The Story of the Cellular Phone Brand Orange


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Case Details:

Case Code : BSTR002
Case Length : 8 Pages
Period : 1995 - 2001
Organization : Hutchison Telecom, BPL
Pub Date : 2001
Teaching Note : Available
Countries : India
Industry : Telecommunications

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Orange is something I did in the 20th century."

- Canning Fok, Managing Director, Hutchison Group, commenting on the company's plan to relinquish the Orange brand.

"The new jewel in our crown will be the India business. We will consolidate this portfolio before listing in the next twelve to eighteen months"

- Canning Fok, Managing Director, Hutchison Group, December 2000.

By the end of 2000, the sun seemed to be setting on the Hutchison empire in India, or at least on its Orange1 brand. Hong Kong-based cellphone operator Hutchison Max Telecom,2 which owned the popular Orange brand in Mumbai (India) might soon have to give it up in favor of the city's second operator, BPL-France Telecom.

France Telecom, which acquired worldwide rights for the Orange brand in May 2000 from Vodafone,3 was planning to enforce its ownership of the brand in India in a bid to cash in on the popularity of the brand.4 France Telecom was keen on using the brand via its joint venture with BPL5 in Mumbai. Said a France Telecom official, "We are likely to retain the brand for this part of the world. A final decision is likely to be taken early next year". Analysts felt that the Orange takeover could come as a severe blow to Hutchison in Mumbai, as the company could lose its leading position in this market. Hutchison would have to re-invest huge amounts in building up a new brand and giving it the same level of credibility that Orange enjoyed.

Analysts also felt that Hutchison, which had controlling stakes in cellular operators in other circles like Delhi, Calcutta and Gujarat, would have to develop a new brand for these circles.6 The company might be hit particularly hard in Delhi, the second largest cellular market in the country. The Hutchison Group had initially planned to launch the Orange brand in Delhi, in May 2000, through its 49 per cent holding in Sterling Cellular. This was later delayed to October 2000. It became clear that the Orange launch in Delhi had run into rough weather.

Sudarshan Banerjee, CEO, Sterling Cellular, agreed that there was a delay in the Orange launch in the Capital, but attributed it to an expansion in its network. He Said, "We might launch Orange some time next year in Delhi." The Orange brand was also to be launched in Kolkata, where The Hutchison Group held 49 per cent in Usha Martin. But France Telecom, the foreign equity partner of Hutchison's Mumbai rival, BPL, seemed to be raising objections over the use of the Orange brand name outside the Mumbai circle. Sandip Das (Das), Chief Operating Officer (COO), Orange, claiming he was ignorant about France Telecom opposing the launch of the brand in other cities. He commented, "It was upto the equity partners in the New Delhi and Calcutta ventures to decide on whether to launch Orange or not..."

The Story of the Cellular Phone Brand Orange - Next Page>>

1] Orange was formed in the UK in 1989, with the launch of Hutchison Telecom to target the growing telecommunications Industry.

2] Hutchison Max Telecom was a part of the Hutchison Whampoa group. Hutchison Whampoa Limited (HWL) was a Hong Kong based Industrial Conglomerate, and had a presence in telecommunications, property development and holdings, retail, manufacturing and services and energy, infrastructure, finance and investment. Hutchison Max Telecom was the largest cellular provider in India, covering Mumbai, Kolkata and Gujarat. In April 2000, it had a subscriber base of 4.55 lakhs, compared to BPL's 3.5 lakhs and Bharti Enterprises' 3.2 Lakhs.

3] A major cellular operator in the UK.

4] Orange had gone through changes of control in recent past. Till 1999, Hutchison retained a majority stake in the company. This stake was sold to Mannesmann of Germany in late 1999, who eventually acquired all of the shares in the company. In early 2000, the European Commission approved Vodafone's purchase of Mannesmann with the proviso that they sell Orange. The European Commission did not allow Vodafone to own two competing phone companies .By the end of May 2000, Vodafone sold Orange to France Telecom. However, through an earlier agreement with Vodafone, Hutchison Max acquired the license to use the Orange brand in India. Hutchison Max would pay a royalty to the owners of the Orange brand.

5] France Telecom had a direct 26 per cent holding in cellular operator BPL Mobile.

6] In December 1999, Hutchison picked up 49% stake in Delhi's Sterling Cellular (the rest was held by Essar Group) and an equal stake in Calcutta's Usha Martin Telecom. In late 2000, Hutchison also picked up a stake in Fascel, the Hinduja promoted mobile services company in Gujarat through an undisclosed equity partnership.

 

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