Shift to 30 per cent share, with upfront loan to subsidise hardware, repayable to Orange over 19 months
Orange last week restructured its commission programme for dealers and distributors, to extend its revenue share with them to 30 per cent, up from 10 per cent.
To coincide with “legal day-one” for the new Orange/T-Mobile company Everything Everywhere on July 1, the new joint venture firm will pay Orange’s accredited third-party resellers a 30 per cent share of customer revenue and a 70 per cent upfront commission.
As with O2’s 100 per cent revenue share programme, third parties will receive a loan, or ‘true-up’, to subsidise hardware. However, Orange appears to have structured its ‘loan’ scheme to minimise clawback risk.
Thus, where O2 ‘loans’ a hardware fund based upon customers’ estimated spend and makes dealers liable for any shortfall, Orange has granted dealers a sum calculated to be 30 per cent of monthly line rental, for 19 months of a two-year deal. This way, the only risk of clawback to dealers is if customers disconnect or fail to pay bills.
The fee is paid in full on connection, and dealers are required to re-pay the fund in 19 monthly instalments.
An Orange spokesperson said: “As part of the vision to become the market leader in the indirect business channel, we updated our channel partner programme in March this year, announcing a variety of changes designed to reward and support loyalty from our partners and their customers.
“We also communicated that we would be extending our revenue share terms to in excess of 20 per cent. In the intervening period we have worked with key dealer and distributor partners on not just the commercial terms but in extending the Orange Partner Programme. These changes take effect from July 1.”
At press, Orange partners were set to discuss the changes at a series of forums.
Mainline managing director Andrew Boden said: “Orange is looking to add high-value customers and reduce churn in the base. The transition to ongoing revenue can be painful but this will be easier because of the advances, which will remove the cashflow burden for dealers.”
One leading Orange dealer said: “Orange is targeting us on churn as well as volumes so this change is a drive for quality. This would have affected a lot of people and had a huge impact on everybody’s cashflow if Orange loaned the revenue and took away all the upfront commission rather than taking it away over a period of time. This is rewarding good quality business, which is better for everybody.”