Investment: Orange numbers again confound the critics

CAN ORANGE do no wrong? Ever since the mobile phone operator launched its service in 1994 it has made a virtue of confounding its critics. Yesterday it did so all over again, releasing an impressive set of first-half results.

Not that it was the profit figures which so surprised and pleased the market. True, Orange reported its first-ever operating profit and is on course to make a profit at the pre-tax level next year. But what really impressed investors were its statistics for the amount of revenue being racked up by each of its subscribers.

On average, Orange customers are now spending pounds 485 a year on their mobile phone calls, compared to pounds 489 last year: this despite Orange cutting its call rates by giving customers more free minutes, and signing up lots of users to its pre-paid service, where average revenues tend to be much lower.

Meanwhile, cheaper handset prices are also bringing down the cost to Orange of signing up new customers.

Whether average revenues will continue to hold up after Orange pushes through another round of price cuts later this year remains to be seen. But if the company can continue its aggressive push for new customers - helped by the introduction of number portability early next year - while encouraging existing users to spend more time with their phones pressed to their ears, the City will be happy.

Of course, Orange's competitors are not going to stand by and let it take market share, so the price war may intensify. However, new roaming agreements with other European operators should boost revenues, while a brace of new services will help keep Orange in the race.

On current figures Orange's market value of almost pounds 10bn - the shares added 45p to 795p yesterday - is hard to justify. But as long as continues to keep its promises, the shares remain a firm hold.