saw the news, I wondered not whether Orange was making the right move, but whether it was going far enough.

Orange’s vision to become the chosen supplier of connectivity in the home, in the office and on the move is not a new one. France Telecom articulated that idea when it created business and home divisions in the last Orange reorganisation two years ago. Making laptops the cornerstone of this strategy is a neat idea but hardly original. Carphone Warehouse might lay claim to that concept.

The lack of originality doesn’t mean this isn’t the right strategy for Orange. The connected — and subsidised — laptop market is going to be as big as the mobile phone market. The least-expensive laptop now costs less than many high-end mobile devices. It makes sense for operators like Orange to subsidise laptops and get subscribers to sign up for a 24-month contract at £15 per month.

There is a demand for connectivity — the astonishing growth rates in the mobile broadband market have demonstrated that. And the economics look great for mobile network operators, as nobody discards a voice contract to take up a data contract.

Orange is almost alone in the UK market in having all the assets in place to pursue a vision of providing broadband in the home, at the office and everywhere else plus, of course, mobile voice calls and texts. Some might argue O2 also has these assets. But if O2 has a weakness (and it doesn’t have many), it has to be its 3G network. It’s reported to be the worst in the UK and O2 was recently reminded by the regulator of the coverage obligations of its 3G licence. It will take O2 a while to catch up with Orange’s 3G coverage.

Why has Orange chosen to keep its fixed broadband division? It’s been underperforming most other providers for two years and is showing no signs of improvement. Orange may need the division’s resources at the moment, but if it invests as much in its mobile network as it claims, it’ll have network speeds of 7.2 Mbps by late 2008 and will roll out 14.4 Mbps in 2009. That’s good enough for the mobile service to become a substitute for fixed-line access, even for bandwidth-hungry downloaders.

Perhaps Orange is waiting for Carphone Warehouse to come knocking with an offer for its fixed broadband division, especially as the retailer has spare cash from its Best Buy deal and Vodafone may snap up Tiscali’s broadband resources.

It’s not certain who the big names will be in the next phase of the Internet access market, but it’s clear that mobile broadband and laptop ownership are taking off. Orange may regret not taking this opportunity to focus more closely on its mobile assets as a way to realise its vision.