The future's bright

When Neal Milsom first responded to the job adverts for a director of financial management at Orange four years ago, he was looking for a new challenge in a sector with growth. Reports out recently, which put the number of mobile phones in the UK at more than 60 million, show he backed the right horse.

The unassuming 43-year-old stepped into the financial hot seat as vice-president of UK finance of the mobile phone giant some 18 months ago. Even in that relatively short time, it’s been a rollercoaster ride, as the need for continuous innovation in the quest for market share continues.

When Orange entered the UK market in April 1994 as the last entrant in a field of four, it made no secret of its ambitious aim to become the first choice in wireless communications. Back then, the UK mobile phone market was a confusing place. Digital networks had just been introduced, but complex tariffs and high prices made mobile phones attractive only to business customers.

Since then, Orange has come a long way. In 1996, the company underwent its first initial public offering with listings on both the London and Nasdaq markets, becoming the youngest company to enter the FTSE100. By July 1997 it had already signed up one million customers, and Orange plc was named the best performing share in 1998.

In October 1999, Mannesmann AG (Orange’s majority shareholder and the leading mobile operator in Germany) announced the acquisition of Orange plc in a deal valuing the company at £19.8bn. The offer was completed in February 2000 and Orange was delisted from the London and Nasdaq stock exchanges.

During this time, Mannesmann itself was bought by Vodafone, a deal approved by the European Commission subject to an undertaking from Vodafone to divest Orange plc. So in was in August 2000, shortly after Milsom’s arrival on the scene as director of financial management, that Orange was swallowed up by telecoms giant France Telecom for a total consideration of £25.1bn.

Milsom admits that having a French parent involves a different way of working. ‘The last four years has been spent working with France Telecom to identify synergies between the business and move Orange from a stand-alone business to being part of a larger group,’ he says. ‘You have to learn the way they operate. Whether it’s France Telecom or the French, there are cultural differences.’

When you look at the figures, it’s easy to forget that the company is only 11 years old. Today Orange represents 10% of the France Telecom group in terms of revenue and profits. Turnover in the UK is almost £4bn with operating profits of £1.4bn, a massive customer base of 14 million, and almost 13,000 staff.

The evolution of Orange – from standalone FTSE100 darling to a ‘small’ wheel in a much larger cog – is just one of the factors propelling the company into a new phase of development.

‘Orange has changed,’ Milsom explains. ‘It’s gone from nothing to the thing it is today in 11 years. Companies like Ford have 100 years of history and culture. In the last four years, we’ve moved the young start-up to being more grown up.’

Milsom’s the first to admit that the market for mobile communications has undergone a revolution in that time. ‘It’s more steady – there’s almost 100% penetration. So it’s gone from carving out an industry to the challenge and huge expectations of 3G and the fact that technology never stands still.’

Orange may be one of the business branding success stories of the last decade – but Milsom’s not resting on his laurels. Differentiation, he says, is another huge challenge facing the company, particular with the next generation of 3G handsets and services entering the market.

‘It’s a very busy marketplace. 3 has come into the market, along with a number of other small players. It’s about standing out from the crowd.’

Milsom is confident that the company’s heritage will stand it in good stead to take on some of those challenges. ‘We pride ourselves on not being the same as everyone else. It’s about constantly reinventing ourselves.’

Orange is not alone in pinning its hopes on 3G. Between them, mobile network operators have invested billions in building, launching and marketing 3G services in recent years. And Orange, along with its other competitors in the market, is desperate to claw back some of that huge investment.

‘We paid about £4.2bn for 3G licences going out to 2021 – Vodafone paid a little more,’ Milsom says. ‘Essentially, we were paying to stay in the game as a major mobile operator. In that context it was probably a reasonable investment. It’s only in the last six to nine months that people have launched 3G services. It’s still reasonably early days.’

Orange launched its offering to market in December, more than two years after rival 3. Vodafone and O2 have also only been trumpeting their 3G wares for a few months. Milsom remains unfazed.

‘Vodafone launched in November but it wasn’t the all-singing all-dancing version. We were slightly more restrained, and we’ve only recently started to crank things up in the last few weeks.’

Orange’s uncharacteristic restraint is understandable. Given the hefty investment it has already made in 3G, there’s a lot hanging on its success. But experts believe that the telecoms industry still has much work to do to meet the basic telephony requirements of businesses before companies will consider investing in 3G mobile technology.

In fact, only 4% of UK mobile users are planning to upgrade to 3G because of fears that the next-generation services will be too complex, according to a poll of 2,000 consumers conducted by YouGov in February.

‘We’d committed to launch in 2004 and were keen to show that the technology worked. We have five handsets compared to 40 on 2.5G and you need the services on them. The market is still very voice dominated, and 75% to 80% of the remainder is text. 3G is a very competitive marketplace and the jury is still out. People are waiting to see. Speed of take-up is the question and how quickly 3G will seize people’s imagination.’

A recently signed deal with Lucas Film Ltd, the film company behind George Lucas’s Star Wars films, is hoping to do just that. As the official mobile content partner, Orange 3G users will have access to exclusive downloads such as film clips and trailers. You can even download the sound of Darth Vadar breathing as a ring tone. ‘It will appeal to people of a certain age,’ Milsom says.

Orange Wednesdays, meanwhile, is the result of a deal with the Cinema Marketing Association offering Orange customers two cinema tickets for the price of one by texting or phoning 241 from their handsets. And anyone who has been to the cinema recently will probably have seen the Orange adverts to promote ‘responsible mobile phone usage’ by encouraging cinema goers to switch off their phones during screenings.

‘We’re setting out our stall as the network that’s into film,’ Milsom explains.

Milsom isn’t a film buff himself. He is more of a petrol head with a penchant for football. Having studied modern history in Liverpool, he joined Deloitte, Haskins and Sells to train in audit. ‘I wanted a business qualification and my cousin was FD of brewers Bass. I didn’t want to be an auditor for ever, but I wanted a career in business.’

After nine years with the firm during the boom years of the 1980s, Milsom made the move to venture capital firm 3i to work under the group financial controller and group FD. ‘It was a really good company. They’d just floated and were expanding into Europe, but I was looking for an FD role. 3i was a good start in business but it was quite small – 600 to 700 people.’

A move to Partco plc, an automotive parts distributor, may not have upped the glamour stakes, but it did give Milsom a chance to indulge in his passion for cars, and offered him a career path from group financial controller to his first divisional FD role.

But, as far as achievements go, it’s the last four years at Orange that Milsom is most proud of. ‘We’ve gone through a lot of change – from being an independent company to being a subsidiary and we’ve reorganised the business and moved to a supply/demand type model.

‘We’ve had to align the finances behind those new structures. It’s been a lot of upheaval, but we’ve held it together and emerged as a much better department – and we didn’t drop the ball in the process.’