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Orange hurls €90m at Israel's Partner to end political bunfight

Chief exec’s crowd-pleaser didn’t go down at all well

Orange has been caught in a political storm after trying to stop Israeli mobile network Partner Communications from using its name.

The company uses the brand because it received funding from, but was not owned by, Hutchison Whampoa, which launched the Orange brand in the UK several years ago.

When Orange (then the UK's third-largest operator) was sold to German conglomerate Mannesmann (in a $33bn cash and stock deal) the Israeli network was not part of the arrangement.

Mannesmann was subsequently bought by Vodafone, which then had the regulatory inconvenience of owning two UK mobile networks. This required Vodafone to dispose of Orange, which it did to France Telecom.

Hutchison Whampoa subsequently sold its shareholding in Partner, with the result that the Israeli network has very little to do with the French one with which it shares its name.

This would be uncomfortable in the best of circumstances – and has now been agitated by Orange chief executive Stéphane Richard telling a press conference in Cairo that he wanted to pull the name from the Israeli network to enhance Orange's reputation with Arab nations.

He is reported to have said: “I am ready to abandon this tomorrow morning, but the point is that I want to secure the legal risk for the company. I want to terminate this ... but I don’t want to expose Orange to a level of risk and of penalties that could be really sizable for the company.”

With the French government owning 25 per cent of the company, a diplomatic incident ensued, with Israeli PM Benjamin “Bibi” Netanyahu calling on the French government to “publicly repudiate the miserable statement and miserable action by a company that is under its partial ownership".

Richard apologised for the comments and travelled to Israel to build bridges. The Jewish Press reported that the French government was under pressure from anti-Israel groups to sever Orange's relationship with Partner because the Israeli firm provided mobile services in Israeli settlements and sponsored IDF units – a common practice for Israeli businesses.

But after all that, it seems that Richard has now got his way, with a €90m deal to bring the (now seemingly troubled) arrangement to an end, eventually.

Orange will initially pay Partner €40m for a “detailed market study” to assess the damage caused by Stephane's comments, with Partner having the option to terminate the current brand licensing agreement within 12 months.

After the first year, Orange gains the right to bin the deal. Either side can trigger the final €50m payment: Partner within the first 12 months, and Orange in the subsequent year.

Partner has been very successful in Israel with the Orange brand, evoking many of the special service offerings of the pre-France Telecom Orange. This includes a “Gold” service aimed at seniors, where an Orange representative goes to the homes of older customers to teach them how to use a Doro mobile phone.

Losing the Orange brand would definitely be a blow for Partner, and would leave it looking for a new name. It could opt for Tapuz (the Hebrew word for Orange, incidentally), which is a company Partner bought, but that would take some real chutzpah. ®

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