Outlook: Snook-ered behind the Orange ball

THE FUTURE may be orange but the mobile industry was seeing red yesterday after Hans Snook's claim that the pre-pay phone is really a device for fleecing the customer. Orange has one million subscribers who fall into this category so the chief executive needs to chose his words with a little care. To some extent, Mr Snook's observation is also a touch self-serving since Orange would much prefer to have no pre-pay customers at all and persuade them all to sign up on 12-month contracts instead.

Contract customers are more valuable for the mobile networks and Orange just happens to be taking the lion's share of this part of the market. They use their phones more heavily, which makes them more loyal, and they are less inclined to hang around for the off-peak period to kick in before phoning their teenage friends.

Nevertheless, there is some credence in what Mr Snook says. Pre-pay phone sales have exploded precisely because customers like the comfort of knowing in advance how much they have available to spend, particularly when the user may not be one picking up the bill. Knock them out for as little as pounds 39.99 at the local Asda, and the pre-pay phone becomes an irresistible bargain.

But there is no such thing as a free lunch, or a free phone call, even when you are dialling 0800. The choice is between paying 40p-50p a minute or paying 5p-10p with an effective network useage charge built into the cost of the pre-pay card.

If Mr Snook is right, then one in every three pre-pay phones sold in the last year will now be lying discarded in drawers somewhere after their users discovered just what an expensive present they could be.

Something similar happened two Christmases ago when the networks decided to start selling handsets for as little as a fiver. There was an explosive growth in sales followed by an equally dramatic rise in churn rates as the bills began dropping through the letter box and customers began tearing up their contracts. Mr Snook worries that the Asda's of this world will give the mobile industry a bad name by selling something which was not designed to be piled high on supermarket shelves and which ends up costing the customer an arm and a leg. But the ball is in the court of the mobile operators. It is up to the Oranges of this world to devise a package which combines the certainty of pre-pay with the value for money of a contract.