Orange, One2One Seen Closing in on Vodafone, BT
29/9/2000 13:58
by Dominic White
Telecoms Correspondent
Orange and One2One are expected to reveal they are gaining further ground on rivals Vodafone (VOD:LSE) [Discuss] and British Telecom (BT.A:LSE) [Discuss] when the four UK mobile operators unveil their third quarter subscriber figures next week.
Analysts expect Orange will have won the most new customers in the three months to October, with around one million new accounts. They predict One2One will be slightly behind, with nearer 900,000 new subscriptions.
Both Deutsche Telekom, One-2-One's owner, and France Telecom, Orange's parent, are preparing to float their mobile businesses. And anlaysts say that both have been offering cheaper, more heavily subsidised products in the third quarter in an effort to boost subscriptions. This, they say, should help them sell a stronger story to the stock market when they come to float.
Anlaysts also say they expect Vodafone to overtake BT in terms of customers added. A consensus of three leading brokers has Vodafone adding 810,000 customers, well up from 572,000 in the second quarter. In contrast, BT's 'net adds' are expected to fall slightly from 670,000 to around 650,000.
But despite adding fewer customers than their younger rivals, Vodafone and BT are expected to maintain first and second place in terms of market share. UBS Warburg's forecasts have Vodafone in first place with 10.2 million UK subscribers (29.8% market share), BT with 8.7 million subscribers (25.3%), Orange with 8.3 million subscribers (24.4%) and One2One with seven million subscribers (20.4%).
The final figures should show Orange poised to take over as the second biggest player from BT, and, interestingly, last week BT indicated it may push its offering upmarket and away from volume pre-pay subscription.
But the news may not be all bad for BT. A Lehman Brothers note yesterday says that BT's lower net adds should be partly mitigated by its lead in the WAP-phone market, where it has 400,000 handsets in circulation and has been increasing its average revenue per user.
Analysts also say they will be watching closely for Vodafone's international figures. Lehman Brothers expects strong growth in Europe and has increased its year-end forecasts for Vodafone's worldwide customer base from 72 million to 75 million. At that level, Vodafone would be challenging NTT of Japan to become the second largest telco in the world after China Telecom.
Many analysts think a large customer base is going to be a crucial weapon in the forthcoming battle for data customers when next generation handsets hit the market in the next three years. "The theory is that it is better to pay for customers now and get that subscriber base in place, rather than trying to steal subs from operators at a later date," says Warburg telecoms analyst Luke Norbury.
However, Norbury adds that investors should be wary of reading too much into next week's numbers. Firstly, they do not reveal the operator's 'average revenue per user' a crucial measure of profitability. And secondly, the carriers concerned can easily raise or lower prices from one quarter to the next to increase or decrease market share.
What investors should be looking for is evidence of good growth. But, in an increasingly nervous climate for telecoms stocks, they will also be on watch for signs of over-aggressive expansion that could badly damage margins. |
