International Business: Telecom
Britain's Orange: Ready to Take on the World
With France Telecom's aid, Orange will vie with Vodafone
Move over, Chris Gent. Here comes Hans Snook. That was the message as France Telecom announced that it was buying British cell-phone operator Orange PLC from Vodafone AirTouch PLC for $46 billion on May 30. Snook, the Orange CEO, made no bones about hoping to eat his former owner's lunch. "We want to be the biggest rival globally to Vodafone that they could possibly imagine," Snook said.
Indeed, with France Telecom's financial backing, Orange could become a formidable combatant in the European telecom arenas. Michel Bon, CEO of France Telecom, has put up big bucks. But he's making a huge bet on Snook's performance. In a gutsy move, Bon is putting a major chunk of his company under Orange's CEO. The combined companies had total sales of $8 billion last year.
Bon is gambling that the maverick Snook is the entrepreneurial executive needed to lead his own stodgy mobile effort into the future. He is putting all of France Telecom's other mobile assets, valued in the $110 billion range, under Snook's management--and eventually under the Orange brand. France Telecom's mobile holdings include 100% of France's Itineris, 50.9% of Mobistar in Belgium, and 80% of Dutchtone in the Netherlands. New Orange, as the company is being dubbed, will be No. 2 in European mobile, with a total of 21 million controlled subscribers compared with Vodafone AirTouch's 38 million. "Snook must be absolutely delighted; he has found the big controlling shareholder that won't interfere with his vision," says Jim McCafferty, a telecom analyst at SG Securities in London.BOAT-ROCKER. Bon is giving Snook the green light to go after his British rival. He is promising a flotation of 10% to 15% of Orange's stock on the London, Paris, and perhaps New York stock exchanges later this year or early in 2001. That, estimates an adviser, will give Snook a market capitalization of around $150 billion to play with, and stock that he can use for takeovers. Vodafone's market capitalization is $259 billion. Still, Vodafone CEO Gent doesn't seem overly perturbed. "We've always been ready for competition," he says. "Unlike France Telecom, we never had a [mobile] license as our birthright."
Snook, 52, may be just the sort of irreverent boat-rocker that France Telecom needs. He is an ex-hippie who got his start in telecom in Hong Kong running a local paging company that was acquired by conglomerate Hutchison Whampoa Ltd. That move eventually produced an assignment in 1993 to straighten out Hutchison's money-losing British telecom assets. Six years later, Orange is a $46 billion company, giving Snook the aura of a magician and plenty of market value of his own.
But not everyone in the European telecom community is sanguine about Snook's suitability to lead a European or, perhaps, global company. Critics say that Snook's success has been largely limited to Britain and that he has not established himself as a world-class dealmaker in a league with Gent. "He doesn't deliver quite as good a game as he talks," says an industry source of Snook. "He has been a boat on a rising tide."
But Snook may surpass Gent as a marketer and salesman of the mobile future. He has positioned Orange as a kind of counterculture brand against incumbents BT Cellnet and Vodafone. Despite changing owners twice in recent months, the company continues to shine, beating both rivals at signing up new customers. He has also been a leader in trumpeting the possibilities of using mobile to deliver an array of Web-enabled services. Gent only embraced that concept during his prolonged siege of Mannesmann. Despite being under the control of Vodafone, Snook won a British license for wireless Web services for $6 billion in April. Bon will now pay the bill when it comes due this fall.
Indeed, Snook has the money to go along with his vision of creating a global mobile empire. As long as he keeps Bon on board, that is likely to be a potent combination.By Stanley Reed, with Kerry Capell and Heidi Dawley in London, and Stephen Baker in ParisReturn to top